THE STRATEGIC NEGOTIATION PROCESS

At its most basic level, the Strategic Negotiation Process is a step-by-step system that enables you to blueprint a negotiation by making it possible for you to see and understand a negotiation from your own perspective as well as that of your customer. Once you’ve gained this understanding, our process further enables you to manage the negotiation in such a way as to not only achieve a “win-win” situation but to make it possible for both you and your customer to come away from the negotiation with more than you anticipated going into it. In other words, it enables you to create true, measurable business value and go well beyond the concept of “win-win.”

But to understand what the process really is, you’re going to have to start thinking differently about what negotiation really is. The traditional view of negotiation is, of course, sitting across the table from someone and promising, cajoling, threatening, or using any of a wide variety of tactics to get what you want from that someone. But that meeting is only—or should only be—the final step in a multistep process. Defining negotiating as only that face-to-face meeting is like referring to this book simply as publishing. In fact, the process that resulted in this book started a long time before you picked it up in a bookstore or ordered it on Amazon. I came up with the idea for it and found a coauthor to work with me; an agent agreed to represent us, and a publisher offered to publish it; we wrote it, and it was designed, printed, bound, jacketed, and so on and so on. In other words, the book you’re holding in your hands is only the final step in the process. And it’s no different with negotiating. Negotiation doesn’t start when you sit down with someone to work out the terms of a deal. It starts as soon as you select an account and start selling. It’s all negotiation, and redefining it as a process is what leads to world-class deal making.

The Strategic Negotiation Process essentially consists of four steps: (1) Estimating the Blueprint, (2) Validating the Estimation, (3) Using the Blueprint to Create Value, and (4) Using the Blueprint to Divide Value. Before you take the first step, though, it’s important for you to establish a goal for any negotiation in which you may be involved. One of the mistakes people often make is trying to plan how to get there before they’ve even determined where they want to go. Establishing a goal, or not doing so, can have an impact, not only on the planning and execution of a negotiation, but also on any long-term relationship between you and your customer. Interestingly, our research has shown that, more often than not, even when people do have goals in their negotiations, those goals are often inappropriate and, ultimately, counterproductive. In the next chapter I show you how to establish a value-creating goal that is appropriate for any negotiation. In the meantime, following are the four steps of our process.

Step One: Estimating the Blueprint

This first step has a twofold purpose and is accomplished through two exercises. The first exercise, the Consequences of No Agreement (CNA) Estimation, enables you to determine what effects—both positive and negative—not reaching an agreement will have on both you and your customer. This will in turn enable you to determine which of you has more power in a negotiation, as well as the place where both sides prefer agreement to impasse. Ultimately, as you’ll see, this is also the most effective, fact-based, relationship-enhancing closing skill there is.

In the second exercise, the Wish List Estimation, you develop lists of all the items you and your customer would ideally like to have in the deal and then determine what’s most and least important to each of you. These are the items that both of you will, or should be willing to, trade in order to achieve your goals. This is an essential part of the process because both sides place a different value on the items, and trading—giving up something to gain something that’s more important to you—is what enables you to create more value to subsequently divide. By creating value, the Strategic Negotiation Process enables both sides in a negotiation to achieve more than just a “win-win” situation.

The Consequences of No Agreement and Wish List Estimations together represent a relatively quick step that’s based primarily on your own knowledge of the buyer from past deals. They are extremely important, however, because together they form the basis of the blueprint of the deal. And, as I noted before, understanding this blueprint is essential because all the tactical behaviors that both you and your customer use will ultimately be governed by it

Step Two: Validating the Estimation

If Step One represents what you think you know, Step Two is about identifying what you’re guessing at or simply don’t know about your customer’s Consequences of No Agreement and Wish List. That is, it’s essentially a fact-finding exercise in which you gather information to determine the accuracy of the estimates you made in Step One. This information is gathered from four different sources: (1) your own knowledge of the customer and your competitors; (2) the knowledge of others in your organization who have worked either for the customer or for your competitor in this deal; (3) publicly available data, such as newspaper articles, annual reports, and the like; and (4) your customer. This last source is, in a sense, the most important because it’s in a validation meeting with your customer that you gather the information that enables you to go on to the next step in the process.

Step Three: Using the Blueprint to Create Value

The purpose of the third step in our process is to create measurable business value for those on both sides of a negotiation. In this step, taking into account all the items you’ve identified in Step One and validated in Step Two, you structure deals in such a way that both you and your customer can get not just what’s of primary importance to you but also other benefits that make the deal even more attractive. In other words, by exceeding the Consequences of No Agreement for both sides, you are able to achieve a “win-win” situation. And by trading items, you are able to go beyond “win-win” and increase the value that you and your customer will subsequently divide.

