When you go along your business life you will realize one of the vital character that will draw the line between a Successful Entrepreneur vs. the Struggled Entrepreneur is the negotiation skill. Often times we mistake ourselves as non-negotiators. Where live every part of negotiation skills in every minute of our life. The thought of being a bad negotiator only appears in our mind if we’re good entrepreneur “by heart”. Don’t take me wrong. You don’t have to be an evil to be a great negotiator. All you need is Reframing Negotiation Strategy.
In this post we will learn how to evaluate and reframe your negotiation strategy to be the best negotiator at the table. Here are the three case studies and three reframing strategies.
1. Context Framing Strategy
Case Study 1: One young man asked the priest, “Can I smoke while I pray?” Priest angrily answered, “Certainly not!”
Another young man asked the same priest, “May I pray while I smoke?” Priest praised, “Good Boy.”
You see, in above situations nothing changed, the praying, the smoking, or the priest. However, the second young man changed the context of the situation. One takes place at praying while the other takes place while smoking. This is a powerful example of how one can appeal to the opposite side just by understanding their needs and reframing the context of the situation they’re in. You do not have to change the situation or the output or the opposition. All you gotta do is just reframe your negotiation strategy.
2. Meaning Framing Strategy
Case Study 2: In 1912, while re-campaigning for United States presidency president Theodore Roosevelt’s campaign office printed 3 millions copies of a brochure with president’s picture and campaign information. Days before the distribution of the brochure his campaign team realized they did not had the rights to use the picture. Copyrights to the picture belonged to a privately owned studio (let’s call it Studio X). There was not enough time for a reprint.
The first reaction to solving this problem would include sending your best negotiator to Studio X to buy the copyrights of the photograph. That would cost millions of dollars as law allowed Studio X to charge as much as $1 per print. What did campaign team do? They send following telegram to Studio X:
Planning to print 3 million copies of campaign speech with your photograph. How much are you willing to pay for the opportunity?
To which the Studio X replied:
Appreciate opportunity, but can only afford $250.
Campaign team accepted gracefully.
Above story represent the “meaning reframing”. Meaning Reframing is taking same situation and the context but reframing the meaning. The above event presents two meaning for Studio X. One, campaign office is just another customer wanting to buy the copyrights of the image. However, campaign office got Studio X to interrupt the situation differently, instead of “just another customer” they reframed the situation as a privilege and marketing opportunity for Studio X. So the natural arrangement would be to ask the studio to pay for the opportunity. This is an “Meaning Reframing” negotiation strategy.
3. Best Alternative to a Negotiation Agreement (BATNA)
HBR Case Study: BSB vs. Sky Television1
In her book Harvard Business School Confidential, Emily Chan writes, using the “real interest” approach helps identify a win-win agreement. Understanding the importance of the “Best Alternative to a Negotiation Agreement” (BATNA) can help you maximize the win for your side. The advantage in negotiations often does not depend on how big and powerful each party is, but on who has a better BATNA: who can better find afford to walk away without an agreement.
A classic example is the battle between Sky Television and British Satellite Broadcasting (BSB) in the early 1990s to dominate British satellite television. it would be a lose-lose situation if both firms were to stay in the market and compete vigorously. It would be a win-win if they could negotiate a deal for one to pay the other to exit. These are the estimates for the financial implications as documented in a HBS case study:
For BSB: Loss of £190 million if both BSB and Sky stay in game and fight; profit of more than £2 billion if Sky exists; loss of £180 if BSB exists.
For Sky Television: Gain of £700 million if both parties stay in game and fight; profit of almost £3 billion if BSB exists; loss of £70 million if sky exits.
It would be a win-win if they negotiate a deal for one to pay the other to exit. But who has the stronger negotiating position in this example? Some would say Sky has stronger position, since it would still make £700 million even if BSB does not exit the market. BSB is weaker because it would lose £180-£190 million if Sky chooses to fight. So BSB must negotiate for Sky to exit.
However, that is not true if you look at the BATNA more carefully. Compare the fight versus exit option for each company it they fail to reach an agreement. if no agreement is reached for one of the payers to exit, then:
For BSB: Fight versus exit means losing £190 million instead of £180 million. The difference is relatively insignificant. So BSB has flexibility of choosing whether to fight or not should sky decide to fight. It has a strong BATNA.
For Sky: Fight versus exit means £700 million profit compared to a £70 million loss! Sky has no choice but to fight. If it has to fight, then it will increase its profit substantially (from £700 million to £3 billion) if it can negotiate to pay BSB to exit. In fact, theoretically, if BSB does its homework and understands Sky’s BATNA, it would know that Sky should be willing to pay anything up to £2.3 billion for BSB to exit!
Note: In the end, sky did pay BS to exit the market.
In above case study you can clearly see that finding BATNA (Best Alternative to a Negotiation Agreement), or walking away without any negotiation is little harder than one would think. Hence, always find your and your competitors BATNA to set the negotiation strategy on the table. Hey, in the end you can always reframe the negotiation strategy.
Notes: 1 HBR Case Study: British Satellite Broadcasting versus Sky Television