1. 1
Uncertainty analysis of
Proposals via Milieu Analysis
Chakradhar Iyyunni, Ph.D. , Faculty L&T Institute of Project Management
Monika S. Purohith, PGPEM Student, NICMAR, Pune
27 September 2013

2. 2Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Agenda
Plan for the talk
Motivation – 1 slide
Background – 5 slides
Proposal : Role and Characterization of – 5 slides
An Illustration – 4 slides
Results, Conclusion, Future Work – 6 slides
Summary – 2 slides

3. 3
Motivation
• With the induction of “Stakeholder Management” knowledge
area into PMBOK 5th Edition, we explore its influence on Project
Proposals.
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
• The premise in the work relates to the important role given to the
project proposal
– address the needs of the customer milieu
– determine business viability ( read as: competitive advantage)
– Ensure delivery excellence
• The “service provider” / “EPC contractor” should develop
flexible, adaptive and innovative ways to market project
capabilities and operate beyond transactional (logic) response.

4. 4
Background (1 / 5)
Industry “positioning” in India:
• Historical success and “optimistic” growth scenarios is not
enough
• Customer focus without technological competence is short-
sighted-ness
• Diversifying capabilities (to include industry-specific expertise
and consulting) as opposed to differentiating them
• Global “Plays” (by leveraging their competencies, breadth of
industry exposure and project execution capabilities) without
inclusiveness (segmented exposure)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Level 3 behaviour – Leadership in Managing Uncertainty needed !

5. 5
Background: Challenges for ESO (2 / 5)
• Teams are
– small in size, moderately skilled
– relegated to a support function in the minds of the customer's
engineering teams,
– use of the bottom of the talent pyramid (0-3years experience)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
• Projects are
– of short duration, needs to be delivered rapidly,
– lacks customer & industry big picture
– unable to absorb product liabilities.
– diffused scope statements which are lacking in specific work
expectation guidelines
• Customer Organizations are
– lack of clear engineering services outsourcing budgets
– emerging industry trends (low cost, specific functionality) create
over-optimistic expectations

6. 6
Background: Current State of ESO (2 / 5)
• Teams are:
– small in size, moderately skilled
– relegated to a support function in the minds of the customer's
engineering teams,
– use of the bottom of the talent pyramid (0-3years experience)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
• Projects are
– of short duration, needs to be delivered rapidly,
– lacks customer & industry big picture
– unable to absorb product liabilities.
– diffused scope statements which are lacking in specific work
expectation guidelines
• Customer Organizations:
– lack of clear engineering services outsourcing budgets
– emerging industry trends (low cost, specific functionality) create
over-optimistic expectations

7. 7
Background: Current State (3 / 5)
• Account / Customer-specific teams fall prey
– to discontinuous usage of engineer's skill, knowledge and
continuity in the type of work performed
– lacking both in maturity and value even though increased skill
level
– un-clear role among the various actors in the Proposal and
Delivery milieu
– significant effort for proposal creation – not billable
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
The underlying uncertainties become risks and problem situations
• Organizational influence on poor proposals
– Undue impact of personality of the project account manager,
– Lack of synergy between sales and delivery teams,
– intense competition and attrition of account managers.
– unable to address the multiple levels of accountability in the
customer organization,

8. 8
Background: Uncertainty Description (4 / 5)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Category Type Uncertainty Description
Market
Internal
Business-specific (ESO is either an Imitator or
Innovator)
External
Market risk (Consumer specific, related to dynamic
aspects from PES(T)LE analysis)
Technology
Internal Novel to Organization not to the market
External Current work by your competitor (unknown to you)
People
Interaction &
Processes
Internal Motivation, Professional pride, organizational culture
External
Technical competence aligned to project
requirements
Customer
Relationship
& Information
Internal
Status of Sales-delivery synergy of internal milieu,
Tension from cultural dimensions mismatch
External
Status of Trust, Matching of requirement to
expectation between organization and customer

9. 9
Background: Literature (5 / 5)
• Cova (2002) : reactive to pro-active approach to proposals
• Holstius (2xxx) : relational dimensions of proposals important
• Tikkanen (2007): two levels of relational dimensions
– (1)project level relations (2)firm-level relations
• Combined scope-schedule risks be managed at Proposal
level (Iyyunni 2013)
– address uncertainties: Market, Technology,
– role definition in the Milieu
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

10. 10
Proposal Dimensions (1 / 5)
• The interaction between actors in the Milieu that increases the
fitness of the proposal
• Two classes
– Functional class : Technical, Financial
– Relational class : Social, Political
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

11. 11
Proposal Dimensions (2 / 5)
• Technical:
– meet the technical specifications
– provide technical training to employees
– use of latest technology and offer customizations
– technology and domain knowledge availability
– technical resource availability
– alignment of technology with the scope of work
– certifications and accreditation
– access to and availability of infrastructure
– access to engineering consultants
– R&D activities in the sector
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

12. 12
Proposal Dimensions (3 / 5)
• Financial:
– favorable financial terms and conditions
– payment schedule and flexibility
– insurance against delivery problems
– Using right type of contract (fixed price, time and material,
profit-sharing etc.),
– financial risk assessment plan
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

13. 13
Proposal Dimensions (4 / 5)
• Social:
– extent of networking
– past customer feedback
– relationship with the end-user
– alignment with the vision, mission and goals with customer
– trust and reputation among customer's milieu
– articulation of the customer's need
– collaborative orientation of the customer
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

