Monthly Archives: October 2011

David Cameron’s appeal to “optimism” as a part of the UK’s recovery programme, is spot on. However, what he could have appealed for is an improvement in the negotiating skills of ‘UK Plc’.

Having a positive mindset is part of the toolkit of a successful negotiator, but UK Plc needs more than that. In all the discussion about the imperative to generate economic growth I never hear effective negotiating technique being mentioned as an agent of that growth. Yet every day, negotiated deals are underpinning UK economic activity – both for domestic and exported goods and services. If UK Plc could get 10% more value out of all those deals through effective negotiation then recovery would be assured.

Effective negotiators are able to manage successfully;

1) Their own mindset and the mindset of those around them
2) The process of the negotiation
3) Their own behaviour and that of others.

Negotiating mindset is critical and David Cameron is right to refer to a more positive outlook as being a pre-requisite of success. This applies at the level of everyday general experience (which is the sense in which he meant it). If we allow ourselves to be panicked by jittery, doom-laden headlines; if we are paralysed by fear into economic inactivity then a negative outcome is assured.

If we can instead believe that every disrupted current business model presents an opportunity for discovering new ways of being successful and new forms of commerce, then we stand a much better chance of economic recovery arriving quicker. If we believe it ourselves we influence those around us – if we influence enough of them it makes the difference between “sogginess” and “success” (see article in guardian.co.uk here).

But this also […]

The latest stats from Tesco showing a dip in revenues are interesting from a negotiating point of view.

First they show that when it comes to bargaining power “size” isn’t everything. Second they remind us that the rules of the negotiation game have changed, and that if you don’t negotiate equitably – including with consumers, you can get yourself into trouble.

Tesco is of course a “giant” among supermarkets, with a market share of over 30% – nearly twice that of its nearest rivals. However, there are at least 9 sources of bargaining power and Tesco doesn’t have an exclusive grip on all of them. “Niche” market power can still be very important even if you don’t have scale. “Expertise” and “Information” are important sources of bargaining power. So are “network” power and “authority” power. The latter can stem from seniority or other forms of reputational enhancement – e.g. integrity. As Asda and Sainsbury begin to make inroads into Tesco’s market share this can be re-framed as Tesco’s rivals beginning to utilse their bargaining power more effectively than Tesco in the ongoing negotiation for consumers’ attention and custom.

Secondly it is interesting to note Tesco being tripped up by making what seem to be somewhat economical statements with regard to price cuts – with publicised price cuts of some goods being matched by unpublicised price hikes for other goods. One of the more dramatic features of the democratisation of the web caused by social media, such as Twitter and Facebook, is the impact that it has on negotiations between big public-facing organisations and the public upon whose support they rely. This applies to Governments and also big brands. If these big organisations don’t treat their […]

Dragons’ Den provides fascinating insights into the modern art of negotiation.

On Monday’s episode of Dragons’ Den (3rd Oct, BBC2) only one pitch was successful. All the rest failed. Some of that was down to lack of quality of the product or service. A lot of it was down to inadequate negotiation skills.

The Dragons are investing their own money, somewhat blindly, in products and people that have only just been introduced to them. They’ll be thinking: “Is it going to be ok? Can I trust this person? How risky is the investment? Am I going to look like a fool if I invest?” They need reassurance.

In this context, there are certain key negotiating behaviours to avoid, and others to use.

Step forward James Eden and Chris Olivier with their toy, Culicka – the first pitch on last night’s Dragons’ Den. One tip here: the more you say as a negotiator, the more you give away. You should spend at least as much time listening as talking. James, however, talked for England.

My second tip: demonstrate expertise. Expertise is an acknowledged form of bargaining power. If you’re not expert enough to know what will constitute a successful level of sales for your product, you’re not likely to reassure potential investors – and so it proved here.

Rob Ford and John Blenkinsop made the mistake of “bidding” too early on Dragons’ Den. Good bidding in the negotiating process is all about timing. Bid too late and people will assume you lack confidence in your offer; bid too early and people won’t be in a state of readiness to receive your proposal well. In this context, bidding for £75k when you only […]

The reporting by Reuters here on the apparent bid by NBNK for the bank branches of Lloyd’s Bank tells us a lot about how deal making is viewed by the media.

We are told that NBNK has reputedly bid up to £1.5 billion for the 630 branches, and that’s about it. This reflects a common misconception that the only thing that is important about getting a deal done is the “content” of the deal (in this case the price). In fact the content is often the least important factor in getting the deal done. Other factors are much more important, none of which are covered in this piece. What is the state of mind of both parties? For example do they want to negotiate? Do they care what the other side wants? Are they negotiating from a position of confidence?