Step Four: Using the Blueprint to Divide Value

In the fourth and final step of the process, you consolidate the data you gathered in the first three steps into a presentation of three or more “Multiple Equal Offers” to your customer. These offers, all of which are equally acceptable to you, provide your customer with more value than he or she had anticipated going into the negotiation, while, at the same time, enabling you to claim as much value as you can without damaging the ongoing relationship. This last step—the face-to-face discussion about terms—is the one that people usually think of when they talk about negotiating. But by the time you’ve gone through the entire Strategic Negotiation Process and have come to this point, you’re in an entirely different situation than the traditional negotiator.

First, because of all the work you’ve done up to now, you’ll find that virtually everything that’s said by the customer during this step is either irrelevant to the deal at hand and should be discarded or is related to some aspect of the process and can accordingly be responded to in a reasonable and logical manner. Perhaps even more important, you’ll also find when you get to this step, that rather than trying to give as little as you can and get as much as you can from your customer, you’ll be in the position of simply dividing a pile of resources that, together, add up to more than either of you ever anticipated.

Some people have suggested that estimating and validating the blueprint just to prepare and present an offer takes too much time and/or won’t work in small “pop-up” or ad hoc negotiations. The fact is, though, that neither is true. I’ve found that taking the time to blueprint negotiations actually saves time for several reasons. First, because of the very nature of using a process, I actually get better and faster each time I do it. Second, it enables me to quickly focus on the most essential data and ignore information that isn’t relevant to the negotiation. Third, when others in the organization are familiar with the process, it provides a common language and, as a result, saves a lot of discussion time because everyone is already on the same page. And, finally, because we don’t have to spend a lot of time talking about how we’re going to conduct the negotiation, we can spend more time discussing what we want out of it and how to get it.

As far as small “pop-up” or ad hoc negotiations are concerned, as you read through this book you’ll find many stories about our process being used to blueprint negotiations in just such instances. There is, for example, the story of how someone bought a used boat in a one-hour meeting at a marina, and the one about the salesperson who, when asked for a price reduction for a recently signed contract, was able to respond in 20 minutes. In other words, the process is the same for a $15, 15-minute deal as it is for a $15 million, 15-month deal. Each negotiation is allotted as much time as is available based on the size and importance of the deal. In fact, these are just a few—and not even the most important— benefits of the Strategic Negotiation Process. In the following chapters you will find a great many advantages to learning and using our process to fill in the blueprint. Among the most important of these are that it

• enables you to see a negotiation from both your side and that of your customer;

• allows you to proactively manage the negotiation so that both sides benefit;

• is applicable to virtually any kind of negotiation, regardless of how large or small the deal;

• makes it possible for you to determine what you’ve done right and repeat it or done wrong and correct it;

• enables you to deal effectively with any kind of negotiating tactic;

• increases the quality of internal negotiation;

• helps you anticipate and deal with irrational competitive behavior and respond in a logical and sensible way;

• fosters long-term relationships with your customers by building real business value;

• allows companies to develop common goals, strategy, and tactics; and

• enables organizations to integrate negotiation more fully into the sales process.

Finally, even though there are clearly benefits to blueprinting negotiations and using the process isn’t hard, I must also admit that it does take a little getting used to. But in that respect it’s no different from learning to ride a bike or drive a car. If you think back to the first few times you tried to do either of those, you’ll remember that it took you a little while before you felt proficient. On the other hand, of course, you’re not exactly a neophyte when it comes to negotiating. In fact, whether you realize it or not, at one time or another you’ve probably done just about all the things that are done in the process. The difference is that you didn’t see them as part of a process, and you didn’t put them all together. Putting them all together, along with learning and using the process, is what will take you to the level of a world-class negotiator.

You may find, though, certain aspects of the process to be a struggle. All I can tell you is to stick with it. If you do, you’ll find that after you’ve done several business deals this way, it will become your new “intuitive” way of negotiating. After a while, you won’t even have to think about the process for blueprinting a deal. In fact, after many years of practice and thousands of live negotiations, I’ve found that I continue to become more proficient at it, getting better at small pieces of the process each time I use it.

Again, I know there’s no one solution to every problem—business is just too complex for that. At the same time, after working through many negotiations using the Strategic Negotiation Process, I’ve found that they all follow the same pattern. Of course, the details of the Consequences of No Agreement and the items that need to be agreed on change, but the structure remains the same. And because it does, the skills required to diagnose and proactively manage the process remain the same as well. So while blueprinting a deal won’t solve all your problems, it will change the odds in your favor so that you do well in negotiation more often than not. And the best way to do that is to keep the blueprint—and the process—in mind.

In the remaining chapters I show you how to blueprint a deal using the four-step process. They say that the first step of any journey is always the hardest, and that’s true of the journey you’re about to take. The first step in the process, Estimating the Blueprint, is the most difficult, but the remaining steps flow logically—and easily—from it. And by the time you’re finished you’ll find that, in the end, it wasn’t all that difficult after all. But even more important, by the time you’re finished you’ll find that you’ve become a world-class negotiator.