BD Pipeline: Calculating pWin
This final post in the Business Development Pipeline series builds on each of the previous posts on validating the pipeline, internal gates, and customer relations to calculate your opportunity pWin. As discussed earlier, pWin is a simplified mechanism of giving your management team a gauge of your company’s ability to win that specific opportunity and validation for spending B&P dollars to perform capture and submit a proposal. We will discuss pWin calculation through an example. In our example, several assumptions are made, specifically:
- The scope of the opportunity aligns with your company’s strategic goals.
- The scope of the opportunity aligns with your company’s current service offerings.
- The scope of the opportunity aligns with your company’s strategic customer engagement strategy.
- The customer is familiar with your company’s products and/or services specific to this opportunity.
- Your company is not the incumbent.
- The customer has given no indication that there are performance issues with the incumbent.
- The customer seems amenable to a new service and/or product provider.
Your pWin calculation process starts with a determination of capabilities and customer experience. You categorize the opportunity by quadrant–current or non-current customer and current or non-current offering–and set maximum pWin thresholds. The closer you get to these thresholds the higher your pWin:
Current Customer, Current Offering – 95%
Current Customer, Non-Current Offering – 75%
Non-Current Customer, Current Offering – 50%
Non-Current Customer, Non-Current Offering – 25%
As a side note, contract size is relevant when determining the amount of resources necessary to capture the opportunity. This ensures that you are consistently aligning the decision-making process for a $1K and a $100B opportunity to the company’s strategic goals.
In this example, we are operating in the non-current customer, current offering quadrant with a maximum pWin of 50%. With that as the ceiling, you run the opportunity through a strategic assessment in the prospecting internal gates and give the opportunity an initial pWin of 35% based on strategic fit and competitive landscape. (We use a 22-point assessment with interval weighting to determine your initial pWin value.)
As you move into the pursuit internal gate, you need to include two additional factors to make a pWin determination that will influence the bid/no-bid decision for this opportunity. First, your company’s win rate for the relevant quadrant. Your company has a 60% win rate for the quadrant into which this opportunity falls. Second, the buying habits of the source selection evaluation board (SSEB). You assess the SSEB’s buying habits as highly favorable for competitors to win contracts and therefore rate your probability of loss at only 40%. Our calculation of probability of loss is a combination of the factors outside your immediate control (e.g. SSEB buying habits, competitor teaming decisions, competitor product and/or service quality/availability, etc.). In this example we are only dealing with the SSEB buying habits because we have not covered competitive intelligence.
In order to calculate the opportunity pWin, you can use the following formula: a*b/(a*b+c*(1-b)). In this formula your win rate is (a) (60%), your initial pWin is (b) (35%), and probability of loss is (c) (40%). So the calculation for this opportunity’s pWin is:
.6*.35/(.6*.35+.4*(1-.35)) = 45%
It is important to note that these variables are independent of each other, meaning that your probability of loss and initial pWin do not have to equal 100%. The accuracy of your internal capabilities and customer relations assessments may increase or decrease either factor independent of the other. For example, if your assessment of the SSEB determines that there is a higher likelihood for incumbents to retain contracts, then can increase probability of loss independent of a proportional decrease in pWin. In this example, if you increase probability of loss based on the SSEB assessment by 40%, then your opportunity pWin drops to 30%.
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Kyle Green (firstname.lastname@example.org) leads the federal business development practice for Mythics, Inc., an award-winning Oracle implementation and customization firm.