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Prompts Are Easy. Adoption Is Hard. Here’s How to Be Ready. (Part 2 of 2) – December 8

Part 1 of this two-part article defined adoption and talked about what makes it hard in any organization. Part 2 describes the ways you can manage adoption challenges.

Exec Summary: Over the past year, countless blogs, articles, books, videos, courses – even job descriptions – focused on prompts and prompt engineering. While prompting is essential to effective GenAI use, it’s only one thing to consider. Generative AI outputs are another, and they need more attention.

Recall the IPO Model – inputs, processes, and outputs. For a simple generative AI use, prompts are the inputs, algorithms are the process, and a GPT’s response is the output. For more complex uses, inputs and processes combine as a user and the GPT interact through a set of prompts. Outputs can also take on a new importance, depending where they lead.

If the outputs of my GPT use become inputs to a business task or process you own, we face added requirements for communication, collaboration, and probably change management. And that calls for an approach to addressing the hard adoption questions.

How Do We Answer The Hard Adoption Question?

Meeting the challenge of generative AI adoption will require a comprehensive and methodical approach. Here are three principles we’re applying at DWPA we recommend you consider.

  1. Use an adoption framework
  2. Clarify goals and objectives
  3. Think like an entrepreneur

Use An Adoption Framework

The grand-daddy of innovation adoption frameworks might be Everett Rogers’ Diffusion Innovation Theory. In his 1962 classic (updated through a 5th edition in 2003), Rogers explains how an innovation diffuses through, or is adopted by, a social system. There’s a lot to Rogers’ research and it would be worth your time to read select portions of this book. But we can highlight the pieces you can use immediately.

Most well-known might be adoption types Rogers identified and arrayed temporally in an S-curve. Rogers called it the innovation adoption customer because he studied many types of innovation. Today it’s popularly known as the technology adoption curve, as shown here:

This shows that adopters organize in five types within any social system – your company, the Federal government, the govcon market, etc. – and that they adopt at different rates. This happens because of the time they take moving through six stages Rogers identified:

  1. Knowledge is gained when someone learns of the existence of an innovation, and gains some understanding of how it works. This leads to Persuasion.
  2. Persuasion occurs when someone forms a favorable or unfavorable impression of an innovation, generally before using. This leads to a Decision.
  3. Decision occurs when someone engages in activities which lead to adoption or rejection. When adoption occurs, this leads to Implementation.
  4. Implementation occurs when someone puts an innovation to work. This leads to Confirmation.
  5. Confirmation occurs when someone is reinforced for additional use, or reverses their decision and rejects the innovation.

Finally, adopters do all this because of the different ways they evaluate the following Innovation Adoption Factors:

  • Relative advantage is the degree to which an innovation is perceived as better than the idea it supersedes.
  • Compatibility is the degree to which an innovation is perceived as being consistent with the existing values, past experiences, and needs of potential adopters.
  • Complexity is the degree to which an innovation is perceived as difficult to understand and use.
  • Trialability is the degree to which an innovation may be experimented with on a limited basis.
  • Observability is the degree to which the results of an innovation are visible.

You might be familiar with another simpler framework called the Technology Adoption Model which looks at just two factors – perceived usefulness, and perceived ease of use. You might have a preferred framework, model, or theory. The important thing is to use one (or more) so everyone works with the same concepts and terms. Without that, people who need to be on the same page won’t be.

Clarify Goals And Objectives

The second principle is to clarify both uses or use cases, and broader adoption goals and objectives. It helps to clarify uses with a statement like the following, which captures use case elements:

As a [role], I want to [perform some action] on [some artifact] to produce [some output] 
in order to [accomplish something] or for [some reason].

This will not only help everyone think through any single use case, but it’ll promote uniformity and consistency across uses by all individuals, teams, and other organizational units. There are other ways to do this but the important thing, again, is that you get everyone on the same page by framing uses with concepts whose meanings are shared.

Clarifying adoption goals and objectives is trickier because adoption occurs by individuals, teams, business verticals, business functions, and the entire enterprise. Each properly has its own business-related goals and objectives which can exist in nested, prioritized, instrumental, or a number of other relationships.

Because adoption is about making full use of generative AI, and because making full use should do something better than what you’re currently doing, it’s important to use frameworks for figuring out what better means at any level. You might already use frameworks for individual performance, collaboration, productivity, innovation, or other things related to one or more levels. DWPA uses the Business Model Canvas. 

Think Like An Entrepreneur

“Think like an entrepreneur” is a way to summarize DWPA’s entire GenAI Discovery Project, which we’ve written about extensively. 

We’ve described our process for state assumptions about generative AI, our clients, and the govcon market and how we turned them into hypotheses to test. Test results are evidence we’re using to fashion capture and proposal generative AI-assisted services to validate with customers before going to market with them.

Generative AI is innovative and your use of it is also innovative. It helps to think like an entrepreneur because by adopting an innovation you are literally doing something different to create new value for yourself, internal recipients, and perhaps your customers.

At the outset there will be nothing but assumptions because you can’t have evidence for generative AI use you don’t have. State all the assumptions you can think of, turn important ones into hypotheses, and test them. Tests can be quick and easy – generative AI trials, simulations, if-then scenarios, voice of the customer, and more.

