Are you dooming yourself to failure in procurement by not knowing your market before you start? Market research and analysis is a key component of the procurement process – but it needs to be done right.
When Martin Luther King Junior stood on the steps of the Lincoln Memorial in Washington, D.C., in front of 250,000 civil rights supporters, he knew his audience. He knew that the people he was addressing supported his cause and agreed with his words. The speech was a success and helped paved the way for President John F. Kennedy’s Civil Rights Act.
This is not intended to be a crass use of what is one of the finest speeches in global history, but an example of how success can be tied to knowing how an audience will react to words, proposals and actions.
Conversely, not taking the time to understand the audience or the market can lead to painful rejection (though in fairness, sometimes the failure to understand the market lies on the other side of the table). Steve Jobs and Steve Wozniak were rejected by Atari and HP in when they presented the concept of the personal computer. Perhaps just as famously, record label Decca rejected The Beatles stating that “guitar groups were on their way out”.
Both of these cases, and many more, are a prime example of organisations not understanding their market and ending up without that all important ‘win’ in the column.
Criticality of Analysis
You’re probably wondering how this relates to public procurement. The examples here show how critical it is to know your audience and market, and that the key is that hard work needs to be put in to provide the foundation for success.
Take a look back at your own career in procurement. How many times have you gone to market on the back of flawed or non-existent market research and analysis? When you have laid your hands on the final draft of a specification, did you always trust that the input was from a good cross-section of the market?
You may think you lack the time or resources to carry out market analysis as part of your tender process, but the business case for doing it well is there for all to see. Market research can be critical in ensuring that the goods, services or works being procured meet the needs of the taxpayers, at a cost that is acceptable and provides best value.
Public sector organisations can use market research and analysis to get a greater understanding of their customers (usually the end-users of the services), to analyse the market and the competition in a particular area, and then to test before launching services.
Informed Decision Making
The same applies in procurement, just from a different angle. Procurement gets to understand the supply market, its competitiveness, how mature it is and the key suppliers, some of whom may already be supplying to the public sector.
It creates a level of informed decision-making, rather than approaching every tender in the same way. As it’s put in the Procurement Journey, analysis of key trends and market dynamics and how the goods or services in question sit within this can help to shape a specification, tender and route to market.
It can also help procurement to understand the role of SMEs in the market and how they could better set out a tender to increase SME involvement. Even down to using market analysis in order to understand how commercial models can be set up and what Community Benefits suppliers would or could offer as part of tender submissions.
Market Research Favourites
There are a variety of methods available to procurement too, some which are desktop based, others which require direct interaction with the market itself.
A few of the most common are listed below:
- Prior Information Notice (PIN) – The PIN can be used to gather information on almost any aspect of a tender and allows procurement to understand and gauge the interest in the supply market. The added benefit is that, depending on the type of PIN used, they can also be used as a call for competition and reduce procurement timescales.
- Soft Market Engagement – This doesn’t have the formality of a PIN, but can be just as useful. It can be done via email or phone calls and is particularly useful if there is a smaller, known supply market, and the engagement is being done to test the water on a specification or aspect of the Technical or Commercial Evaluation.
- SWOT, PESTLE, Kraljic – Old favourites for anyone who has ever done courses in procurement! These can provide a picture on the suppliers (SWOT), market conditions (PESTLE) and product category (Kraljic), better informing decision-making and strategy.
- Applied Analytics – The likes of Dun & Bradstreet and Spikes Cavell provide information on the supply market, from spend analytics to market analysis. All of this data is presented in a usable form, saving procurement from having to carry this out themselves.
Paralysis by Analysis
While market analysis is a critical part of the procurement process, it’s important to remember that it’s only one part of a much wider whole. Perfection is the enemy of progress – striving to capture all the information possible, to speak to every supplier and put this all together can lead to stagnation in the process and actively hinder decision making.
Avoid decision-making by committee at all costs and decide where you, as procurement, will draw a line under the analysis and move to the next stage. Mark this out at the start of the process and stick to the timelines. After all, you don’t want to spend so long analysing the market that you never actually go to market.
Know your audience, pick your method and crack on!
I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!