Jim Salvatori, PV Technologies (PVT) best salesperson and Nathan Rubenstein, PVT’s Director of Sales and Marketing are faced with potentially losing bid for Solenergy’s Barstow project. Solenergy development LLC was one of the largest customer of PVT’s solar energy business unit and well reputed, major developer of alternative energy generation system. Executives at PVT were concerned that if company lose this bid than it will not only have negative impact on revenue but also lose their reputation as a market leader in this segment.
Based on the information Salvatori has received from external sources, PVT is trailing the other competitors – SOMA energy and BJ solar for Barstow Project RFP (Request for Proposal), mainly due to higher than expected price difference of inverters and results of confidential vendor evaluation lade by Greg Morgan, widely respected chief electrical Eng. at Solenergy. Salvatori had not been aware of this evaluation process prior and one can argue that PVT was rested at the their successes and fallen asleep at the switch
Analysis of the situational factors which influence the decision During 2009-2010, PV Technologies was dominant supplier to the several segments of the solar energy technology field and earned 38% of US market share primarily because of its R&D and reputation for product reliability and efficiency Solar segment was relationship driven market where 95% sales were driven by salesperson making direct sales calls on customers and prospect clients.
PVT had strong sales team and Jim Salvatori was considered their best sale person. Salvatori was also having good relationship with Solenergy decision making unit including Greg Morgan. As part of Solenergy’s operational risk management effort, company was conducting periodic confidential evaluation of their vendors finance and products offering Solenergy was committed on renewed focus on expense
control for their Barstow project During 2010-2011, inverter technology for solar energy was relatively new in the market and there was no standardized metrics available at the industry level to measure reliability and efficiency Efficiency and reliability, manufacturing cost and anticipated maintenance cost where the Solenergy’s deciding factors to pick the vendor for inverters PVT’s products were remained superior in terms of efficiency, reliability and productivity but price were significant higher than competitor – BJ Solar Greg Morgan believed that enhanced maintenance scheduled coupled with proactive quality control should compensate for the inferior performance characteristics of the less costly inverters and lower the net ownership cost Best alternative solutions 1. Offer to extend the original warranty at internal cost from 10 to 20 years Pros : Marketing and sales team believed that economic value of this alternative would offset any product cost related shortcoming Morgan may have identified Cons :
PVT already has best in class warranty – much better than their competitor so this may not help to move the needle This solution does not address Solenergy’s primary concern about upfront higher cost 2. Accelerate the introduction of a new product with higher capacity at 1. 25M and 98. 5% efficiency Pros : This option gives higher capacity, better efficiency and not significant price increases so company may able to gain top spot in the competition Better gross profit margin (43%) than 1. 0MW inverters (40%) Cons : PVT will be introducing this product first time in the market R&D team was concerned that all the potential malfunctions may not have been identified due to compress testing timeline 3.
Tactfully initiate the dialogue with Morgan and share information PVT had obtained about the reported findings of the evaluation and request for re-evaluation of the criteria from which he drew conclusion Pros : It will give PVT an opportunity to understand Solenergy’s product evaluation criteria which PVT engineers missed during the confidential review Since there are no Industry specific standardized metrics available to measure reliability and efficiency, re-evaluation process may help in finding common grounds on specifications and may ping out certain facts which Morgan has ignored No further action is required if information Salvatori’s has received from other sources is not true and just speculation Cons : This might result in challenging Morgan’s finding Evaluate and Select the solution
From above mentioned best possible solutions, solutions 2 and 3 might work depending upon how it’s executed but since the core issue was underlying fact that PVT was not partnering with their biggest customer, Solenergy’s product evaluation process. Solution 3 will have most impact on PVT’s prospect of getting Solenergy’s Barstow project. PVT inverters are superior in terms of efficiency, reliability and productivity but their list price is about 12% higher than nearest competitor – BJ Solar. PVT 1. 0MW inverter has better expected service life – 13. 2 years as compare to 10. 7 years and 12. 5 years for BJ solar and SOMA Energy respectively. PVT also offers 10 years of warranty as compare to 5 years, BJ solar and SOMA Energy offer.
It seems described parameters are worth for demanding extra premium as compare to their competitors. The real issue might be the product evaluation criteria Morgan used to come up with alleged conclusion that even with higher maintenance cost BJ Solar’s inverters will have lower net ownership cost. Since Salvatori was not aware of the evaluation prior (fallen asleep at the switch), PVT engineers missed the opportunity to justify their product specifications while Solenergy was conducting confidential product review. Identify and Resolve implementation issues Implementation of solution 3 needs to be planned very carefully as it challenges Morgan’s ability and it can also negatively impact customer relationship.
Since the information Salvatori has received is from external sources, there is a potential that it might be not true so PVT needs to weigh-in that option as well in their discussion. Here are the implementation steps to avoid above mentioned issues. Implementation steps 1) Salvatori to leverage his relationship with Morgan and start an offline conversation on PVT’s product specifications review to get Morgan’s buy-in 2) Once Morgan is ready for the review, Salvatori to bring his R&D team and engineers in the discussion with Morgan and provide in-depth justifications of their product configurations and how its differentiate as compared to their competitors 3) PVT engineers to Share internal evaluation criteria with Morgan.
4) Provide value propositions matrix, like shown below and give detail analysis on cost justifications Value Proposition Matrix Minimum Standard PVT Standard Efficiency in % 95% 97. 50% Reliability in % 94% 99% Expected Service Life 10 years 13. 2 years Warranty 5 years 10 years Up-time in % 96% 98% Fault tolerance in % 94% 97% 5) Above mentioned steps should give enough information to Morgan to revisit his alleged conclusion and Solenergy decision making unit may able to change potential decision company has made before publishing results of PRF. 6) This should also help in strengthening their relationship and define road map for future projects