14. 14
Proposal Dimensions (5 / 5)
• Political:
– consideration of customer market position,
– market share of the product/service by customer
organization,
– ESO's market presence specific to service/solution
– local partners, referrals, influence on customer's milieu,
– understand and maintain clients reputation in industry-
segment and market
– customer's influence on peer-group in industry segment
– associationwith standard and professional bodies
– supply chain relationship,
– alignment to government regulations
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

15. 15
Why is a “Proposal” key to the organization?
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Illustration (1 / 4)

16. 16
Illustration: Organizational Snap-shot (2 / 4)
• An ESO organization's account strategy is crucial to maintain a
sustained growth.
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
• Account growth depends on success (size and volume )at
proposals
Data deleted

17. 17
Illustration: Account snap-shot (3 / 4)
– Account Management is a complex process ~ market influences and
industry trends,
– customer organization's strategy and
– ESO‘s sales team priorities, technical team capabilities
– Age and Health of the accounts (mentioned in paper)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Account
Number
Ratio of Current year to Previous Year Revenues
YoY-1 YoY-2 YoY-3 YoY-4
1 1.55 1.45 1.30 1.49
3 3.21 1.59 1.16 1.18
4 2.89 1.50 0.92 0.93
6 2.74 1.37 1.97 1.37
7 0.75 1.59 4.01 1.10
8 1.77 2.61 4.82 1.73
11 1.09 1.31 1.15 1.06
12 1.90 1.29 0.99 1.27

18. 18
Illustration: Proposal Snap-shot (4 / 4)
• Proposals should be analyzed by industry type, market
conditions, customer profile, customer relationship parameters
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
No. Proposal Description Win /
Loss
Reason for Win /
Loss
1
Large scale data (in PDM system) Win
Social, political,
Financial
2 Passenger bus for India launch Win Social, Political
3 Asset Management Win Technical
4 Large engineering engagement Win Social, Political
5
Engineering “Program” Win
Technical, Social,
Political
6
New PLM implementation program Loss
Social, Political,
Financial
7 Large Automotive design project Loss Technical
8 Medical device development Loss Political

19. 19
Results: Proposal Characterization on
T,F,S,P dimensions (1 / 6)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Proposal No. Rating on these aspects of Proposal
Technical Financial Social Political
1 4 4 3 3
2 4 4 3 3
3 4 4 4 3
4 3 4 3 3
5 4 3 3 4
6 4 4 2 2
7 2 4 3 3
8 3 4 1 1
• Customer profile is also a key determinant of proposal quality –
geography, market segment, R&D spend etc.

20. 20
Results: Assessment (2 / 6)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Dimension Scheme-1 Scheme-2 Scheme-3
Functional Technical 0.46 0.4 0.34
Financial 0.18 0.2 0.22
Relational Political 0.18 0.2 0.22
Social 0.18 0.2 0.22
Proposal No. Weighted assessment
Scheme-1 Scheme-2 Scheme-3
1 3.6 3.7 3.6
2 3.6 3.7 3.6
3 3.8 3.85 3.82
4 3.2 3.15 3.25
5 3.6 3.7 3.6
6 3.3 3.4 3.16
7 2.7 2.6 2.9
8 2.5 2.55 2.37
• cut-off score: (1) overall- 3.0 (2) technical dimension - 4.0
• 3.0 to 3.3 to be in the grey area (either a win or a loss)

21. 21
Results: Milieu Characterization (3 / 6)
Internal Milieu
External Milieu
Uncertainty in Proposals via
Use for managing the appropriate
dimensions
Milieu Engagement plans by
Proposal Project Manager.

22. 22
Results: Conclusion ( 4 / 6)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
Category Type Stakeholder Responsible
Proposal
dimension
Market
I Senior Marketing team Political
E
Sales person, Vertical Head Social,
Political
Technology
I Subject Matter Expert Technical
E Discipline Team Technical
People
Interaction &
Processes
I
Project Manager/ Account manager
; Delivery Team
Social
E Resource Management Team Social
Customer
Relationship
& information
I
Account Manager Social,
Political
E
Project Lead/ Project Manager Social,
Technical
I – Internal ; E – External
• Every stakeholder has a key role to play for ensuring proposal quality!

23. 23
Results: Conclusion ( 5 / 6)
Uncertainty in Proposals via
• Invest to Build robust project/ program pipeline
• Stakeholder / Milieu role clarity is vital and crucial

24. 24
Results: Future Work (6 / 6)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry
What else?
Translating our understanding of
customer needs to functional and
relational dimensions
How?
2nd level of parameters listed here.

25. 25
Summary ( 1/ 2)
• Relational dimensions play an important role in winning
proposals.
• Pre-sales practices facilitating intense action ‘upstream' of
project by anticipating, defining and constructing of project
scopes have to be developed and refined.
• Managing relationships and networks, during a proposal life-
cycle, and good decision making methodologies (like AHP) are
crucial. (PMBOK 5th Edition, Stakeholder engagement process
group)
Uncertainty in Proposals via Milieu Analysis in Engineering Outsourcing Industry

26. 26
Summary: Directions and Good News (2 / 2)
Uncertainty in Proposals via
The Good news
• Engineering Service Organizations have understood the need
for relational dimensions. A rough guess that 40-60% revenues
come without the need to bid.
Directions
• Strategy dimensions: (1) Articulation of Customer need (2)
organization’s ability to differentiate technology for meeting the
need
• Measurement on the Social, Political dimensions and maturity (a la
CMM) is yet a distant goal.
• Correct excessive Customer focus with technological competence”

27. 27
Thank You.
Presentation Title