Vendor Selection: What Works

The Bay Bridge’s Newest Section

The California DOT’s selection of a partnership with Fluor and Shanghai Zhenhua Heavy Industry Co., Ltd. (“ZPMC”) to build the new section of the Bay Bridge hasn’t gone well.  It isn’t easy to chose the right partner for a unique project, there are some standard steps CDOT likely followed prior to picking the Fluor-ZPMC partnership.

Site Visits

I assume that CDOT personnel spent plenty of time in Shanghai with ZPMC and their partners, Fluor.  Getting to know a business at their site, reviewing their quality systems and developing relationships with their people are the best way to understand if they could really deliver what was needed for the bridge.

Partnership Audit

How long have Fluor and CDOT worked together?  Who are the key personnel?  How well do they know each other?  Do they have personal relationships outside of the office?  These are tough things to understand and this would usually be considered outside of the boundary of a standard investigation of a vendor, but with a project like this and a partnership with the dynamics of Fluor and ZPMC, it would be essential to understand what the dynamics really are when buying from this group.

Most Favored Nations Clause

A most-favored nations clause usually states that, “what we agree to here will be the best type of terms we agree to with any customer; and if not, we will offer any better terms that are offered.”  For most customers, this is a concern about price – they don’t want to pay top dollar for a system that they find out was sold to someone else for less.  However, this can be extended to items like service response times, quality yields, etc.  Even if it isn’t agreed to, by asking for it CDOT would trigger serious conversations from their vendor – the kinds of terms that Fluor and ZPMC granted to Greater Gabbard on their wind farm would have gone a long way to making CDOT whole for the pain of the faulty welding.

Capability Review

weldsZPMC wasn’t capable of performing the welding needed by CDOT in the volume that was required by the project.  A basic capability review of the vendor would likely have uncovered this.  Further, the welds were to have been tracked in quality systems that weren’t up to par.  A systematic review of the methods needed would have uncovered the weaknesses experienced by both the wind farm and bridge construction projects.  Asking someone, “can you do this welding with the right quality?” will get the answer that passes the question.  Spending several weeks on site and reviewing their current welding and quality recording projects would get a real understanding of what they are currently doing.

A Second Project

Neither the wind farm group nor CDOT will likely work with ZPMC ever again – and in this situation they lose a lot of their leverage.  The potential for a second project would bring ZPMC and Fluor back to the table to address the problems that they’ve had so far.  In fact, it may be the possibility of future wind farm projects that keeps the North Shore engagement on fairer economic terms (these projects may be fundamentally a better fit for ZPMC’s capabilities).  Fluor likely has more incentive since they are most likely to be looking at additional, similar projects.

Conclusion

There are many ways to understand if a vendor’s capabilities will really deliver what you need.  The true costs of bad vendor selection for these kinds of custom projects are far beyond the costs of more diligence on the part of the buyer.  CDOT will spend money for decades repairing this work when it would have been much cheaper to choose the vendor more carefully in the first place.

Posted in Industry, Marketing, Theory | Tagged , , , , , ,

Vendor Selection: The Bay Bridge

Choosing the right vendor is never easy.  The California Department of Transportation’s recent woes with the $2 Bn updated suspension span segment that was overseen by the US construction firm Fluor and physically built by Shanghai Zhenhua Heavy Industry Co., Ltd. (“ZPMC”) illustrate some of the challenges in choosing your partner in long term projects.

It is not easy to figure out who to work with in these situations:

  • How do I know who can do this project if it has never been done before?
  • How do we contract with each other in the case we encounter unforeseen problems?
  • How does a customer run the vendor evaluation process to get the right outcome?

There aren’t any perfect answers.  In a perfect world, CDOT would circulate an RFP and there would be 50 companies who had built identical bridges with long track records that are easily audited.  The competition under this scenario would be dictated by price.  Unfortunately, classical economics don’t work here.  CDOT has a unique site with unique time and other needs.

To choose the right vendor they needed time to develop trust in the vendor.  With enough time and exposure, they would understand what the vendor can and cannot do.

Time would allow ZPMC to fully understand what CDOT’s needs really are and whether or not a relationship with Fluor could help them achieve their goals.  From ZPMC’s standpoint, signing up for a project where they can’t deliver doesn’t help their interests – it only creates an installation that can’t be supported.

Unfortunately, it doesn’t sound like there was enough time for all of the parties to truly understand what they were getting.  ZPMC hasn’t met the quality and reporting needs of the bridge.  Welding methods that were needed weren’t followed correctly.  CDOT may have gotten a deal on the bridge, but the service and maintenance costs will be far beyond their initial estimates.

Posted in Uncategorized

Building the Right Team

In our management meetings the other week, we talked about what we want our teams to look like.  Running our commercial organization, my ideal team needs to reflect the needs of the market and be able to help our customers win using our technology.