You need hours and days to try something to see what you get, and that’s your evidence. You’ll get strong evidence. You’ll get weak evidence. Collect it. Appraise it against goals and objectives, and apply it to see what happens in what actually amounts to another round of hypothesis testing and evidence gathering.


Generative AI is a powerful technology which is changing the human-machine relationship. And that has the potential to change the human-human relationship. Whether that change is beneficial or not depends entirely on us.

Use generative in the way you use all other software and you’ll get some ROI but not what you could get. Shift your thinking from use to adoption and you’ll not only execute tasks faster, you’ll improve communication, collaboration, and problem solving.

Prompts Are Easy. Adoption Is Hard. Here’s How to Be Ready. (Part 1 of 2) – December 7

Prompts and prompt engineering became all the rage just a year ago once the world had free access to a powerful, personal new AI tool called generative AI (GenAI). “How to” prompting blogs, articles, books, videos, and entire courses quickly appeared. And for good reason.

The way generative AI works is entirely different from most software we use, and learning to prompt it is essential to benefiting from it. But the benefit is in what we do with what generative AI gives us. In the outputs, not just the inputs. And that means thinking harder about adoption.

This two-part series defines and describes the adoption challenge, explains why it matters for business, and offers tips for managing it.

Follow ThinkSpace for weekly insights and contact Lou.Kerestesy@DWPAssociates.com for more information.

Prompts Are Easy

To prompt a generative AI system or tool – let’s call them GPTs – is to instruct it to do something for you. There are different ways to prompt GPTs, each of which has a purpose.

Prompt terminology sounds esoteric and much more intimidating than necessary.

  • N-shot prompting gives a GPT several examples to learn from before you ask it to do something for you. ‘N’ stands for the number of examples you give.
  • Generated knowledge prompting involves using information that the GPT has previously generated as a basis for new responses.
  • Maieutic prompting is a method based on the Socratic method where questions are used to encourage deeper thinking and self-discovery.

All logical and reasonable, right? (Want a chuckle? Maieutic is from the Greek and means “acting as a midwife,” which is truly fitting.) But these and a dozen more you or your teams might have done without the labels. Knowing they exist is a good starting place, and having a list in front of you can help if you hit a roadblock.

What makes prompting easy?

It’s conversational in nature, something we humans excel at. We prompt with natural language, not software language. We are at the center of the interaction, not a spreadsheet formula or word processing workflow. We see results quickly, which is generally reinforcing. We can end a session and start another if things aren’t working. You can try your first prompts in seconds, improve in minutes, and become reasonably good in an hour. You might have to learn to prompt for different results in different ways, but none of this is hard. We can get GPTs to prompt themselves.

There is an art to some prompting. “Summarize this article?” No art required. Just intent and knowledge of three words. Asking a GPT to help you and a team think through a knotty problem with no clear answer? That’ll require some artfulness – a little cleverness, thoughtfulness, experimentation, iterations, and patience. But it’s still easier than learning the art of cooking, golf, or piano playing.

What Is Adoption? And What Makes It Hard?

Has this happened to you?

You use generative AI successfully on one small task and immediately wonder if it’ll help you with a second task. You successfully use it on a few tasks and think to yourself, “I could make a process better!” Or, a team experiments, beneficially, with generative AI. Members compare notes and see the possibility of improving whole workflows and processes.

Adoption refers to making full use of an innovation. Organizations first try generative AI in piecemeal ways, which is entirely logical. But use will diffuse across the organization, and it will happen in different ways.

Some uses will remain “local,” where the output of a GPT stays with the person who provided the input. “Summarize this article for me,” or “Give me a first draft of a position description,” are examples. But the output of some uses will become inputs to others – or imply them – and use will spread. Using a GPT to evaluate project plans, technical approaches, or budget narratives might lead to better written content. But it can also lead to revised processes for producing content, revised workflows to better use the improved artifacts, and increased integration with related processes.

What constitutes full use will depend on the output, not the input or prompt. Full use can have big implications beyond prompts and even GPT responses. Many of these might be unforeseen when users start playing with a GPT. But they’ll emerge and this is one of the things that makes adoption hard.

In this way, organizations will see generative AI use lead to change. Generative AI could become a significant change agent, helping people do things differently to produce new value for themselves, internal beneficiaries, and paying customers. Many users will absolutely use generative AI to work more effectively and efficiently, and those uses will be voluminous. But generative AI’s true promise and threat could very well be change. And change is hard.

Unknowns make adoption hard, too, and there are quite a few with generative AI:

  • How it works
  • How to use it effectively
  • How to use it safely
  • What makes it hallucinate and what to do

And you’ve no doubt heard or read the speculation that GenAI, or AI, might take over the world. There’s some uncertainty.

Generative AI adoption will vary by user and that will make adoption hard on teams, business units, business functions, and entire organizations. Different people will see different opportunities and boundaries in generative AI use, different benefits and risks, and even different value and ethics questions.

Finally, full use will be an investment by organizations which can be hard. Who will be trained, for what?  How many? At what cost? On what schedule? To do what and change what in which parts of the organization? What business objectives, outcomes, and measures should be applied? And what about our products and services? Are any candidates for adding generative AI capability customers would like to have? What will that entail?

