VALIDATING THE CONSEQUENCES OF NO AGREEMENT ESTIMATION


Although information from your customers about their CNA can be, quite literally, invaluable, getting that information out of them isn’t necessarily easy, primarily for two reasons. The first is that even though people are generally more than happy to tell you what they want out of a deal with you—their Wish List—they’re much less likely to tell you what would happen to them if they don’t make the deal with you. The other reason is that, as noted before, the chances are they haven’t even thought about what would happen to them if you don’t reach an agreement, or they have thought about it but have misdiagnosed it. In either case, even if they wanted to tell you their CNA or its positive and negative effects, they wouldn’t be able to.

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Despite this inherent difficulty, you have the advantage of having already learned a great deal about your customer through the estimation step and the first part of the validation step; and you can build on that information to develop questions that will provide you with the kind of information you’re looking for. It’s important to note, however, that the questions and answers won’t provide only a learning experience for you but for your customer as well, so that ultimately you’ll both benefit from the exchange. Even if they don’t answer your questions, this step provides you with an opportunity to educate them about your knowledge of their CNA.

Preparing Questions for Your Customers

Because of all the information you’ve already gathered in the Strategic Negotiation Process, preparing CNA-related questions for the other side is actually quite simple. First, you review a customer’s most likely CNA and all the elements you’ve already estimated. Then you formulate an obvious question for each—a simple question about what would happen to your customer if they don’t make a deal with you. Finally, because you’re not likely to get a simple answer to a simple question, as I mentioned, you restate each question in three “less obvious” ways.

Getting all the elements of their CNA on the table.  As you well know, customers generally oversimplify the negotiation (e.g., “Your competition is cheaper”) and overestimate the positive aspects of their own CNA (e.g., “They’re also better and faster”). For that reason, once you’ve determined your customer’s CNA, it’s essential that you get all of the various positive and negative elements of that CNA out on the table so they can be taken into consideration in a total value proposition–to–value proposition comparison.

Let’s say, for example, that you’re involved in a negotiation in which the other side has told you that one of your competitors is better, faster, and cheaper than you, or maybe just cheaper, and that they will go with the competitor if you can’t come to an agreement. Now that you know their CNA, what you have to do is look at all of the elements of that CNA, not just price but also such things as service, product quality, design, delivery, installation, impact on the customer’s customer, financial and/or political risk, ease of use, and ability of your competitor to grow long term with the customer. In other words, you must have a clear idea of all of the decision criteria your customer “should” be using when they compare the value proposition of your firm against your competitor’s.

What you’re doing in this exercise, then, is focusing on what the consequences will be for your customer if they don’t reach agreement with you, what they will choose and how that will affect them, and whether that choice is actually better than choosing you. The key is to put yourself in their shoes and think through, from every stakeholder involved on their side, all of the various effects of not making a deal with you, decide whether those elements represent a plus or a minus for them, and then prepare questions that both educate them on their CNA and provide you a perspective about how they see it.

Preparing questions for each element.  Once you feel that you’ve clearly thought through the other side’s CNA as well as all of its elements, the next step is to prepare the “obvious” question for each of them. The questions shouldn’t be difficult to prepare as they represent the most important things you need to know to validate your customer’s CNA. Let’s use, as examples, some of the areas I considered in the Estimation Step— design, delivery, and installation. If your potential customer is considering going to one of your competitors, this is one of the obvious questions you’d want to ask: “How easy and effective is the competitor’s design process compared with ours?” Similarly, you would like to be able to ask the other side: “How accurate, timely, and efficient is the competitor’s delivery process compared with ours?” And, finally, in regard to installation, you need an answer to this question: “How easy and safe is the competitor’s installation process, and how much work disruption would changing suppliers cause in your organization?”

These are good, straightforward questions, and if the people on the other side would give you good, straightforward answers, you’d have all the information you needed. Unfortunately, however, that’s not likely to happen. In fact, for the reasons I noted above, the likelihood of getting a direct answer to any of these questions is, at best, slim. But you still need the information, so you have to find another way of getting it. Restating the questions in less obvious ways is a good way to do that.

Restating each question in three less obvious ways.  Restating an obvious question about an element of your customer’s CNA in a less obvious way is somewhat—but not much more—difficult than stating an obvious one. The best way to do this is to break down the question into its component parts. That is, rather than raising a general question, think of more specific aspects of the question and ask about those.

Let’s take the first obvious question as an example: “How easy and effective is the competitor’s design process compared with ours?” Three different—and less obvious—ways to state that question might be the following:

  • “What percentage of our competitor’s solution is customized, and how do they charge for it?”

  • “How many man-hours would be required by your organization to complete the design process with our competitor?”

  • “What is the timeline for our competitor’s design process?”

If you were to ask these questions, you would essentially get some of the answers you need about your competitor’s design process when compared with yours. But there’s an even better way of doing it. Keep in mind that you should have already estimated the answers to these questions during the estimation step. By embedding your estimations into the questions, you can make the questions even more effective in two ways. First, it shows the people on the other side that you know the facts, that you’ve done your homework. And at the same time it educates them about the facts in the event that they haven’t properly thought through all of the elements of their own CNA. This is actually a customer benefit in that it provides customers with the facts they must have to make the best decision given their needs.

For example, if you have a sense that you have superiority over your competitor in this area, by embedding data into your questions, you can get the people on the other side to confirm or deny it by asking these questions:

  • “As you know, virtually 85 percent of our solution is customized and included in the purchase price. What sort of customization does the competitor do? I understand they have a 10 percent price premium for customization.”

  • “Our company guarantees the maximum hours that your organization has to invest in customization. How do other firms handle that?”

