Lessons from Pragmatics' 30-year run in the federal market

When I got the pitch that Pragmatics, the company founded by Long Nguyen in 1985, was celebrating its 30th anniversary, I thought, Nice company, they probably deserve a little recognition.

But as I talked to Kim Nguyen, the son of the founder and head of business development, I realized their story isn’t just about celebrating success. It’s about gleaning lessons from their 30-year run.

The younger Nguyen described several key points about Pragmatics creation and survival:

• Founded in 1985 by Long Nguyen, who was a Georgetown University professor at the time.
• Nguyen acted on the entrepreneurial bug he caught while working for IBM in his native Vietnam.
• Graduated from the 8(a) program in 1995 and then all small business designations in 2005.
• Doubling down on its focus on customer service and delivering quality to pull out of the recent market down turn.

As he spoke about the company and its strategy, several themes emerged that apply beyond Pragmatics to the broader market. This is a story of one company’s transformation and flexibility, but it is also a story of how much tougher the market is today than it was just five years ago, and what it takes to survive.

In 1995, Pragmatics faced a challenge when it graduated from the 8(a) program.

“You have to completely remake your company when you transition out of these different protected areas if you expect to continue to grow,” Kim Nguyen said.

Companies need to build the right infrastructure to continue to grow. Your company has to scale.

“When you are a small business, you have maybe four or five heroes who drive growth,” Nguyen said. “But when you are a midtier, you need the right structure, and you need incentives for all layers of management.”

A company needs programs to train and develop its next generation of leaders. Pragmatics offers a three-day training course to all program managers that covers topics such as business development, program management, and proposal writing. The company also has a series of leadership seminars that cover more on business development, communications and other soft skills.

The company also has a focus on customers and quality that has long been a tradition. It has achieved CMMI Level 5 certification and several ISO certifications for its software development and other processes. The company also conducts surveys of customers and has an internal team focused on quality assurance.

“Beyond all that, every level of management goes out and meets customers,” Nguyen said. “We don’t want to get bigger and lose touch. We work hard to avoid that.”

The company faced one of its toughest transitions in the last several years as the market contracted and became more competitive.

After nearly a decade of consistent 30 percent annual growth, the company saw its growth cut in half and then in 2013 and 2014, revenue actually shrank. It finished last year with $150 million in revenue. But 2015 promises to a return to growth.

“One reason is we won all of our recompetes last year,” Nguyen said.

But hitting that snag in growth says a lot about how the market changed for Pragmatics and everyone else.

“Before, if you were a high-performing company, your work could go up 10 percent a year and you’d be a hero,” he said.

But then the market turned, and instead of customers’ budgets growing, they were shrinking, and instead of winning nearly all of your recompetes, you’re winning 50 percent.

Pragmatics did some soul searching when it began losing its recompetes. “Are we really in touch with our customers? How did we fall out of touch? How did we lose?” Nguyen said. “We had to look in the mirror. We couldn’t do things the way were doing them.”

In some cases, the company was underbid – this is the era of lowest price contracting after all – which meant that Pragmatics had to focus on costs and the greening of its workforce.

“When you have a three or five year contract, and the same people are working on it from the beginning, your salaries will have increased, and you won’t be as cost competitive as when you won,” he said, explaining the concept of greening. “To green your workforce, you have to shift senior people out and move junior people in so your costs remain stable or even decrease.”

If the company is growing, there will be opportunities for senior people to move up into roles with greater responsibility.

The company also put a focus on improving business development and capture management. It is the basic blocking and tackling, “but sometimes it is surprising how you depart from that in the thick of the fray,” Nguyen said. “You have to step back and do lessons learned. You have to be brutally honest.”

One thing that has helped Pragmatics survive these challenges is that the company has a culture of flexibility and adaption and that skill will be critical as the company moves forward, Nguyen said.

The company will continue to build out its Agile development skills, which it has had since 2004 when the company picked up several developers after the dotcom bust. The company has combined the strengths of Agile with the discipline of CMMI processes for a unique offering called Pragmatic Agility, he said.

“It is about growing and winning new projects,” he said, counting work in areas such as software development, testing, desktop support, help desk and learning management as areas that benefit from this approach.

The company is also making strategic investments to help it stand out from competitors. For example, the company holds the contract for the Army Enterprise Classroom, a program to modernize 500 to 700 classrooms a year. The company bought a warehouse in Williamsburg, Va., to support this program. Another is being set up in Kansas City.

“It is a large program for us, and it gets the investment and the attention,” Nguyen said. “It also makes us more efficient.”

To grow beyond its current $150 million level, Pragmatics also is focused on winning new business away from incumbents. It has had success at the Patent and Trademarks Office, the Federal Deposit Insurance Corporation, and the U.S. Special Operations Command.

It is a matter of having a good reputation, performing well and training program managers to grow their business, he said.

“Our operations folks are trained to deliver to the customer and grow their people and grow their programs,” Nguyen said. “You just can’t do two of the three anymore and expect success.”

Lesson learned.