Part 2 of this two-part series will answer the question, how do we answer the hard adoption question?

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When AI Adoption Means Different Things to Different People, How Do You Get Them on the Same Page? – November 27

Work teams usually contain members of different types. Some are risk taking, others risk averse. Some think big picture, others work in the weeds. You have introverts and extroverts, different DiSC profiles, and more.

When people think, feel, and communicate accordingly, getting everyone on the same page can be a challenge. This is especially true of change, and that presents a special challenge for adopting generative AI (GenAI).

How do you help different types try and use generative AI so individuals, teams, and your organization benefit in ways you intend?

If you don’t have time to sort all this out, we’ll get you started. This article highlights two adoption frameworks and shows you how to put them to work, together.

Follow this page for weekly insights, and contact Lou.Kerestesy@DWPAssociates.com for more information.

A GenAI Challenge And Opportunity

Individuals and teams face known challenges adopting innovations. One 2015 National Library of Medicine study examined 20 adoption theories and frameworks, some of which have become well-known over time. One is the innovation adoption curve, popularly known as the technology adoption curve. Another is the technology acceptance model. More on both below.

What’s less well-known is how to support adoption by type. We have less research on this, and much of what’s available is written by typology advocates. With different types on our teams, this presents a generative AI adoption challenge.

When we talk about GenAI at work, we might expect colleagues or team members to hear one conversation. The same conversation. We might not consider that different types hear the conversation in different ways. That they think and feel their way through adoption in ways that make sense to them – and that there isn’t one way for all types.

So, if frameworks tell us the types of questions adopters ask, how do we help types of adopters answer them, together? How do we help individuals and teams have a collective conversation about generative AI without talking past one another?

Let’s look at the two frameworks we mentioned to see if they’ll help.

Framework 1: The Technology Acceptance Model

Developed in the 1980s, the Technology Acceptance Model (TAM) explains how users come to accept and use technology. It identifies two primary acceptance considerations – Perceived Usefulness and Perceived Ease of Use.

Perceived Usefulness refers to how much one believes a technology will enhance performance. Perceived Ease of Use refers to how much effort one believes will be required. TAM proposes that these two perceptions affect one’s intent to use a technology and that, in turn, affects one’s actual use.

One general finding is that Perceived Ease of Use affects Perceived Usefulness. The easier a technology is perceived to be, the more it’s seen as enabling better performance. The four-cell matrix is a common representation among these basic relationships.

Framework 2: The Diffusion of Innovation Theory

Developed in the 1960s, the Diffusion of Innovation Theory explains how innovation spreads through systems to be adopted or rejected. Like TAM, the Diffusion of Innovation Theory has been widely researched and popularly used.

The theory’s original author, Everett Rogers, investigated how innovations diffuse through social systems ranging from businesses to agrarian tribes. There are few adopters of any innovation at first, then more, then many, and over time adoption levels off. Adoption follows an S-shaped curve and Rogers identified five adopter categories along it:

  • Innovator
  • Early Adopter
  • Early Majority
  • Late Majority
  • Laggards

Rogers called this the innovation adoption curve, but today it’s well-known as the technology adoption curve. Rogers also hypothesized that adopters proceeded through five adoption stages:

  1. Knowledge – Knowledge is gained when an individual learns of an innovation’s existence, and gains some understanding of how it functions
  2. Persuasion – Persuasion takes place when an individual forms a favorable or unfavorable attitude toward an innovation
  3. Decision – Decision occurs when an individual engages in activities that lead to a choice to adopt or reject an innovation
  4. Implementation – Implementation takes place when an individual puts an innovation to use
  5. Confirmation – Confirmation occurs when an individual seeks reinforcement of their decision to use an innovation, or reverses that decision if exposed to conflicting information

Rogers, Everett M.. Diffusion of Innovations, 5th Edition (p. 23). Free Press. Kindle Edition.

Combining Frameworks

If we create a matrix using both framework’s key elements, we provide each adopter a way to think about and document their thoughts, feelings, hopes and dreams with regard to GenAI adoption:


In it, any user can document the information they look for to judge usefulness or ease of use (knowledge), what would make them form a favorable or unfavorable view of GenAI’s perceived usefulness or ease of use (persuasion), etc. Because each user would fill in the table, their comments would represent their voice as whatever type they happen to be.

Individuals, teams, or entire organizations could identify types if that were considered useful, but doing so isn’t necessary. If each person records their rationale in each cell, it gives colleagues, teams, business units, and organizations a basis for understanding perceived usefulness and perceived ease of use from multiple, diverse, perspectives.

That should be enough for differences related to types to benefit conversation, without making a study of types.


We want conversations to “get at” the different ways colleagues and team members think about generative AI, and excavating views by type is especially valuable for two reasons.

First, generative AI is available to your organization as general-purpose apps, domain-specific apps, and GPTs you create. Not only do you need to evaluate GenAI as a capability, you need to evaluate the form or forms in which individuals and teams will adopt and use it. It could be very instructive to see if different types prefer different forms.

Second, as organizational change goes, generative AI might be especially weighty because of its expected impacts to jobs and performance. Some will wonder, “Will my job change? Will I be able to change with it? Will my job go away?” Others might think, “We could use GenAI to improve so much – but we’re dragging our feet!”

