In a tough defense market, executives seek winning edge.

• Author: Erwin, Sandra I.

* As the Defense Department continues to cut spending, contractors must rethink how they work with customers, how they partner with other companies and how they market their products, industry executives said.

It is a basic tenet of the corporate world that companies that seek growth must focus on "business development." In the defense sector, however, many of the traditional rules for developing new business no longer apply, and companies ought to rethink their strategies, said Bantz J. "John" Craddock, a retired Army general and senior vice president for strategic relations at Engility, in Chantilly, Va.

"It is a very confusing time now in Washington. ... And it will continue to be a very confusing time," Craddock told a group of executives at a business development workshop in Leesburg, Va., hosted by the National Defense Industrial Association and MBDi Mastering Business Development Inc.

Craddock suggested that, as the market becomes increasingly competitive and opportunities more scarce, companies need a deeper understanding of customer requirements and how procurement decisions are made in the Defense Department.

Executives in the industry have spent years developing "customer intimacy," Craddock said. In the current environment, though, the traditional relationships might not work as they used to, he said.

"In my judgment, customer intimacy started changing five to six years ago," he said.

As they position themselves to compete for future contracts, companies need greater awareness of who really is the customer and who makes the buying decisions, said Craddock.

The military is a complex customer because there are multiple chains of command that have some degree of power over buying decisions, and it not always clear who makes the final call. "Who is 'the' customer? Is it the 'using' customer or the 'buying' customer?" asked Craddock.

This is a key question that companies must answer, he said. The users of a piece of equipment--troops in the field, for instance--might favor a product whereas the procurement authority might have a different opinion. In general, users tend to go for performance and quality while buyers are biased toward the lowest price, Craddock said.

A company that lacks a "differentiator"--a unique technology or skill that nobody else has--will face a "dog-eat-dog kind of world," said Craddock.

"What we have seen in the last several years, and we continue to see, is that the using customer has his own perspective,"...