The system that corporate America has adopted as the way to hire professional service firms is fundamentally flawed. This is especially true when choosing a partner for a complex engagement like medical product development. We’ve seen the Request For Proposal process tragically hamper innovation more times over the years than we care to admit— and it’s not just us. There’s a constant buzz about this topic in our product development industry, whose service providers collectively receive, review and respond to many thousands of RFPs per year.
RFP’s come in all shapes and sizes but the underlying theme is the same: “Explain to my company in writing, how you will solve our particular problem according to our problem statement, how much it will cost, and how long it will take. If you have any questions I’ll circulate them among my team and get you the answers. I’ll send all of the proposals and my recommendation to our executive team who will compare them and make a decision. Our RFP process was designed for speed and efficiency so I should get back to you very soon.”
That request is a recipe for misdirection, confusion, and wasted time for everyone. Let’s dissect it and see why.
Misdiagnosis Carries Great Risk
Don Norman, the father of human centered design and consultant to thousands of companies , once told me “95 percent of the companies who have hired me over the past four decades brought me a symptom rather than a problem to solve. My first task is always to identify the underlying problem.” If the underlying problem is so elusive, how can a company ask a bunch of strangers to solve it correctly, and for free by simply pointing them in a certain direction? Isn’t the reason you’re hiring an outside company in the first place to tap into expertise and experience that you don’t have in-house? Would you hire a doctor and instruct him to remove your kidney because you have a pain in your side?
Let’s assume for a moment that it is morally acceptable to ask bidders for your business to craft a plan or strategy for free through an RFP process. How could they do that without conducting a thorough diagnosis of your company’s very unique situation in context of your business goals? In The Quest For Truth in Medical Product Development, I explain in great detail why betting your company’s future success on assumptions could be disastrous. .
The Right Way to Engage
A better way is to have the product design firms you are evaluating present proof of their expertise in solving problems like yours and their ability to repeat the success for you. This goes beyond the simple challenge-solution-result case studies that you would expect to see during initial qualification. Instead, ask them to take you on a detailed journey where they completely lift the veil, using a few projects to illustrate their repeatable process, while allowing you to taste what working with them would be like. You should walk away with a clear understanding of exactly how the firm will solve your particular problem having developed personal confidence in their abilities. This quick and effective approach will only require an hour or so investment from both sides.
Cost is the second most critical piece of information sought through the antiquated RFP process. Companies normally ask for a fixed price to compare bids and finalize their budget. With the probability so high that the root problem is misunderstood and that your challenge is unique to your circumstances, then how can anyone be expected to attach a reliable cost to solving it? Providing a fixed price for a lengthy and complex product development project is impossible. There, I’ve said it.
My response to this question is always “What is your budget” and most reply “Well that’s why I’m asking for a proposal from you, so I know how much it costs.”
Dispense with Budget Games
RFP issuers should understand that being cagey is counter-productive. A true evaluation of project cost always hinges on the amount of risk the company is willing to accept, a factor that cannot be properly addressed through the RFP process. Frank discussion of risks, with cost data presented for alternative approaches, is the only way for companies to strike the best balance between risk and cost. The best and most experienced product developers will have detailed process-framed case studies of projects like yours available in different cost ranges so that you can understand the risk reduction additional services will provide.
The market-leading infusion pump manufacturer for example, has a lower risk tolerance than a start-up would. While both expect an infusion pump at the end, the plan and cost would be different.
The best approach is to talk about money early, at least putting the prospective product design firms in the right ballpark, or even giving them an exact number. If a primary RFP goal is to enable apples-to-apples comparisons, there’s no better way than adding a constraint like cost. It will help you pick the firm that can do the best work and bring the most value for your budget.
Change: The Great Unknown
The only constant in complex engagements like yours is change. Unanticipated changes relating to the development of new medical device technology play havoc with both cost and schedule estimates. A stranger parachuted into an RFP response situation can never anticipate all the changes innovation require. The most accurate and realistic way to find out how long a firm might take to complete your project is for that firm to compare it to similar past projects. You’re better off setting schedules based not upon wishful thinking but actual paths taken that were chock full of changes, delays, and challenges. Both schedules and budget estimates should be fleshed out at the same time through analysis of detailed case study presentations.
As to the RFP processes themselves we frequently hear that they are “designed for speed and efficiency,” I submit that speed and efficiency are false goals and one reason your RFP process may be hurting your business. Your primary goal should be to choose the most qualified partner for your project.
Additionally, there is some inherent clumsiness in a static RFP process that invites potential responders to ask questions for which staff provides answers when conversations are so much more valuable than information passed along on paper. Conversations allow you to explore nuances, discover vital nuggets of information and potentially reveal ways to improve your business that extend beyond the immediate project.
Bring in the Boss(es)
This, in turn, raises the all-important question of conversations with whom?
Strategic engagements require strategic conversations and it’s the job of upper-level executives to have them, not to delegate them down the chain of command. An engineer or purchasing agent is well equipped to source components or consultants for tactical tasks but not expert partners for strategic initiatives like medical device development.
The very notion of an executive team choosing a strategic partner solely by reviewing stacks of spiral bound paper proposals is insane.
Is there any better use of an executive decision-maker’s time than engaging in conversations that will determine the success of the business?