Book Club For Business Impact: 3D Negotiation
Some Notes on the 3D Negotiation Webinar
“3-D negotiators reshape the scope and sequence of the negotiation process to achieve the desired outcome. Acting entrepreneurially, away from the table, they ensure that the right parties are approached in the right order to deal with the right issues, by the right means, at the right time, under the right set of expectations, and facing the right no-deal options.” David Lax and James Sebenius in “3D Negotiations”
We have added Steve Mock as a panelist for our next Business Impact Book Club on “3D Negotiation” a 2003 Harvard Business Review Article by David Lax and James Sebenius.
Steve Mock (@steve_mock) Founder or management team of 5 venture-backed start ups. Proven track record of effective marketing and sales strategy, business planning, and execution of successful technology ventures. Drove 150+ distribution deals, acquisitions, corporate relationships, and venture financings ($32M) in 15+ countries. Managed dozens of product launches targeting consumers, enterprises, and OEMs in the Internet, gaming, mobile, enterprise networking, web, and consumer markets.
“Tactics at the table are only the cleanup work. Many people mistake tactics for the underlying substance and the relentless efforts away from the table that are needed to set up the most promising possible situation once you face your counterpart. When you know what you need and you have put a broader strategy in place, then negotiating tactics will flow.” Charlene Barshefsky (quoted in 3D Negotiations)
We cover the key elements of a successful deal:
- Tactics – Interactions at the Bargaining Table
- Deal Design – Crafting a Deal That Creates Lasting Value
- Value to all Sides
- Mechanisms to Monitor & Adjust
- Setup – Right Party, Right Issue, Right Sequence, Right Time
- Sequence is Key to Maximizing Bargaining Power
See also the Nov-1-2003 Harvard Business Review Article by David A. Lax and James K. Sebenius on “3-D Negotiation: Playing the Whole Game.” There is a longer pre-publication draft available with an extensive reference section at http://www.people.hbs.edu/jsebenius/hbr/3-DNegotiation.pdf [now Archive.org version]
Why The Term “3D Negotiation” (excerpt from Jan-29-2003 draft)
- Interpersonal Process and Tactics, “At the Table.”
“One dimensional (1-D) negotiators” appreciate the obvious truth that negotiation is an interpersonal and tactical process. As such, they mainly focus on the interaction with the other side at the physical or electronic “table:” setting the atmosphere, choosing the most effective bargaining style, building trust, listening and shaping communication dynamics, framing arguments, persuading, deciphering body language, accurately reading personalities, and bridging cultural differences. One-dimensional negotiation entails thinking through offers, likely counter-offers, commitments to positions, creating or evading deadlines, and anticipating the unfolding process. Much, if not most, academic study by game theorists and psychologists plumbs this vital 1-D process for tactical and interpersonal insights.
- Substantive Deal Design, “On the Drawing Board.”
“Two dimensional (2-D) negotiators” relentlessly look beyond interpersonal process and tactics to the underlying substance of the problem, seeking to figure out where potential value exists and how to craft agreements that could realize this value for those involved. Once the parties to a negotiation, their interests, and the situation is sufficiently well-described, one could—at least, in principle–figure out, structure, and write down the set of agreements that could create more value for the parties than they could realize through their best no-deal alternatives.
- Does some sort of trade or exchange make sense and, if so, on what terms?
- A staged agreement?
- A contingent deal such as an earnout?
- A risk-sharing arrangement?
- An option or swap?
In answering such questions, 2-D negotiators function as deal designers, working “on the drawing board.” Economists and other analysts who study gains from trade, comparative advantage, financial engineering, and the principles of optimal contracting have fleshed out this second dimension of negotiation. Effective 2-D negotiators grasp the important truth that substance and value should drive interpersonal process, not the reverse.
- The (Missing) Third Dimension: Acting “Away from the Table,” to Set up the Game Itself.
Who sets up the negotiating “table” in the first place or specifies the “game” within which the process and substance are to be played? The game itself is not simply a given, but arises from conscious efforts to shape it. Actions by one or both players in effect determine the third dimension: which game is to be played, or, more basically, its scope and sequence. The great insight of 3-D negotiators is that, once the bargaining table has been set, a great deal of the game has already been played. Thus, rather than focusing on the direct interpersonal or substantive aspects, 3-D negotiators instead think hard about scope and sequence, how to set and often re-set the table:
- Who should (or should not) be there?
- What is the best means to get them there (or keep them out)?
- In what order should potential parties be approached?
- Separately or together?
- Publicly or privately?
- Dealing with what set of issues?
- Separated or combined?
- In what order?
- Framed to evoke what set of interests?
- By what “rules” of interaction?
- Under what set of expectations?
- Facing what no-deal alternatives?
- More basically, at what table? Or should there be a series of tables, possibly linked, possibly separated, possibly sequenced, or possibly arranged in parallel?
These elements comprise the architecture of the game itself, the “scope and sequence” of a negotiation. With the potential value to be created as their guiding beacon, the best negotiators are entrepreneurs, playing a wider, 3-D game. They envision the most promising potential architecture, and deliberately craft actions away from the table aimed at bringing it into being. They seek to maximize the expectation of success by getting the right parties to the table, to deal with the right set of issues, at the right time, by the right process, under the right set of expectations, and facing the right set of no-agreement prospects. Not only do 3-D negotiators skillfully play the game as given, they are masters at designing and changing it to be most amenable to success.