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By Nick Wakeman

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Nick Wakeman

Welcome to the era of 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?

Posted by Nick Wakeman on Feb 22, 2013 at 9:48 AM

Reader Comments

Mon, Feb 25, 2013 HardDisk Portales, NM

Harvard's Clayton Christensen coined the phrase 'disruptive technology' when studying the hard drive industry. He recognized that markets reach a point where the top competitors offerings offer so much capability, they outstrip their customer's abilities to leverage the advances. What some companies do in that situation is focus on offering less rather than more. They offer something with less utility but at a smaller price which may be much more manageable. If you read Steve Jobs' bio, you will see that he was influenced by Christensen's observation about where opportunities may be found. The concept of disruption is almost always detached from the Christensen origin I have sketched out above. Instead, people, like the author here, try to talk about disruption using a dictionary definition and end up talking generically about change. This is a tragedy because the original concept laid out by Christensen (admired by people like Steve Jobs) gets lost in the confusion. Is there an appropriate way to apply Christensen's concept to present day federal contracting challenges and generate a more illuminating analysis of potential opportunity? I think there is. Federal contractors looking for opportunity in today's market should not rule out solutions which offer less capability but which are significantly less costly to maintain and leverage. This is counterintuitive: many think the solution is to increase value by offering their govt customer's more capabilities or services. In some cases, maybe, in others maybe not. If you can cut a capability set by 20% but cut it's cost by 80%, that's a winner.

Mon, Feb 25, 2013 Girish Seshagiri United States

A potential disruption is the government requiring that contractors provide warranty against software defects. It is likely that the 2014 defense appropriations will have a warranty provision. To the best of our knowledge, we are the only company that provides lifetime warranty against software defects and cybersecurity vulnerabilities found in production use. Defect free product delivery on predictable cost and schedule is a requirement to stay in business in most other industries. It is a disruption only in the case of software.

Mon, Feb 25, 2013

Nick, good points. The era of disruption is only going to accelerate in the IT sector. To remain competitive and bring innovative solutions to the government market, companies need to forge relations with new IT players to bring unique and cost effective solutions built on new platforms, not the same old legacy IT horses. This was highlighted in a recent article by Daniel Burrus, considered one of the world’s leading technology forecasters and business strategists,"When Technology Platforms Change, the Old Leaders Are Seldom the New Ones." http://goo.gl/jmlgr Your "The big question is: which side of the disruption equation is your company?" is right on the mark. Companies can either continue to cling to the old ways of doing business, or embrace new platforms devising new, successful business models. It is easiest to ride the IT horse in the direction it is headed.

Mon, Feb 25, 2013 Don O'Neill

It is time to shift from a blue ocean to a red ocean strategy base purely on competence and performance.

Mon, Feb 25, 2013 Charlotte, NC

Thanks, Nick. You nailed it with this insight.

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