To whatever degree views of GenAI’s change impacts depend on types, it would help you make adoption and investment decisions to know not just that certain individuals or teams view GenAI the way they do, but why they do. Especially if other individuals or teams view GenAI in the opposite way. Conversations about GenAI adoption with voices by type will help get you there.

Follow DWPA’s company page for weekly discovery insights. To learn more or launch your own discovery project, contact Lou.Kerestesy@DWPAssociates.com.

FedRAMP Modernization – November 20

The Office of Management and Budget (OMB) released a draft memorandum on October 27, 2023, outlining its recommendations for modernizing the Federal Risk and Authorization Management Program (FedRAMP). The OMB’s recommendations for modernizing FedRAMP are significant, as they reflect a recognition that the program needs to be updated to keep up with the evolving cloud computing landscape. If the recommendations are implemented, they could make it easier for agencies to adopt cloud services, drive innovation and improve the overall security of the federal government’s cloud computing environment. In addition, the recommendation could reduce the time, energy and perhaps cost of entry into the Federal government for cloud-based technology companies. A potential win-win for Government and Industry  

The need for speed and innovation 

OMB and the FedRAMP program office recognizes that our government must move faster to remain competitive and to stay ahead of our Adversaries Software as a Service (SaaS) remains the fastest growing segment within government cloud acquisitions. The US government is increasing its adoption of SaaS applications at a rapid pace. In 2022, US federal agencies spent a record $6.1 billion on cloud-based and SaaS applications, and this number is expected to continue to grow in the coming years. Factors driving this growth include: the need to improve efficiency and reduce costs, the desire to increase agility and innovation, and the need to improve security.  At the same time the introduction of new technologies/innovation such as Security, Artificial Intelligences, Machine Learning, Back Office Automation have exploded Artificial Intelligence (AI) market is a great example. As of November 2023, there were approximately 18,000 AI companies are based in the United States. This number has been growing rapidly in recent years, as AI technology has become increasingly powerful and accessible. Factors driving the growth of AI in the commercial and Public Sector markets include improved efficiency and reduced costs, desire to increase agility and innovation, and the need to improve security. SaaS providers typically have more resources and expertise in security than government agencies, which can help to protect government data from cyberattacks. 

The OMB recommendations are intended to accelerate the adoption of new technologies by the government.  

OMB key recommendations in the draft memo: 

  • Become more responsive to the risk profiles of individual services, as well as evolving risks throughout the cyber environment. This would involve developing a more risk-based approach to FedRAMP authorizations and considering the unique needs of each cloud service. 
  • Increase the quantity of products and services receiving FedRAMP authorizations by bringing agencies together to evaluate the security of cloud offerings and strongly incentivizing reuse of one FedRAMP authorization by multiple agencies. There is also language around a “No Sponsor “accreditations and the ability for companies implement “Proof of Concepts” up to 1 year for non FedRAMP compliant offerings. This would involve streamlining the authorization process for businesses and making it easier for agencies to adopt cloud services. A determination by the PMO would need to be made on the minimum number of security controls that would need to be implemented and the criteria for which the two approaches can be implemented. 
  • Streamline the authorization process by automating appropriate portions of security evaluations, consistent with industry best practices. This would involve using technology to reduce the manual burden of FedRAMP assessments and make them more efficient. The adoption of technologies and the refinement in approaches (Oscal, Continuous Monitoring.) should make Agencies more receptive to sponsoring new technologies. 
  • Improve sharing of information with the private sector, including emerging threats and best practices. This would help to ensure that both the government and the private sector are working together to protect cloud-based systems from cyber threats. 
  • In addition to these general recommendations, the draft memo also includes specific recommendations for improving FedRAMP’s approach to continuous monitoring, security controls, and risk assessments. 

The OMB’s recommendations for modernizing FedRAMP are significant, as they reflect a recognition that the program needs to be updated to keep up with the evolving cloud computing landscape. If the recommendations are implemented, they could make it easier for agencies to adopt cloud services and improve the overall security of the federal government’s cloud computing environment. 

FedRAMP Accreditation = Success?  

Congratulations, your company has invested the required energy, time, and capital to achieve FedRAMP accreditations. This is not an easy feat, but you now have an enterprise class offering which will be recognized by your potential customers in the Federal Government but also by the commercial markets that you serve (regulatory markets, retail, etc.) However, this does not guarantee your success in the Federal market. Understanding the nuances of the market is the difference between success and failure in this marketplace. 

Failure to develop a business case  

Many companies that attempt to enter the Federal market failed because they didn’t develop a business case. The companies fail because they don’t understand the dynamics of Federal Government market, the unique mission of the customers in order to secure sales let alone gain market share, fail to understand its competitors and their incumbency positions and/ or existing contract vehicles, fail to adapt their business model and/ or understand and comply with regulatory hurdles. Understanding your total addressing market within Federal is critical, it should be the first thing a business does before entering the market. 

By developing a business case, companies can identify and mitigate the risks associated with entering a new market. They can also ensure that they have the resources and capabilities necessary to be successful.  