The heavy industrial technology we sell:

  • Is complex
  • Takes time for customers to understand
  • Has global demand
  • Is very valuable once proven
  • Enables our customers next generation products (often their highest margin SKUs)

That means that individually, my team members need:

  • Good judgment to tell if an opportunity is real (and to get rid of ones that aren’t)
  • Persistence to pursue big opportunities that may take time to develop
  • Excellent inter-cultural and interpersonal skills to deal with the diversity of our own team and those at our customers
  • Discipline and poise to deal with situations that can be high stress with significant capital on the line
  • The right amount of attention to detail to map our capabilities to our customers needs and also master the intricacies of our legal and commercial agreements

As a team, I need them to be able to:

  • Address three core industrial applications
  • Be able to field unconventional / opportunistic inquiries beyond those three focused fields
  • Be able to cover the following languages fluently: English, Czech, German, Russian and Mandarin (and get by in several others including Spanish, Portugeuse and Italian)

Lastly, since we’re in materials science, we face a long adoption curve.  We must be both aggressive and patient, covering all of these areas with minimal costs and maximum impact.  Building the right team in such an environment makes our own business and that of our customers successful.

Posted in Industry, Theory | Tagged , , , , , ,

Organizations Want to Live

Any organization, once it is created, takes on a life of its own.  It wants to live.  Just as Kevin Kelly describes ‘technology’ as a seventh kingdom of life, in many ways the individual organizations encountered every day also behave like an organism or population.

It can be tough to kill an organization, even when it is clear it won’t last.

We’ve had competitors where (i) the economics don’t make sense, (ii) there aren’t enough customers for their product, and (iii) even management recognizes that their outlook is dramatically different than what was originally believed.  But the environment around them – investors, employees and potential customers, manages to keep the entity around and kicking.

Twice I’ve helped in the creation, and eventual dismantling, of nonprofits.  Both were worthy causes which had early successes – only to find that the giving environment for what they did was less robust than hoped.  Too small to support full time staff, it made sense to shut them down rather than let them die.  One has been closed for several years – and still there are glimmers from time to time that maybe it could survive – it wants to live.

Once created, an organization wants to exist.  The individuals who created it, who maintain it and who are impacted by it, prefer inertia to the unknown -and in doing so they keep it alive, even if that is not the best option.

Posted in Theory, Uncategorized | Tagged , , , , , ,

CrossFit is for the Cheap and Lazy (Like Me)

1-Fullscreen capture 532014 32938 PM

From SNL – “Talking to Putin “is like being cornered at a party by a guy who just started CrossFit.”” I was/am that guy.

CrossFit entered my life two years ago while working as an advisor with The Startup Factory to a health metrics company that was focused on the space.  If you are working as an adviser, then you should at least understand the market.  It turned out to be very enjoyable and create great results, primarily because I am cheap and somewhat lazy – two things that aren’t often discussed in regards to that mode of exercise.

Lazy or Delegating?

Having someone else figure out your exercise programming is great.  No need to open a book or do any research.  Don’t spend time thinking about it.  If you can get connected to a good gym with good programming that will be the last programming decision you have to make.  (Finding a good gym with good programming isn’t easy or automatic.)

In addition to not wanting to spend time picking programming, having everything focused into an hour is a great thing.  Working out in the morning makes for a great day – especially with my work life tied to a European manufacturing entity.  Manufacturing days start early.  Europe starts six hours ahead of North Carolina.  Making efficient use of that pre-dawn hour gives me more time to be a good husband and father.

Traveling a lot for work provides downtime in cities where it is tough to figure out what to do.  Not anymore – the third way CrossFit lets me be lazy is that I just find the nearest gym and go do a drop-in.  Stopping by gyms is part of the culture, it lets you push yourself and keeps you in new and challenging situations (like the time in Zurich I got lost on a run).

Cheap

My health wasn’t terrible – but it wasn’t good.  My weight was too high and my diet was lousy.  Several friends in similar situations had signed up with personal trainers.  My average attendance cost is $15 for an action packed hour with a good group of people and the results have been great.  That is a good deal.

Your Mileage May Vary

As the outstanding hosts of Barbell Shrugged are often heard to say, “there’s a difference between training and exercising,” and over time I’ve gotten more focused on training, which means I’m getting less lazy about my own programming and fitness goals.  Some days, when I’m over-thinking the training component, it is nice to turn things off, head to the gym and know that I’ve got a challenging hour in front of me that produces great results.

Posted in History, Industry | Tagged , , , ,

Seven Red Lines (3): Anderson the Expert’s Failings

2-Fullscreen capture 532014 114148 AM

“Anderson, it seems like you and Walter aren’t getting along very well.”

Anderson the Expert is in a tough spot, his value as an expert wasn’t well defended, but he doesn’t do very much to help himself out.  Stuck in a meeting with a customer who is uncertain of their goals, a project manager intent on scoring points and a boss who appears most interested in putting together a business trip, he’s the only one in the room who seems able to deliver what the customer needs.  Unfortunately, he compounds the difficulty of his position by making a few mistakes.

