Kirsten Gosch and Geert Van der Elst share their insights on the European public services opportunity: deep, wide and open for business.
Every year, over 250,000 public authorities in the EU spend around 18 percent of GDP purchasing solutions, services and supplies. The European public services market is very broad and deep, with multiple levels in each of the European countries.
With New Zealand joining the WTO’s Government Procurement Agreement in 2015, Kiwi companies can now do business with the public sector freely across the 28 countries of the EU.
As in any other market, government business is rarely won through opportunism and luck. It takes time, patience and good planning to position your company as a trusted supplier and serious contender for government contracts, but it can be hugely rewarding.
Navigating this complex market and competing with well-established local companies is well worth it as the GPA opens this huge opportunity to New Zealand companies.
Like any mature and competitive market, you should start by understanding the opportunity, the demand and the market structure, and then start developing a focused go-to-market strategy. Appropriate focus is truly needed considering this market’s vastness, and through this focused and clear go-to-market strategy, businesses can confidently explore the massive opportunity.
Firstly, it’s great to have friends and contacts, and because so many Kiwis do an OE in their late teens and twenties, it’s not uncommon for a company to appoint a sales manager, or distribution partner, who they once flatted with in Earls Court, or is a mate of a mate.
While this opportunistic approach can work, as those contacts may have existing relationships in place in your target market, it doesn’t constitute a well thought-out market strategy.
Europe is NOT a single market – yet, and may never truly be for public services. Market strategy in Europe starts with deciding which countries to target. What defines your ideal target market and the biggest opportunity? What are the drivers? What the constraints? Are your chances of success better competing for major national projects or should you concentrate on making the regional and city authorities your customers? In Europe, a lot of the public sector spending is at regional or city level.
The structure of the government sector across Europe is massively varied – take Germany and France for example, where the German public sector is devolved, while in France, Paris remains a true decision centre. Also, experience of having sold to and worked in the New Zealand Public Sector will be appreciated and perceived everywhere in Europe, but expect more knowledge and awareness in the UK versus, for example, Spain. New Zealand has a reputation for innovation and, not unlike Ireland and Denmark for example, has a size that enables that innovation.
Success in the UK however doesn’t automatically mean you can use the same strategy in the rest of Europe and you will have to rethink. But it’s worth looking at the opportunities in the Netherlands, Denmark, France, Germany and Poland and Spain.
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“The Public Sector market is very broad, very deep and very big, and with the right approach it’s an attractive, recession-resistant market. The public sector always has money – regardless of the economy. Healthcare always needs to be provided, and pensions paid.”
– Geert Van der Elst.
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Focus the key to success
Public services procurement is serious and complex and usually has long lead times. Yet at heart it’s not that different from typical B2B sales, especially of complex solutions. As with any other market, you want to identify the areas that offer the best opportunity, specifically for your company, as well as ensuring that you understand your customer’s needs and pain points, as seen through their eyes. It’s worth noting that in many markets, the customer’s needs are quite different from what New Zealand customers would see.
Partner another key to success
Your company may not have the size and local resources yet to win a government contract in Europe. Size, however, is not the only thing that matters: a well-selected partner will mutually ensure success: the right local partner speaks the language, knows the market well, is known by the purchasing party and might already have won a similar project in the country.
Thus a key part of the effort to develop your market entry strategy will be to decide on the question: ‘Who should I be partnering with to have the best chance of success?’
Once selected, go about building partnerships as you would for typical B2B sales in the private sector, and consider whether a particular company will be a constant partner, or a partner only for one particular deal.
Large opportunities in particular are usually announced many months in advance. You need to evaluate the potential partners in the market and find out who is thinking about bidding and who is already partnered with a company like yours.
Factor in how much sales time you should put into partners – for example, which of your team will you send from New Zealand?
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“You need to look for the markets that offer the best opportunity and understand the customer’s needs and triggers. In most cases you will do this with your partner, who will help you look at the lay of the land.”
– Kirsten Gosch.
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Know how they buy
In many large improvement projects there is a consolidation and preparation phase – from six months to two years – when the public services entity collects input from market specialists, defines the specifications (often with the help of client-side consultants) and looks at the available technology and solutions.
The time to position a company and a solution is during that phase, either direct or with a well-connected local partner. Once the request for proposal is published it usually cannot be influenced anymore, so if the biggest competitor was involved in the preparation phase chances are the specifications may favour them. This is despite the fact that the procurement rules will usually have measures in place to avoid this.
Government procurement processes are extremely formal. While this is daunting it also helps you because it’s the same for everyone.
Convince
When it comes to reference customers, most decision makers in the public sector would prefer to have local examples, as relevant and alike to their own situation as possible. However, if push comes to shove, if they see you making an effort to understand their requirements and adapt to them, and believe you have enough people on the ground to be believable – and will pass the financial checks – then a lack of local reference customers can be overcome.
Ultimately what you’re looking for are decision makers in the public sector with an agenda. The public sector is in constant flux; driven by both the desire to deliver better services for a changing population as well as reducing and reallocating budgets.
Be persistent – today’s failure can be tomorrow’s success
If you’ve never been involved in a bid and you hear on the grapevine that there is a huge project coming up, take it as an opportunity to observe, learn and prepare for next time.
If you have gone through a request for proposal process and your bid isn’t successful, learn from it so you know what to do differently next time. Understand the level of government you’re aiming for (federal vs state/local government), in what geography and – most importantly – why.
Time is a huge factor; it may take a long time to get in and government agencies are risk adverse. The upside however, is that once you’re in, you’re in, and others will have as much of a hard time replacing you.
Kirsten Gosch is the NZTE Business Development Manager, Hamburg, and Geert Van der Elst, is a European Beachheads advisor.
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The 6 top tips
1. Do you know the rules? When bidding for government work you have to follow the rules. Make sure you’re compliant.
2. Public sector leaders are often intelligent and idealistic, and they are usually open to communicating with anyone. It’s often easier to speak to someone in government than it is to speak to a decision maker in the private sector. If you call up someone in the public sector they will hear you out if they reasonably can
3. If you’re going to go after public sector business, plan for it well and think strategically ahead. Public sector procurement can take months – in some cases years to conclude.
4. You are likely to be involved in public sector contracts as a sub-contractor, so forming partnerships within the supply chain is crucial.
5. If your bid isn’t successful, learn from it so you know what to do differently next time, and what to do in the same way.
6. Understand what level of government you are aiming for (federal vs state/local government), in what geography and – most importantly – why.
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