Deep Water Point and Associates (DWPA) provides a 3rd party, unbiased market/business justification for companies wanting to enter the Federal marketplace. DWPA provides end to end services to accelerate client growth in areas of market research and intelligence, strategy and management consulting, business development services across the entire growth lifecycle. This is why so many businesses rely on the expertise of Deep Water Point and Associates to accelerate their understanding, entry and growth within the Federal marketplace. 

For more information, go to https://dwpassociates.com/ or contact Tom Ruff tom.ruff@dwpassociates.com

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What Is a GenAI Discovery Project? (And why do I need to know?) – November 14

Whether you use GenAI within your organization or you want to add it to services, where to start is a challenging question. Internally, you could run a small, first use at minimal cost and risk. You might even absorb the cost and risk of a somewhat larger trial. But costs and risks are different when you take a product or service to market.

To learn that clients don’t want the GenAI-assisted solution you took to market by taking it to market is costly. It wastes time and money, incurs opportunity costs, and can damage relationships and brand. There’s a way to prevent this and, ironically, it’s in the very unknowns that worry us about adopting GenAI.

The smart start is precisely with the things you don’t know. State all your guesses and assumptions. Turn some into hypotheses. Then test those to gather evidence for decision making. That’s exactly what DWPA’s GenAI Discovery Project does, and that’s what we’ll describe below.

What Will We Discover?

The term discovery in GenAI Discovery Project isn’t just descriptive – it’s prescriptive. It refers to a particular method for turning hypotheses about markets and customers into facts. It’s part of a larger method called customer development, created by Steve Blank and Bob Dorf to answer the question, “Why do startups with great ideas fail?”

In The Startup Owner’s Manual, Blank and Dorf argue startups risk great ideas by conducting product or service development without also conducting customer development. By conducting them in tandem, startups greatly increase their odds of going to market with a product or service customers want, and are ready to buy.

You don’t have to be a startup to benefit from customer development.

Today’s govcon market for GenAI-assisted products and services is so new, we’re all startups within it. Filled with more questions and hunches than facts, adding GenAI to existing services is sufficiently startup-like to benefit from customer development. That’s why DWPA is using the method to turn assumptions into facts for investment decision making. That’s what our GenAI Discovery Project is.

DWPA’s Discovery Process

We started in August by brainstorming every assumption we could think of about customers and the market. We generated dozens and grouped them in Osterwalder and Pigneur’s Business Model Canvas. 

Using that layout, we could see assumptions held about value propositions, customer relationships, customer segments, and channels – all outward facing from DWPA to the market. We could also see assumptions we held about inward-facing parts of the business model: Key activities, resources, and partnerships, revenue streams, and cost models.

Next, we turned assumptions into hypotheses. “GenAI will save time” became, “GenAI will get clients to a pink team draft faster by finding and aggregating content.” We literally reworded select assumptions as testable propositions using measures we could discuss or directly observe. To test, we used several capture and proposal tools on a trial basis, and we interviewed clients about their generative AI experiences.

Here’s where it got interesting. Testing didn’t just confirm or disconfirm hypotheses in a thumbs-up or thumbs-down way. Testing revealed new information which suggested new opportunities for support.

Testing the hypothesis that “GenAI will get clients to a pink team draft faster by finding and aggregating content,” for example, became evidence of several things:

  1. Clients will, in fact, save time
  2. We can help them plan time savings in different ways
  3. We can help them use time savings for different purposes
  4. We can help vendors to serve them, their clients, or both

With such evidence we could fashion provisional services and validate them with customers – which is the next step of Blank and Dorf’s customer development process.

We Discover Something Unexpected

Our discovery process led to an ahh-ha! moment we didn’t see coming.

The wording of assumptions read like results or outcomes, as they should: Time saved, money saved, the summary of a section, etc. Tests would demonstrate the possibility, and perhaps the probability, of realizing them. But they demonstrated more.

Tests highlighted requirements for realizing a benefit, and also highlighted steps which would logically follow from a benefit. The view into workflows, benefits and risks, option analysis and decision making – all related to use cases GenAI could support – expanded opportunities for support. Not every opportunity would be a value proposition, but some could be. One unexpected value of hypothesis testing was the broadening of our conversation about value propositions.

Earlier this year, there might not have been a single service in your line of work which included generative AI. There might not have been a single customer wondering how generative AI could benefit them. Today, every customer is probably wondering how GenAI might help, and first offers might be under development by competitors. Customer development is a methodical way you can manage risks in a new and emerging market, and capitalize on its opportunities.

To learn more or launch your own discovery project, contact Lou.Kerestesy@DWPAssociates.com.

ThinkSpace 11-23 GenAI Discovery Project

October 2023 – Vol. 12; Issue 10

Tracking Federal M&A’s Fall Foliage

The Turn of the Season

DWPA forecasted 2023 federal M&A activity in the March Practitioner’s Perspective. Now, as we enter the fall season and the government fiscal new year, it is time to reflect on the 2023 M&A atmosphere thus far and put on our weathermen hats again. In March, we forecasted that capital markets, private equity activity, technology trends, strategic acquirer activity, and a troubled geopolitical climate would stimulate more M&A activity. Conversely, we projected that higher interest rates and a looming debt ceiling, paired with procurement trends emphasizing Small Business Set-Asides, would cool deal volumes slightly. Heading into the final three months of the year, most – but not all – of our predictions hold true. Overall, transaction volumes were initially cooler than anticipated, with data showing a 21% decrease in closed transactions in the first half of 2023, as compared to the first half of 2022.

