Targeting Opportunities in State and Local Government By Thomas Davies
The overall attractiveness of the state and local market continues to grow. By almost any measure - total market size, market growth rates, availability of funds or buyer willingness to invest in technology - state and local government has never been more attractive. However, favorable market dynamics don't always translate into attractive new business for companies.
To take advantage of these positive market dynamics, companies must carefully target the right sales opportunities. Companies experiencing profitable revenue growth in state and local government realize that their success often depends on how well - and how early - they pick the right opportunities. But picking the right targets is easier said than done for many companies. The failure to have this targeting capability - which includes having access to modern marketing tools, databases, business processes, skills and the organizational discipline to use these resources - is causing even the best companies to stumble in the market.
Why has targeting the best opportunities in this market become such a challenge for companies? There are many contributing reasons, but four stand out: (1) the increased diversity of the market; (2) the growing sophistication of state and local government buyers; (3) the lack of a deep and rich understanding of the business of state and local government; and (4) the rapidly changing competitiveness of the market. Each of these reasons is making the challenge of targeting the right opportunities significantly more complex. But herein lies the basis for differentiation and new competitive advantage. Companies that are navigating the new complexity underlying targeting, without incurring tremendous fixed costs, or taking a long time to do so, are reaping the advantages.
State and local government is a very diverse market. On the surface these buyers may look very similar because for the most part they are all in the business of providing for the health, welfare and safety of citizens. But how they go about carrying out their constitutional obligations is very different, and the differences are growing daily with every new federal block grant.
There are dramatic differences in state and local governments with regard to the management, purchasing and use of information technology. They differ in their openness to new vendors, their willingness to take risks, their reliance on outside contractors, their purchasing practices, the involvement of elected officials, their financing practices, their governance of information technology, their priorities and the standards they adopt. Each of these factors should have a direct impact on a company's sales and marketing strategy. Failure to take them into consideration during the targeting process is the equivalent of trying to navigate an obstacle course blindfolded.
The growing sophistication of state and local buyers also is having an equally important impact on targeting. Partnerships with industry in this market, for example, rival those in the commercial market. Cooperative purchasing practices, long discussed at the federal level, are being implemented in some of the leading jurisdictions with states, counties and cities beginning to collaborate by aggregating their buying needs and buying from shared contracts. The use of past performance as a basis for selection is done routinely in many jurisdictions. And the most innovative buyers are often not found in those segments of the market that companies sometimes choose based on size and location. For companies that compete as much on their business model as they do on their products and services, these differences are critical to their success.
A third reason for why targeting has become so difficult is that companies often do not have sufficient knowledge of the business of state and local government. In order to compete successfully, companies must go beyond simply targeting the major functional areas of state and local government such as public safety, education and human services. As a basis for market segmentation and targeting, these broad categories simply no longer provide any real competitive advantage.
To be competitive today, companies need deep knowledge of their customers' business at the business process level. In the public sector, state and local government is pioneering the linkage of measurable improvements in business performance to financial and contract performance. Understanding how technology directly impacts the performance of government - its processes, outputs and outcomes - is critical for gaining initial support, funding and payment. The movement to performance-based government, begun in some state and local governments many years ago, will only accelerate this trend.
Finally, the growing competitiveness of the marketplace is creating targeting challenges for companies, especially those who once enjoyed dominant positions. As the market has become more attractive, new competitors have entered. Companies that historically specialized in this market, and were entrenched in well-protected market niches, are now finding themselves competing against global companies who are taking advantage of open systems and the move to commercial buying practices. This is forcing companies to look beyond simply next quarter's revenue in their targeting process. Targeting a marketing niche that can't be protected long enough to enjoy some advantages is no one's idea of an attractive business opportunity.
Thomas R. Davies, Ph.D., is vice president of Federal Sources state and local government consulting practice in McLean, Va. He can be reached at [email protected]
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