How about the process of the negotiation? There are normally at least 4 stages of a negotiation before the “bidding” stage which is reported here:

1. Have both sides “prepared” properly? What are their likely bottom lines? Who is on the teams and what roles are they likely to play? What is the balance of bargaining power between the parties? What are their styles as negotiators?

2. What is the “climate” of the negotiation? Is it warm, cold, hostile or wacky? Different types of climate suit different negotiations.

3. What are the emotional “needs” on both sides? – Reassurance? Respect? Achievement? A sense of belonging? Desperation? These needs underpin the outcome of any negotiation. If they are not met there is no deal.

4. What is the “coinage” available on both sides? These are concessions which have a low value to one party but a very high […]

The launch of the Amazon Kindle Fire is attracting attention, with commentators suggesting its low price point may supply meaningful competition for Apple’s iPad in the tablet market.

Certainly in the “negotiation” for the consumer’s wallet, Amazon does enjoy certain advantages. An attractive price can provide “market” bargaining power as it does in a range of consumer products from electronics to cars, and the price differential here is significant – US$199 versus US$499. Moreover Amazon are able to link the device to content offerings in relation to digital books and latterly digital videos and digital music. Being able to link products in this way offers another type of “market” bargaining power and indeed this is exactly the way that Apple first generated breakthrough sales for its iPod – spinning out of its iTunes content offering.

However, Apple still has some enormous bargaining power with consumers which should not be under-estimated. Firstly it has 80% of the current market for tablets – a huge source of “market” power. Equally Apple brings “expertise” to the table, another potent source of bargaining power. It also has tremendous “network” bargaining through its access to its massive base of existing users. In addition Apple is working hard on bringing the power of “rules and regulations” to bear in its favour through its concerted legal campaign to enforce its patents against the likes of competitors such as Samsung. This may not be sustainable as a source of power, but it is clearly a form of bargaining power to which they attach great importance.

These sources of bargaining power suggest that Apple is not going to be eclipsed just yet in the tablet market. There is one Achilles Heel though which may yet […]

President Obama is of course absolutely right in saying that the Middle East peace process can only be addressed by direct negotiation between Palestinians and Israelis, and that there are “no shortcuts”. Whilst the Palestinian attempt to secure state recognition at the UN is borne of understandable frustration, it is not a way to solve this enduring dispute. Indeed by seeking to paint the Israelis into a corner it probably decreases the prospects for progress. Furthermore, making the US veto the decision is embarrassing for Obama and will not be forgotten – in any negotiation it is very important not to offend players of influence.

So, marks awarded for recognising that the UN is not the place to resolve the dispute. However, relying on the Quartet of Mediators to resolve it may not achieve anything either. This Quartet of representatives from the UN, the US, Russia and the EU is already in the news. It is reported that it may issue a statement requiring Israel to accept a return to its pre-1967 borders, an end to settlements and a two state solution as a basis for settlement discussions, whilst the Palestinians are required to recognise the right of existence of a Jewish state.

If this is true, I see some clear problems with this approach:

1. Mediators would not normally set out the parameters of a deal – that is the responsibility of the parties, and it is not for the Mediators to tell them what to do. Mediators should not have a “position”.

2. Mediators would not normally set preconditions of this kind. The most important thing is to get the conversation going, not to pre-determine the outcome before it has even started.

3. […]

Mediators have many tasks that they have to juggle. They must seek to understand the causes of the conflict, monitor the state of the relationships, keep an eye on process and background legalities, and facilitate the generation of compromise positions.

But they have one other duty above all else, which is that they must remain neutral. If they are not perceived as neutral then they cannot possibly succeed, Only if both parties trust the mediator can the mediator influence the outcome – otherwise the parties will not share their secret hopes and fears, and reveal the areas where they may be prepared to compromise.

Tony Blair was always a curious choice as a Middle Eastern peace envoy, given that he is chiefly remembered for allegedly misleading his country into fighting a bloody war in the Middle East, in Iraq. It felt almost as though Gordon Brown was determined to shunt him off as far as possible from either domestic politics or Blair’s own comfort zone.

Blair’s own apparent relentless pursuit of financial gain since he left office also counts against him in establishing his credentials as a neutral. He has a £2 million a year contract with JP Morgan, and has been accused of championing clients of JP Morgan in two large business deals in the West Bank involving telecoms and gas. How can he be a credible member of the mediating Quartet, critics say, if he puts his own financial interests first?

Now it is suggested by the Palestinians (in this article in the Telegraph.co.uk) that he lobbied against them among European powers prior to their UN application for statehood, with officials like Nabi Shaath calling him “an Israeli Diplomat”.

There are many obstacles to Middle […]