Buyers to Face the Cold

As temperatures drop, uncertainty looms over continued risk of a government shutdown and another interest rate hike, we expect buyers, particularly PE and PE-backed firms, to remain active in the market. As of March, we expected legacy consulting firms to remain the most aggressive buyers of scarce/in-demand capabilities to augment their existing federal IT portfolios. However, private equity (funds investing in platforms as well as acquisitions for platforms companies) has constituted the majority of deals closed in 2022 and continues to extend that lead in 2023. We also expected buyer strategy to be split between paying up for F&O businesses and stacking a few highly differentiated small businesses. This forecast was accurate, as many buyers are not willing to take on the risk of majority Small Business Set-Aside work. The hottest commodities have not shifted much since our last forecast—think DevSecOps, AI/ML, Low/No-code, and Cloud as the primary buzzwords, with bonus points for Cyber or Intelligence.

2022 and 2023 deal counts

Select Sellers to Stay Warm Indoors

Less than favorable economic conditions (debt ceiling uncertainty, turbulent credit market dynamics marked by regional bank failures, etc.) have generally not deterred sellers from coming to market by any significant margin. However, select businesses will likely elect to stay indoors this winter. As for small businesses, the OMB’s increase in the small business revenue threshold size has already disincentivized SB owners from wanting to sell, as expected. As for 8(a)s, we do not expect the recently enacted social disadvantage narrative requirement to have any tangible impact on M&A activity, although 8(a)s that must submit new certifications will demand more due diligence from prospective acquirers. Generally, “story” companies that are not obviously attractive assets will be highly scrutinized in a tighter market and will likely wait a few years before trying the market. At a macro level, the chilling effect of procurement delays will continue to be felt – likely more by would-be sellers than buyers, as companies banking on that one recompete continue to wait out the cold.

Vibrant M&A Volumes to Come

We expect M&A foliage to become more vibrant through the end of the year. Specifically, we predict peak foliage for actionable mid-major assets in the market. We expect a resurgence in mid-tier acquisitions by PE platforms to keep warm through the winter. The historic trend of sizable, high-profile deals in recent years and the shortage of mid-tier contractors gives way to an increased appetite for mid-major assets for an autumnal cornucopia. Further, we expect continued PE and PE-backed platform interest in acquisitions through the end of the year. We also anticipate continued emphasis on cybersecurity and intelligence procurements into the new year. Finally, we will be avid leaf peepers when it comes to watching for a potential government shutdown and any impact on deal flow – could the government really move towards tighter budgets after 5+ years of good spending? We’ll continue to monitor the landscape.

Top 10 Drivers of M&A Activity in 2H23

  1. PE interest accounts for the majority of closed transactions
  2. Scarcity of actionable mid-tier targets causing many buyers to reach for earlier stage targets
  3. Interest rate uncertainty impacting total leverage far more than valuation
  4. Sellers willing to take increased structure to prop up multiples
  5. Pivot away from the War on Terror toward peer competition with China and Russia
  6. Concern with tighter federal budgets after 5+ years of good spending enticing those that can come to market
  7. Procurement delays causing those waiting on recompetes or major new business awards to have to stay on the sidelines
  8. Insatiable demand for scarce technical capabilities around cyber, DevSecOps, AI/ML, autonomy, etc.
  9. Looming election uncertainty and choppy debt markets make mega deals hard to execute
  10. Foreign buyers experiencing renewed interest in gaining exposure to the world’s largest defense budgets via M&A

Marty Brennan

Charlotte Brewer

Shera Bhala

September 2023 – Vol. 12; Issue 9

Drafting Your Way to Federal Growth: Strategy vs. Tactics

You’re on the Clock!

The leaves are falling, the air is crisp, and laptops are humming as fantasy football owners log back into their long-dormant leagues. While federal contractors simultaneously prepare for the final days of FY23, both groups find themselves asking the same question: how to balance a coherent growth strategy with clear, effective tactics for the coming months? After all, fantasy football drafting strategies set the tone for the season—relying on trades from stingy fellow owners or grasping for straws on the waiver wire are easy ways to end up with an embarrassing tattoo or wearing your rival’s jersey for a day. Just as fantasy owners must carefully select their lineup, contractors must develop clearly defined and reasonably set strategic initiatives to empower federal growth for the year ahead. Prioritization of a small number of high-impact initiatives, reinforced with a tactical approach that includes specific assignments and actions, can help companies create a focused, attainable path to growth.

Sleepers, Bye Weeks, and “Do Not Drafts”

If fantasy owners could perfectly balance ease-of-schedule, high-value players, and a healthy bye week mix, anybody could be Matthew Berry or Field Yates. The fact is every fantasy owner is going to give up something when the draft jingle chimes. In the same vein, contractors cannot expect to pursue every single strategic initiative brainstormed at the annual strategic offsite. Build out a team with uniformly spread bye weeks (or an evenly distributed pipeline), and you may find yourself having to sideline your ease-of-schedule strategy (or focus mostly on big-swing, low p(win) opportunities). Draft Patrick Mahomes in the second round (or make hiring a dedicated capture manager an immediate priority) and you may not have enough depth in skill positions (or enough funds to train internal resources). Weighing the importance, value, and attainability of strategic initiatives against each other is key before diving into pure tactics.