An opening “No”

Anderson spends a lot of his time trying to clarify what the customer wants – but his first word to them is “no.”  Many of his later efforts at clarification could have been more successful had they been his opening response, rather than immediately putting the buyer on the defensive.

Let the customer speak – “Red lines”

The Customer lead mocks Anderson slightly (1.45) asking, “And what a “red line” means, I hope I don’t need to explain to you?”  This was a perfect opportunity for Anderson to let the customer play out their own definition.  Instead, he works hard to maintain his ‘expert’ title, rather than using it as a segue to get her definition of ‘red line’ – which would have been useful as it contains neither lines, nor the color red.

Send ahead and preparation

At several points, Anderson is forced to describe basic technical terms for his area of expertise.  Color terms and perpendicularity pop up right away.  Using some kind of FAQ or ‘Red Lines 101’ document would have armed him with a way to address the customer’s ignorance in a way that is not insulting and doesn’t waste anyone’s time.

Re-write the spec

As the customer continues with her definition of seven red lines, Anderson holds dearly to the spec.  He’s got everyone in the room, all the decision makers are present, and rather than adjust the spec on the fly he allows himself to be trapped.  He could have made the modification himself or done a hand-off to his colleagues.

Improvisation without caveats

improvisation

Improvisation is fine, as long as everyone knows it isn’t predictive.

At nearly 4 minutes the customer notes that her example used a blue pen – she clearly wanted red lines.  Anderson then follows this path too far, with his point-scoring project manager Walter using his own words against him.  Anderson was improvising in front of the customer, but hadn’t made sufficient caveats to clarify what his results would imply.  Using the proper caveats would have helped the customer understand and also improved the likelihood that the improvisation would have worked.

Playing down to the customer

i-m-with-stupid

If you think your customer is stupid, you are both in a bad, bad place.

The customers’ “transparent lines” comment is pretty ridiculous.  Rather than address it directly by saying something like, “we can get the same effect with simply no red lines, and that will save you money,” Anderson decides to play along.  At the end, frustrated he uses his expert status to claim confidence in all fields.  At some point this is going to catch up to him – the customer team has their own Anderson somewhere, and when they finally discover the silliness going on here, the vendor will love all credibility.  Treating the customer like a fool will not lead to a winning scenario, educating them and helping them get what they want will lead to success all the way around.

Sidebar with the customer team

Justine shows interest in the perpendicularity issue.  As her request for kitten drawings emerges, it becomes clear that she could be the brains behind the customer’s desires.  This provides an occasion for Anderson to have a sidebar meeting with her and resolve some of these issues directly.  Empowering Justine would improve the customer’s comfort with the project and help alleviate the vendor’s technical risk in taking them on as an account.

Wrong job

Anderson’s in the wrong job.  He’s clearly frustrated with his boss.  The project manager he works with is more intent on embarrassing him.  The customer doesn’t have any appreciation for his skills.  Anderson himself seems pretty frustrated, and rather than maintaining calm, he simply caves to the social situation he finds himself in.

Posted in History, Industry, Theory | Tagged , , , , ,

Seven Red Lines (2): Technical Sales Meeting Mistakes

The biggest mistake made by the vendor involved in the Seven Red Lines / “The Expert” video is that from a strategic standpoint, they are failing to defend their technical resources.  However, there are a series of other mistakes that are common as a company develops its technical selling skills which are worth noting.

Documentation

4-Fullscreen capture 532014 114148 AM

Your technical team’s time is a strategic resource.  Use it wisely.

This meeting shouldn’t occur unless the Customer has put together a Request for Proposal (“RFP”) and the vendor has a standard Statement of Work (“SoW”).  Some kind of written interaction should have occurred prior to this meeting, and a huge amount of the confusion consists of fluctuating definitions that have not been put down on paper.

Documentation forces an internal dialog about what will be delivered.  It forces alignment of resources within the vendor and then between the vendor and the customer – failing to have any kind of documentation heading into a technical sales meeting or an initial project meeting as is depicted here, is a recipe for disaster.

Meeting Preparation

Anderson the Expert, Walter the Project Manager and their boss should have spent some time together preparing for this meeting – it looks like they’ve all just met each other.  That meeting prep should have covered the aforementioned documentation and also a conversation about what they will and will not cover in this meeting.

Unprofessional Dialog

Walter’s comments to and about Anderson are unprofessional.  He’s both promoting him as an expert and using it as a snarky comment to make himself look more important.  The customer lead is already losing her patience with the vendor team.  Unprofessional dialog brings efforts to clarify some of the technical gaps to a halt at several times in this dialog.  With only five people in the room, it seems as if there is more focus on point-scoring than there is on finishing the project with both parties happy about the outcome.

Walter’s Presence

Walter doesn’t need to be in the meeting, and depending on what the real next tasks are, his presence is not well justified at all in this business.  Having extra personnel on any kind of technical project leads to idle, empty and unhappy hands.  Walter spends most of his time justifying his presence by scoring points against Anderson, the only person in the room who appears to have real value.

Posted in Business, Industry | Tagged , , , , , , ,