Value Creating Negotiations - Getting to Win/Win
Posted: 7/2/2018 by Norma Watenpaugh
Partnerships are about creating new value that could not be easily achieved alone. So the focus of negotiations should pivot on partner math 1 + 1 > 3.
Your first discovery conversation with a potential partner is usually about how you create more value together. Then, how do you each realize value in the partnership. Sustainable alliances are built on both creating value and claiming value, but without the focus on value creation you are playing a zero-sum game.
There are other negotiation approaches that are more confrontational resulting in win/lose outcomes. These never work well for partnerships. Or in truth for most negotiations as recently reported in a study of negotiation outcomes published by Harvard Law School.
Value creating negotiations involve seeking mutually beneficial outcomes. It often entails asking “Why?” a lot to understand your partners requirements, how they grow their business, how they make money. In understanding their business, you are better positioned to find alternatives and solutions that will benefit both of you and cost you little or nothing. And a good partner will be looking out for your interests as well.
An example is the parable of the orange. Two cooks are tasked to prepare a special meal for a VIP. Their reputations are at stake and tensions are high. One cook intends to make a fabulous dessert and the other a tangy meat entre. Each require an orange for their recipe, but there is only one. They argue about who should get the orange and after many bitter words and bruised egos, they agree to cut the orange in half. Neither is fully satisfied and each is disappointed in the outcome the meal. Had they asked ‘Why?” the result could have been quite different. One cook needed the peel of one orange; the other, the juice.
In reality, getting a potential partner to reveal their true interests is not always as simple as asking “why?” You have to build a relationship of trust to get behind the defensive shield. Often you do that by being more forth coming and showing a little trust yourself.
I often hear the phrase “Gives and Gets” when discussions turns to contracts. Makes me shiver. It sets up a very transactional, zero-sum negotiation, like the example of the oranges which ultimately was lose/lose, since neither cook was satisfied with the outcome. When I hear this phrase, I always interject “No, its Give to Get”. What am I willing to contribute to our mutual success and what does that success look like for you?”
Many less seasoned alliance managers often want to jump into negotiation right away and come armed with contract lawyers. This doesn’t exactly set the stage for relationship building and fostering trust. In the model we advocate, you should have clarity in the value proposition for the customer and all partners and a fairly complete business plan. Most of this prework can be accomplished on an MOU (memorandum of understanding) that enables you to work together to design the partnership without binding commitment other than an intent to work together in good faith until you can establish whether or not you have makings of sustainable alliance.
During this process, you will learn a lot about each other and whether you can work together effectively. This will be important in the weeks and years of the partnership lifecycle. You might as well figure this out up front. An alliance is not a deal after all, not a one-time transaction. Negotiations in the form of joint problem solving and collaboration will be a daily occurrence.