Federal Growth Strategy and Tactics

Setting Your Lineup

Strategies provide overarching guidance—fast, sustainable federal growth is underlaid by a set of dedicated, tactical approaches which outline clear actions and responsibilities. The same is true in fantasy football, where this realization happens quickly—once the dust from the draft settles, Week 1 lineup setting is usually right around the corner. For those “handcuffing” star running backs with their backups, a tactical approach of monitoring the injury report before kickoff will ensure they are never left with a goose egg. In the federal world, smart tactics similarly make up the backbone of an effective strategy. Planning to expand into a new customer? Targeting dates for executive meetings with agency leaders might be a good start. Aiming for $50M in TCV submission before the end of the quarter? Assigning capture and proposal managers to specific deals can make that number tangible. Just as fantasy owners set their lineup each week, companies in the federal market should consider quarterly or even monthly reviews of strategic goals and tactical approaches.


No matter the amount of strategy or tactics, fantasy owners and federal contractors know well that both the fantasy world and the federal market bring their fair share of surprises. A fantasy draft strategy that relies on ease-of-schedule would normally employ a tactic of rotating players during their weeks facing elite opponents. However, when your leading scorer inevitably goes down with an injury, plans will change – suddenly, your tactic of reviewing other teams’ trade needs every Tuesday becomes crucial. The balance of strategy and tactics is useful in promoting flexibility. An overarching strategy can keep a singular focus, while numerous tactical avenues keep things flexible enough to weather nasty surprises. For example, under a strategic goal to win at least 1 of 3 major bids, the tactical decision to implement a weekly review of capture and proposal resource allocation can provide quick response to sudden RFP requirement changes. In the demanding worlds of fantasy football and GovCon, strategy and tactics must coexist in harmony.

Mock Draft of Growth Strategy and Tactics

  1. WR1: Run up the score—strategically anchor company growth goals on clear comparative advantages
  2. RB1: Every-game starters—understand that delivery team needs may require tactical flexibility within growth strategies
  3. WR2: Strength-of-schedule play—lay out the year ahead for major capture efforts and large bids
  4. QB1: Team leader(s)—hold annual exec gatherings that set the strategic and tactical tone for the upcoming FY
  5. RB2: The “workhorses”—assemble a dedicated capture and proposal team that meets regularly
  6. TE1: Unsung heroes—mix in smaller, more attainable strategic goals focused on building internal capacity
  7. D/ST: The elite, competitive edge—“stream” teaming partners when opportunities exceed internal capabilities
  8. K: The longshot—low p(win), high-value wins are rare, but can result in tremendously quick growth

Jack Jacobs

Shera Bhala

Jessica Butturff

Congressional Leadership Remains at Odds with Each Other after the August Recess

Supplemental Aid for Ukraine and Disaster Assistance Splits House and Senate Republicans

Members of Congress were back in session this week after the August recess, and they have begun laying the groundwork for what is expected to be a nasty spending fight through the end of the month. The fiscal year and the government’s spending authority end after September 30th. On October 1st, without a full spending package or a short-term, stopgap spending package passed, the government will shut down, leaving all non-essential government employees furloughed. But before we get to that point, Congress has a few weeks to try and resolve what is shaping up to be a massive budgetary gap between House and Senate spending bills, as well as a variety of political and policy issues.

The Senate is hitting the ground running with Majority Leader Chuck Schumer scheduling the FY2024 MilCon-VA, Agriculture, and Transportation-HUD bills to be introduced on the floor early next week. The Senate versions of these spending bills contain billions of more dollars in spending and lack the “culture war” provisions which the House Appropriations Committee approved. Senators are approaching the appropriations process in a bipartisan way and there is no appetite for a government shutdown.

Meanwhile on the House side, Republicans are running the show on their own; they weren’t able to get a single Democrat to vote for any of the bills in the House Appropriations Committee. Spending in these bills has been cut to well below the number reached in an agreement between Congress and the White House during the debt limit standoff earlier this year. House Speaker Kevin McCarthy is now put in the position to somehow wrangle an agreement out of all of this; he stands in the middle between his the far-right Republican Freedom Caucus and the White House and Senate which are mostly in lockstep with each other. Adding to the complexities of this budget deal are the need for a supplemental aid package which the White House and Senate want for disaster relief and to support Ukraine’s military. However, House Republicans want to cut out military assistance for Ukraine is exchange for additional funding and policy changes on the U.S.-Mexico border. Some Republicans have even suggested leveraging their support of any agreement for action by Speaker McCarthy to begin impeachment proceedings of President Joe Biden. As this budget fight continues, keep in mind that any one Member of Congress can issue a motion to vacate and attempt to oust McCarthy from his Speakership.

