Negotiation strategy consists of counterparties, leverage, staging, framing, and value sharing.
Counterparties - with whom should you negotiate? Counterparties are a set of actors that care about your desired outcome of negotiation and can make it happen. Don’t restrain the definition to easy answers. Look for all possible parties in your ecosystem (complementors, suppliers, competitors, clients, etc.) and in ecosystems of those actors.
Leverage - how will you incentives the counterparty to bring your desired outcome? You have two types of leverages: negative and positive. The negative leverage depends on your BATNA, i.e. the threat that you will walkaway from the deal. The positive leverage is about the promise of creation of value for the other party.
Important
The positive leverage is especially important in complex negotiations, where your BATNA is weak or when the alternative does not exist.
You can increase the leverage in three ways:
- Focus on group of interest within the counterparty - Rarely companies are homogenous in terms of needs and their importance. The same issue when presented to management at global level may seem unimportant whereas when presented to local management may seem extremely important.
- Play around with the scope of the negotiation - See how adjustments to scope may create a value for the counterparty. Extending the scope may promise creation of new opportunities, whereas narrowing the scope may offer decreased risk.
- Account for future deals - Show how the negotiation at hand impacts future deals. For example, counterparty may have higher leverage and demand very aggressive pricing when you are in a desperate need. You may show that this will happen but given the pricing you will have to change the supplier, which will decrease the counterparty’s revenue in the future.
Staging - what is the best sequence of issues tackled & parties engaged and how events outside the negotiation may impact the leverage? Consider whether the sequence of issues negotiated and partes engaged changes the pace of the negotiation. Consider also how you can adjust the pace to exploit outside events to strengthen your BATNA or simply work on your BATNA as well as how those outside events may strengthen counterparty’s BATNA or how it may work on its BATNA.
Important
Consider how other deals made by you or your counterparty may impact BATNAs.
Framing - how will you present shape the discussion? There are two ways to shape the negotiation talks:
- Offer-counteroffer - You may start an iterative proces of offer-counteroffer with a proposal or request the proposal from the counterparty. You can present or respond with aggressive terms or more balanced ones.
- Problem-solving - You may invite the counterparty to a creative approach to solve the issue through joint problem-solving. For example, you may present your problem and how it will impact the counterparty. Then you jointly try to find a solution.
Important
Although you may switch the framing, it may be easier to switch from problem-solving to offer-counteroffer than the other way around.
Value sharing - how will you share the value created by the negotiation? The value above the sum of BATNAS is the value added by the negotiation.
The way you split the value added will influence the perceived fairness of the negotiation and ultimately the ability to reach the agreement.
The most fair way is to divide the value added equality, as each party has an equal claim to it, regardless of the size of the their BATNA. Hence each party, should receive value of their BATNA + half of the Value Added.