  • “Most of the industry has targeted installation timelines with no project scope changes. Our firm has guaranteed installation timelines with limited project scope changes. How does this factor into your analysis of our company versus our competitor?”

The benefit of asking these “less obvious” questions is that, generally speaking, the more direct the question, the less likely you’ll get a useful answer. On the other hand, even though asking a more general question is likely to elicit a more honest and “safe” answer, the chances are that the information you’ll receive will be less relevant for your purposes. This is one of the reasons I suggest you ask two or three questions for each element of the other side’s CNA. Multiple answers to a series of questions are much more likely to yield good data than the answer to any one question.

You’ll notice that in these examples I’ve used the terms our competitor or the industry rather than naming a particular organization. I do that because I’ve found that asking about a specific competitor frequently yields a more conservative answer from the other side. I also have to admit, however, that while asking a question about the industry generally elicits responses that are more open, it also allows you less opportunity to show the other side how much you know about the competitor’s value proposition (the customer’s CNA) for this deal.

To give you a better idea of how all of this works, let’s look again at the data and data services provider I used as an example earlier. You’ll remember that when faced with a client’s CNA of “We can build our own database, and it’ll be cheaper and more customized than if we buy from you,” the salespeople went to those in their own organization responsible for designing, implementing, and managing databases. They asked them to provide a sense of the elements of the client’s choice to build their own database, things like collecting data, rationalizing it, updating it, and the like. The salespeople then looked at each of these elements in an effort to determine if it would actually be better for the customer to build their own database. Finally, with the help of the database designers, the salespeople were able to develop a series of questions to ask the customer in order to validate their estimations in five different areas.

Design Elements Questions

  • “Who in your organization has the skill to design a database?”

  • “Who will handle their job function while they are building it?”

  • “How long do you anticipate it will take?”

  • “What steps are involved in the design process?”

  • “How will global versus national data be collected?”

Implementation Elements Questions

  • “How difficult do you think it would be to integrate this database with your existing systems?”

  • “How long do you think it will take? How long before beta testing?”

Risk Elements Questions

  • “What happens if the head of your design group changes jobs in the middle of the project?”

  • “What will the internal consequences be if an internally designed system fails? (Of course, if we do it and it fails, it’s our fault.)”

  • “How will you handle budget overruns? (If we do it, the cost is guaranteed.)”

Outcome and Ongoing Maintenance Questions

  • “How will custom reports be built and charged for?”

  • “How will updates and data accuracy be maintained?”

  • “How will service be handled on evenings and weekends? (As you know, we provide 24/7 service globally.)”

No doubt you’ve gotten the point by now. As you can see, with questions like these, even if the other side doesn’t give you open and honest answers, you will still get a good sense of how they see their CNA. And if they haven’t properly diagnosed their CNA, you’ll actually be helping them by creating some FUD (fear, uncertainty, and doubt) about it.

As in anything, there are, of course, potential pitfalls in this process. The first of these is being overly confident about the quality of your initial estimation. If you are and as a result feel little need to add more validation, you may well find yourself with a lot of inaccurate and, ultimately, useless information. At the same time, there is also a risk of asking a great number of nonrelevant questions and leaving the validation meeting with lots of data but little information that is useful in validating your estimations. A third potential problem is asking questions that are either too direct and not getting good answers or too vague and getting equally poor responses.

It’s only by preparing, asking, and getting answers to multiple, well-thought-out questions that you’ll be able to see a pattern by which you can learn how the other side perceives its CNA, as well as how to diplomatically educate them about what they don’t know. Remember, the single most important reason for proper CNA estimation and validation is that the other side sees your offer as a gain or loss depending on their perception of their CNA. So before you even think about making an offer, it’s essential that you know more about their CNA than they do, that you understand how they see their CNA, and that you adjust their thinking through good question preparation and delivery. Then, and only then, should you make an offer.

Validating the Other Side’s Consequences of No Agreement Estimation

Now that you have an idea of how to validate the other side’s CNA, it’s time for you to apply that knowledge to your own negotiating situation. Go back to the data you recorded in Chapter 4 under “Consequences of No Agreement—The Other Side” and review your customer’s CNA as well as the short-term and long-term hard and soft costs and benefits associated with that CNA.

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As mentioned before, this is a good time to take another hard look at that information to make sure that you are fully satisfied that it’s reasonably accurate given what you learned by talking to others in your organization and using publicly available data. Now, applying the concepts I’ve discussed in this chapter, for each element of your customer’s CNA, develop an “obvious” question about that element in the space on page 103 and then two or three “less obvious” questions.

Now that you have completed the preparation for the CNA-related aspect of the validation meeting with your customer, it’s time to prepare for the Wish List–related aspect.

CONSEQUENCES OF NO AGREEMENT VALIDATION QUESTIONS—THE OTHER SIDE

Customer’s CNA: _____________________________________________

Element 1: ___________________________________________________

Obvious Question: ____________________________________________

Restatement A: _______________________________________________

Restatement B: _______________________________________________

Restatement C: _______________________________________________

Element 2: ___________________________________________________

Obvious Question: ____________________________________________

Restatement A: _______________________________________________

Restatement B: _______________________________________________

Restatement C: _______________________________________________

Element 3: ___________________________________________________

Obvious Question: ____________________________________________

Restatement A: _______________________________________________

Restatement B: _______________________________________________

Restatement C: _______________________________________________

Element 4: ___________________________________________________

Obvious Question:_____________________________________________

Restatement A: _______________________________________________

Restatement B: _______________________________________________

Restatement C: _______________________________________________




Strategic Negotiation. A Breakthrough Four-Step Process for Effective Business Negotiation
Strategic Negotiation: A Breakthrough Four-Step Process for Effective Business Negotiation
ISBN: 0793183049
EAN: 2147483647
Year: 2003
Pages: 74

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