Here’s what else you may have missed this week:

Department of Defense going on the offensive against Senate blockade of military promotions. Senator Tuberville (R-AL) has been denying unanimous consent to all senior military promotions since February in retaliation for a Pentagon policy which grants leave and reimburses travel expenses for military personnel who cannot obtain an abortion or receive reproductive health care in the state where they are stationed. The backlog has now affected over 300 positions which need Senate confirmation, including those nominated to lead the Joint Chiefs of Staff. Throughout this week the Pentagon has taken the unusual, but not unprecedented, tactic of having its top military leadership write op-eds and conduct TV interviews to try and get Senator Tuberville to budge. They even spotlighted the issue in an article on their front page earlier this week. In taking the case to the American people, they are arguing that Tuberville is negatively impacting military readiness; Navy Secretary Carlos Del Toro claimed the Senator was “aiding and abetting Communist and other autocratic regimes around the world.” Despite this effort, the issue is likely to remain at a standstill with Pentagon officials and the White House refusing to budge on reversing the policy, Senator Chuck Schumer refusing to introduce each nominee one-by-one (to avoid creating a precedent in denying nominees for political expediency), and Senator Tuberville refusing to budge in his anti-abortion fight.

FDA and CDC set to approve new COVID booster as hospitalizations spike around the country. The Food and Drug Administration may approve the updated COVID-19 booster as early as today (so keep an eye on the news) which would pave the way for the Centers for Disease Control and Prevention, which is scheduled to meet on Tuesday, to give final approval on the vaccines as early as next week. This update comes as hospitalizations for COVID infections have increased for seven weeks in a row; even First Lady Jill Biden tested positive for the virus (she has since tested negative). The new booster shot will target the omicron subvariant and has been found to give additional protection against other variants as well.

Senate Minority Leader Mitch McConnell vows to finish his term despite health concerns. During the August recess Sen. McConnell captured headlines again after yet another protracted on-camera freeze during an interview which itself included questions about his health. Staff responded to the incident saying that the Senator was dehydrated. McConnell then took the issue a step further this week during a meeting with Senate Republicans where he presented letters from the on-site doctor in the Capitol for members of Congress who concluded that the Senator had not suffered a seizure or stroke. McConnell asserted that he would finish his term as leader, which ends in January, as well as his term in office, which ends in 2027 unless he runs for reelection. For the most part, McConnell has the support of the rest of his party, although Rand Paul, the junior Senator from Kentucky who himself is a doctor, has voiced skepticism that he could have really had a thorough medical evaluation. For the time being, McConnell has the important role of keeping his party and the Senate united throughout this appropriations process.

Local Government G-News September 6, 2023

September 6, 2023
Federal Funding Opportunities

U.S. Department of Commerce; National Oceanic and Atmospheric Administration Fiscal Year 2024 Marine Debris Removal under the Bipartisan Infrastructure Law letters of intent due October 27, 2023

The National Oceanic and Atmospheric Administration (NOAA) Marine Debris Program, through the Bipartisan Infrastructure Law, will support the removal of large marine debris throughout the coastal United States, Great Lakes, territories, and Freely Associated States. These removal projects should focus on large marine debris, including abandoned and derelict vessels, derelict fishing gear, and other debris that is generally unable to be collected by hand.

U.S. Department of Commerce; National Oceanic and Atmospheric Administration Fiscal Year 2024 Marine Debris Interception Technologies under the Bipartisan Infrastructure Law letters of intent due November 15, 2023

The Marine Debris Program, through the Bipartisan Infrastructure Law, will support the installation of proven marine debris interception technologies, throughout the coastal United States, Great Lakes, territories, and Freely Associated States. Projects will focus on the installation, monitoring, and maintenance of proven marine debris interception technologies that will capture marine debris at or close to known marine debris sources or pathways.

U.S. Department of Energy; National Energy Technology Laboratory Inflation Reduction Act Transmission Siting and Economic Development Program concept papers due October 31, 2023

This program aims to ensure the timely siting and construction of new or upgraded interstate or offshore electric transmission facilities while providing economic benefits to impacted communities. In order to accelerate and strengthen siting and permitting activities carried out by state, local, and Tribal siting and permitting authorities, this program will support efforts to standardize and streamline siting and permitting processes, coordinate across jurisdictions, and carry out robust public engagement, among other things. In order to provide economic benefits to communities impacted by the construction and operation of interstate or offshore transmission lines, including economically disadvantaged communities and environmental justice communities, this program will provide funds to siting authorities or other types of state, local, or Tribal governmental entities to support a wide range of projects that provide benefits targeted to the needs of impacted communities.

U.S. Environmental Protection Agency Region 2 Fiscal Year 2023 and 2024 Wetland Program Development Grants applications due October 24, 2023

Wetland Program Development Grants (WPDGs) assist state, tribal, territory, and local government agencies and interstate/intertribal entities in developing or refining state, tribal, territory, local programs which protect, manage, and restore wetlands. The primary focus of these grants is to develop or refine state, tribal, and territory wetland programs. A secondary focus is to develop or refine local (e.g., county or municipal) programs. Projects must be performed within one or more of the states, territories, and federally recognized tribal nations of EPA Region 2 specifically within the geographic boundary of New Jersey, New York, Puerto Rico and/or the U.S. Virgin Islands to be eligible to apply for funding.