3-D Negotiation Strategy
Jim Sebenius and David Lax’s 3-D negotiation skills for business negotiators @ PON
No matter how many right moves you make at the table, however skillfully you read body language, frame arguments, make offers and counteroffers, doing so at the wrong table can undercut your results and undermine your negotiating skills and negotiation tactics.
Not only should you negotiate right, you should do the right negotiation. Sometimes this means looking with new eyes for a more promising table. 3-D negotiation confronts an often overlooked aspect – and moves away from the table to ensure the most promising setup.
3-D Negotiation Examples in Real Life
For example, the owners of a niche packaging company that boasted an innovative technology and a novel product were deep in price negotiation to sell the company to one of three potential industry buyers, all larger packaging operations.
The owners’ first instinct had been to persuade their bankers of the need for a higher valuation, refine their at-the-table negotiating tactics for dealing with each major player, and try to spark a bidding war.
But my colleague David Lax and I urged the company’s owners to rethink this approach.
“Why not look for a new, potentially more profitable negotiating table?”
Our analysis suggested that one of their major customers, a large consumer goods firm, might value exclusive access to the company’s technologies and innovative packaging products vis-a-vis other consumer products companies.
The company’s managers opened negotiations with the consumer goods firm.
In doing so, they uncovered a completely new source of potential value (value creation) – and a much higher potential selling price.
They also increased pressure on the larger packaging companies to up their offers, because they would lose all competitive position if the deal went through.
By moving to a new table, the company’s owners greatly improved their options.
At the outset of the sale process, the niche player negotiated, however skillfully, at the wrong table.
David Lax and James Sebenius developed the “3-D negotiation approach” to address this challenge and a broad range of related issues.
You’ve undoubtedly encountered the first two dimensions of negotiation, staples of managerial training. The third, however, may be less familiar.
Negotiating Skills and Negotiation Tactics from 3-D Negotiation:
1-D Negotiation: Focuses on interpersonal skills and tactics at the negotiation table. 1-D negotiation advice typically teaches you to foster a more effective process, enhance relationships, develop cultural sensitivity, and make better moves and countermoves.
2-D Negotiation: Stresses deal design and value creation. 2-D advice adds the art and science of diagnosing value, both economic and noneconomic, and crafting agreements that unlock that value on a lasting basis.
3-D Negotiation: Confronts an often overlooked aspect – moves away from the table to ensure the most promising setup. In a 3-D negotiation, you learn to ensure that the right parties are dealing with the right issues, in the right sequence, facing the right walkaway options – and at the right table, which you have set.
3-D Negotation Observation: It is exactly the moves away of the negotiation table which enrich the negotiation environment in terms of interests analysis and the creation of additional value for the parties envolved in the negotiation setting.
In most of the times and in real life you can NOT understand the most valuable negotiation setting from the beginning of the process. You have to search, compare and analyze and then, to strategically place your findings in the deal design approach you follow.
3-D negotiation. Playing the whole game
What stands between you and the yes you want?
According to negotiation experts David Lax and James Sebenius, executives face obstacles in three common and complementary dimensions.
The first dimension is tactics, or interactions at the bargaining table.
The second is deal design, or the ability to draw up a deal at the table that creates lasting value.
And the third is setup, which includes the structure of the negotiation itself.
Each dimension is crucial in the bargaining process, but most executives fixate on only the first two:
1-D negotiators focus on improving their interpersonal skills at the negotiating table–courting their clients, using culturally sensitive language, and so on.
2-D negotiators focus on diagnosing underlying sources of value in a deal and then recrafting the terms to satisfy all parties.
In this article, the authors explore the often-neglected third dimension. Instead of just playing the game at the bargaining table.
3-D negotiators reshape the scope and sequence of the game itself to achieve the desired outcome.
They scan widely to identify elements outside of the deal on the table that might create a more favorable structure for it. They map backward from their ideal resolution to the current setup of the deal and carefully choose which players to approach and when.
And they manage and frame the flow of information among the parties involved to improve their odds of getting to yes.
Lax and Sebenius describe the tactics 3-D negotiators use–such as bringing new, previously unconsidered players into a negotiation–and cite examples from business and foreign affairs.
Negotiators need to act in all three dimensions, the authors argue, to create and claim value for the long term.
3-D Negotiation Observation: A 3-D Negotiation approach aims at offering the multidimensional view of a given negotiation setting. The main point is that it is not always the situation you see or understand at the beginning of the negotiation process or when you read te relative documents.