Your Customer May Be Your Best Discriminator!

If you feel like you don’t have many technical differentiators, don’t fret. As equally important and valuable as differentiated horizontal markets are your vertical markets. Horizontal markets are your capabilities or service offerings. An example of a horizontal market may be software development. An example of a vertical market would be a specific customer, such as the US Navy. In fact, you could have several vertical markets within the Navy, such as NAVSEA, NAVAIR, OPNAV, etc.

Some Federal Government organizations appear to be “incestuous,” tending to only give awards to their “family of companies” with experience supporting their organization. Their logic is not sinister. They simply believe that a solid understanding of their processes, protocols and culture is critical to a contractor’s ability to successfully perform in their organization. Government Contracting Academy founder, Randy Wimmer, has frequently decided to “no bid” opportunities despite having perfectly aligned qualifications because of the customer’s “incestuous” reputation.

At first glance, you may be naturally inclined to shy away from these organizations.  However, these customers may ultimately be your most valuable assets! These are the organizations that you should develop a strategy to penetrate. If you do, then your competitive field drops off dramatically.

In Randy’s case, investing in strategies to overcome barriers of entries paid incredibly high dividends. Although he had some differentiated “horizontal” capabilities in operations research, he significantly invested into penetrating the Intelligence Community. He focused on the Intelligence Community because it has the ultimate barrier to entry. In all practicality, you must already be supporting the Intelligence Community to even see their bid opportunities! Of course, this begs the question “how can any new company ever win their first Intelligence Community contract?” Yes! You get it, exactly! This is the classic “which came first, the chicken or the egg?” dilemma. 

When Randy was on the outside, looking in, he hated this predicament. However, his investment to overcome this barrier to entry ultimately paid off. After he cracked the code to becoming a member of the “family of companies” that can actually see and bid on Intelligence Community opportunities, he was rewarded with an immediate $35M contract doing intelligence community work. He beat the “chicken and egg” dilemma by entering a mentor-protégé program that was sponsored by an Intelligence Community agency.

However, there are other ways to beat a “chicken and egg” dilemma. One of the most common ways is to provide a potential prime bidder with incredibly cheap personnel, therefore maximizing the prime’s profit at your expense. You will almost certainly lose money on this contract, but it will be the best investment that you’ll ever make should you gain access to a “closed market.”