A recent study into business negotiations discovered that the top challenges faced by businesses and individuals are (a) the price/value trade off and (b) creating alternatives/generating options, respectively. A recent Fortune Magazine review in partnership with Miller Heiman (the complex selling methodology gurus) found that sales people quoted price as the number one reason why they lost deals.
There has been much talk in the IT sector on both the buy- & sell side about 'partnering' to deliver solutions. Looking at the supporting data, it is questionable whether this talk has translated into action.
Whilst most businesses would like to believe that they are interacting with both clients & suppliers in a 'solution based' format, the role of price still dominates the process. This is due in large part to the failure of individuals to see the 'big picture' or to engage in creative thinking. Our research & experience shows that one of the key features of successful business negotiators is the ability to be creative & flexible.
Whilst many IT organisations have built their reputations on the back of their innovative and creative technologies, it would seem that creativity is often limited to the design & engineering departments. One of the main drivers of human behaviour is the tendency to avoid potential deficits. When considering information about the future, managers are more interested in avoiding possible losses than achieving the same gains. This means that during negotiations that support complex and high value IT agreements, the focus is more often on managing risk to avoid potential deficits, rather than on discovering innovative and creative ways to create additional value for all stakeholders.
The more complex the agreement, the more vital it becomes to manage risk. Rather than just trying to avoid losses, we should concentrate on ways to create alternatives for mutual benefit during negotiations.
To avoid falling into the price trap, ask yourself the following questions ahead of each negotiation and make this part of your negotiation strategy:
1. Vision
a. What are the main interests of all the parties to the transaction that will be satisfied by reaching a settlement?
b. How important will it be for each party to the deal to act in a mutually beneficial mode?
2. Value
a. What are the key objectives of all the parties to the transaction?
b. What are the limits associated with each of the objectives for all parties?
3. Process
a. What assumptions have you made that you could confirm through questioning during disucssions?
b. How can you frame the negotiation so as to support a collaborative, partnership based approach rather than a price centred negotiation?
4. Relationships
a. Do all parties have the same requirement for a lasting relationship?
b. How can you influence the 'climate' of the negotiation so as to support a collaborative approach? ('Climate' pertains to non-verbal, physical and cultural aspects.)
Once you have covered these basic elements of preparation you will have time left to be initiative. Being creative is not something that comes easily to most of us but it is an important negotiation skill. Use one of the well known creativity methodologies such as De Bono's Six Thinking Hats, or the Disney Creativity Model to help you generate options.
If you want to truly embrace a partnership method that delivers optimal value, you should waste no time in getting the creative juices flowing.
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