3D Negotiation - 80/20 Summary
Updated: Feb 23, 2022
Skill Category: Negotiation
Mental Models from the book:
'3D Negotiation' can be summarised using 9 mental models:
Anchors shape peoples' perceptions. Higher anchors, such as minimum bid prices, will usually increase the final price of an item being auctioned. Give a plausible reason why you are using the anchor that you are using. A "because" plays an important psychological role and having any reason helps (even if it is not logical)
Use flexible but extreme offers and "non-offer-offers" to anchor, for example: "We'd obviously need to do our due diligence on your company to determine our valuation. Our general sense is that private companies of this size in this industry tend to sell at 12 times earnings, which is what we're currently thinking". When you make such a statement, watch for the person's reaction very closely, you have 2 goals: (1) Learn about the 'Zone of Possible Agreement (ZOPA)' and (2) Shaping their perception.
A non-offer that is unrealistic may work well as an anchor because it doesn't undermine the person's credibility or expertise. For example: "Purchasing is undoubtedly going to demand price cuts of 15% or more just to get the conversation started".
If you have been anchored, clearly and politely communicate that you are ruling the offer out of consideration.
Be aware that there might be a difference between what people say they want and what they really want. This is why it is useful to probe and to understand their position.
3. Expectation & Prediction
Sometimes there will be differences in belief about how things unfold with permits, price and other things outside of both parties' control. Use beliefs in future events as a contingent agreement.
Ask yourself: Who might get the most out of this deal, and are they part of the negotiation?
Inoculate against the other's side arguments. Any counterarguments that you can think of can be inoculated against if you highlight them yourself.
Use reciprocity to build trust and share and get information. Share some low-cost information.
7. Supply & Demand
Never do a deal without talking to other parties that might be interested. Having other interested parties will change your own self-perception and conviction. Do not negotiate with your most preferred suitor first as this will have implications if you are rejected. Be careful when bringing in another suitor if the person you are negotiating with values loyalty.
8. Surface Area
Ask yourself (and your counterpart): what can we do (including even outside of this deal) that could create the most value together? What can we do to increase the value of the total pie?
Look for interests that are easy for one party to give and that are valuable for the other party: High benefit, low cost. "The most frequently overlooked sources of value in an agreement arise from difference/complementarities of interest among the parties." Ask yourself: What is something they need that I don't value nearly as much?
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