Sequestration, the budget, lowest price contract--take your pick of another dozen issues; all are blowing up the usual business models for government contractors. Can you take advantage of all the disruption?
The concept of disruption is well known in technology circles.
Something new comes along and changes how we work, live or play. Nothing is the same again, and new avenues of commerce are created.
Smartphones and mobile technology are the most recent examples of disruptive technologies. Like the microwave oven, we didn’t know how much we needed them until we had them.
But lately, I’ve been hearing the term disruptive being applied not to technolog,y but to ways of doing business.
With the threat of sequestration, fights over the debt ceiling, continuing resolutions, budget cuts, delays in contract awards and the growing use of lowest price contracting – to name just a few of today’s challenges – contractors face a market that is unlike any other.
Agencies are pushing contractors hard for innovative solutions that can bring efficiencies and increase effectiveness as they try to do more with less.
These factors are creating a market that is hyper-competitive, as companies try desperately to hang onto the business they have, and take business away from others.
Some of the disruption to business models is being driven by technological changes, particularly for companies whose revenue was built around selling software licenses. Virtualization has drastically reduced the number of licenses needed because the number of servers is going down. The adoption of the cloud also is driving down the need for as many software licenses.
The result is a lot of churn in the market as contractors scramble to make sense of the new landscape. Companies are employing a variety of tactics to adjust to current conditions, and what they think the market will look like when we emerge from this period of uncertainty.
These market conditions are causing disruption, and with disruption come opportunities.
For example, with the emphasis on lowest price, the value of being an incumbent has gone down, making winning recompetes more difficult, but on the other hand, it also makes it easier to take business from another incumbent. You are both stronger and weaker at the same time. It makes performance with current customers critical. You also have to be extremely astute at how you manage and apply business development resources.
There will be times when you aggressively pursue opportunities, and other times when you'll need to walk away. And knowing the difference has never been more critical.
This is one of the biggest factors that pushed CACI International to bring in a new CEO with a strong BD reputation.
Not everyone is making the dramatic changes that CACI has. It is hard to change how you do business, and to face the possibility that what has made you successful to this point might not be what makes you successful going forward.
You need the ability to look inside yourself, honestly identify your weaknesses and then take action. Companies are making some very hard choices.
Any company you talk to will tell you that they are positioning themselves to take advantage of these disruptions. But not everyone will make the shift.
Some companies will disappear, most likely through acquisitions. Other companies will become weaker competitors.
Some winners will be larger and stronger; others will be smaller and stronger because they’ve divested businesses not central to their strategy. They’ll be more focused, closer to their customers and more flexible in how they deliver solutions.
The big question is: which side of the disruption equation is your company?
NEXT STORY: What CACI's CEO move says about today's market