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Step 5: Making value-chain analysis a strategic capability of the marketing department Engineering/construction companies have developed at least two approaches to break the forces of commoditization in their industry: 1. Project screening and selectivity. Not all projects are created equal or represent equal opportunity. Service providers should select projects on the basis of projected margin, not projected revenue. They must pursue projects that build on their strengths and core competences, projects where they can apply their best talents to serve their customers. This is done by first serving customers’ commodity work to position them to then pursue customers’ strategic opportunities. This is the approach used in the Fluor example. 2. Become selected customers’ strategic business partner. Such practice puts the business-services provider right in the customers’ lap, a decidedly advantageous position to be in when strategic opportunities are brewing. It also leads to many sole-source or noncompetitive-bid opportunities and, potentially, to higher margins. Both approaches require an investment of marketing resources. An account-management approach places significant demands on a provider’s marketing resources and budgets, and selectivity demands that market analysts be assigned to the selection process. But the traditional, undisciplined bidding process in the engineering and construction business can be even more expensive. In fact, so-called ‘‘pursuit’’ costs involve technical proposals and cost quotations at times exceeding several thousand pages at costs stretching into millions of dollars. Worse, the batting average in this free-for-all is about .300, meaning that more than two-thirds of these cost-proposal efforts are in vain, that two-thirds of the marketing-pursuit budgets are wasted. This dilemma calls to mind the time-honored adage of retailer John Wannamaker: ‘‘I know half my advertising budget is wasted. I just don’t know which half.’’ Continuing to serve the routine operating needs of customers is what service-providers all too frequently do, with disappointing results. Market share may be maintained and even grow while margins remain unchanged or, worse, decline. A value-chain analysis, combined with other kinds of information, is a useful way of discovering areas of B2B customers’ strategic needs and hence creating new business that will not only get a receptive audience, but also command premium margins. From Chevron’s point of view, getting its most urgent projects done in record time not only means that it is willing to pay a premium to achieve such results, but also strengthens its relationship with Fluor. Chevron continues to be a very satisfied client, and Fluor’s ongoing value-chain analysis increases the likelihood that Chevron will someday become a strategic partner.