Why estimating the probability of winning (pwin) is a myth and your estimate is wrong

Before people invest in a pursuit, they like to know what their chances of winning are. They want to know the odds of winning are high enough before they commit. To make their estimate of their chances sound more scientific than it really is, they often call this estimate “probability of win (pwin).”

The problem is that no one can accurately predict pwin

Try this… Add up every pwin estimate your company has done over the last year and average them. Now compare that average to your win rate over the same period. The difference proves that your pwin estimates were inaccurate. If your pwin estimates were accurate, they’d average out the same as your win rate. 

How much would you like to bet that most pwins are much higher than the actual win rate? People who want to bid tend to estimate high.

Most companies avoid comparing their win rate with their pwin so they don’t have to admit that all of their pwins, and quite possibly all the decisions based on them, are wrong. Not only that, but nobody in charge of business development wants to admit that they don’t know the likelihood of winning. And nobody in finance is willing to make future revenue projections without something “quantified” to base them on.  So people go along with the mythical fiction that is pwin. Because they need some way of quantifying the chances of winning.

Pwin can’t be fixed

Go back to your pwin average. Where did your pwin estimates go wrong? Which factors were too high, low, or missing? And how can they be changed to be accurate under future circumstances instead of last year's circumstances?

You don’t know. You can guess, but your guess won’t be accurate. If we come back next year, your pwin estimates will not match your win probability. Again.

Because pwin is a myth.

There is no way to accurately represent pwin as a percentage. No matter how much we want it to be true.

It’s just that pwin is a myth we can't do without. We need to be able to make decisions based on the likelihood of winning. Should we pursue it? How much should we invest? How much revenue will result? 

What we can do to understand our chances of winning

We can stop pretending we can estimate pwin as a percentage with sufficient accuracy. We can admit it’s a guess and not a mathematical probability. 

I recommend using simple pros and cons and then talking it out. Whatever you do, don’t try to convert it into a percentage. There is value in talking about whether a lead is worth pursuing. But let’s not fool ourselves that there’s mathematical precision to our guesses. I mean forecasts.

A good reason to base your pursuit decisions on talking about the factors in favor of and against bidding, is because that is what will drive your win strategies. A percentage just gives a false sense of confidence. Pros and cons can both be turned into action items. A percentage does nothing to help you win and may work against it. But pros and cons help you know what you need to do to win. Arguments for and against bidding articulate your strengths and weaknesses in a way that you will need if you bid.

If you must assign a number to pwin so you can do spreadsheet calculations, then do what you have to do. My recommendation for this is to do that as a factor above or below your average win rate instead of as a percentage of the chance of winning a future competition. If we think this one has a 10% better than your average chance of winning, you can calculate your estimates. You are likely to be more accurate with an amount over or under your actual win rate than you are starting from zero to estimate your chances of winning. 

And could you at least once a year compare your pwin average to your win rate average and improve your estimates? Create a feedback loop. And can we have some corporate tracking and accountability for these numbers? Because if a number for pwin is so important we must have it, then it’s important enough to refine our accuracy and to make those who make  the estimates accountable for them.