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⚡️ Today’s level up ⚡️
Welcome to the final installment of our 4-part series on mastering the best negotiation frameworks used in business today. Understanding how to negotiate complex deals is the difference between collecting 4/5-figure or 6-figure commission checks each quarter. Today’s focus is on 3-D Negotiation, which helps you design and setup complex deals creatively.
Let’s go!
Read time: <7 minutes
If you missed them, catch up on part 1, part 2, and part 3.
What does negotiation mean to you?
Early in my sales career, negotiation was a necessary evil.
As I progressed, I came to appreciate it. Let’s be clear though, I always needed to have help on my deals, but I eventually learned that good negotiation ultimately comes down to creativity vs compromising. It’s part art and science.
Today’s breakdown will build on everything we’ve learned so far so you can elevate above the tactics most sellers use (1-D tactics) to design better deals (2-D) and set up the right environment for winning (3-D).
Negotiation Framework #4: 3-D Negotiation
Navigating the world of strategic sales can sometimes feel like you’re playing a game of chess, but the board is constantly changing, especially during negotiations of an agreement.
Just when you think you’ve got a grip on the opportunity, there’s always another layer to uncover.
Enter the concept of 3-D Negotiation. It’s not just about what happens at the “bargaining table,” but it’s also the strategy before a deal is even constructed.
Here’s a brief summary:
1. Tactical Level – The Game At The Table
Most of us are familiar with this dimension. It’s where the action takes place – the pitching, the haggling, the immediate tactics. However, solely focusing on the tactical elements can be limiting. Think of it as playing tennis with only a forehand. You might have a really good forehand, but you’ll be exposed and limited when a shot is played to your weak side.
2. Deal Design – Crafting the Perfect Offer
Before you even sit down at that table, there’s groundwork to be done. The Deal Design is all about setting up the right conditions for your negotiation. It’s the prep work, understanding the intricacies of the deal, the stakeholders involved, and finding common ground. It’s about creating an offer that doesn’t just suit you, but aligns with the needs of everyone involved.
3. Setup – Setting The Stage
Then there’s the Setup, arguably the most overlooked dimension. This involves maneuvering the right players into the right places even before discussions start. It’s like setting up a game of chess and ensuring your pieces are in the best positions before any moves are made. Remember, strategic selling isn’t just about responding but setting up the landscape in your favor and creating value for everyone involved – even parties not directly involved.
Here’s how David Lax and James Sebenius, authors of 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals, summarize it:
“Beyond the interpersonal and deal design challenges executives face in 1-D and 2-D negotiations lie the 3-D obstacles—flaws in the negotiating setup itself. Common problems in this often-neglected third dimension include negotiating with the wrong parties or about the wrong set of issues, involving parties in the wrong sequence or at the wrong time, as well as incompatible or unattractive no-deal options. 3-D negotiators, however, reshape the scope and sequence of the game itself 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.”
3-D Negotiation In Action
On Sunday January 14, 2018, I was thrown into the deep end.
It was literally my first day on the job as a Strategic Account Director at LivePerson, and I was asked to work the booth, along with a handful of others from my new team, at The National Retail Federation Show at the Javits Center on the west side of Manhattan. My official onboarding wasn’t set to begin until a week later.
At that show, former partners (from Apple) introduced me to Peter, an ambitious VP at the world’s largest food services company, where they run concession operations for entertainment and sports arenas, venues, and stadiums.
Peter envisioned modernizing how guests received food and beverages inside these venues. Instead of flagging down a “hawker” (the guys and gals carrying a tray strapped to their neck yelling “beer here”), he wanted to enable a more modern way for guests to text what they wanted, pay for it, and like magic, it shows up to their seat a few minutes later.
Unbeknownst to me, Peter had already been actively engaged (and very excited) to work with a chatbot startup on this vision – who were already throwing their entire company behind this initiative.
Apple introduced me because, to enable this vision, they wanted to use a new service they were rolling out called Apple Business Chat. LivePerson was already an integrated partner for this service, and the startup was not.
During a six month process to enable a pilot with the Philadelphia Phillies to prove out the concept, Peter wanted LivePerson and the chatbot startup to work together. Let’s just say “love” between the two of us wasn’t there, mainly because they were trashing us at every moment they got, even with us in the room, and it was clear Peter was being swayed in their direction.
Because LivePerson was focused on moving beyond conversational care (using messaging to resolve customer support issues where Apple Business Chat had been successfully deployed prior) and into conversational commerce, I was not thinking about a short-term deal to win, and started to do everything in my power to make it as easy as possible for Peter and his company to start favoring us as his strategic partner.
After the free proof of concept was a success, I knew we had to get in a better position to win a paid deal with the company. Relying solely on 1-D tactics wasn’t going to be enough (but a business dinner at Del Posto certainly didn’t hurt things 😋).
The startup had positioned a grand vision for the company to use the chatbot service as the heart of their operations, not just in the entertainment and sports arenas, but in the large business cafeterias they served. They were beating me at my own game (get prospects to think big).
Here’s how we turned things around:
The Achilles heel of the startup was that they were resting the entire future of their company on this deal. However, LivePerson was a public company with far more resources and runway. That was leverage.
1. Enlisted help from above (1-D)
Because of the strategic nature of this opportunity, our CEO was excited to participate in shaping its future. Although the startup’s CEO was also involved, leveraging the credibility of the 2nd longest-running CEO on the NASDAQ (at the time) added a level of credibility that I or others on the account team could not. The startup couldn’t either.
2. We focused on Peter’s legacy (2-D)
With the backing of our CEO, the main focus of our discussions was getting Peter to clearly see both the challenges and impact of bringing this vision to life. Was he going to trust enabling his grand vision with a money-strapped startup, or did he want to tap into the resources of a public company that could run just as fast as a startup, but also be vested in long-term success? This got him thinking, and it got him to allow us closer access to their C-Suite.
In addition, we completely revamped the commercial model – which the startup was asking for a large 8-figure investment to enable a large-scale rollout. Because of resources and our strategic priority to become a leader in conversational commerce, we negotiated smaller rollouts on a flat-fee basis, giving Peter a much easier job of requesting budget to begin scaling this concept out to more venues (and gain more raving fans).
3. We leveraged the power of our partnership with Apple (3-D)
A key factor was our existing integration with Apple. The company already had a strong relationship with Apple, since they deployed iOS devices across their venues and fleet of employees. Apple benefited too by being able to position Apple Business Chat beyond customer care. Working with them outside of our negotiations with Peter ensured we had a unified front as partners. It was Apple + LivePerson vs working solely with a small startup.
Ultimately, we won the deal for the paid phases in December of that year.
The startup? They ended up selling themselves to another chatbot company.
As the authors of 3-D Negotiation put it:
“To find complementary parties and issues, you should ask questions that focus on relative valuation. What uninvolved parties might highly value elements of the present negotiation? What outside issues might be highly valued if they were incorporated into the process? Are there any parties outside the immediate negotiations that can bear part of the risk of the deal more cheaply than the current players?”
“On the other hand, it is sometimes necessary to shrink—or at least stage—the set of involved issues, interests, and parties in order to create value. For example, rather than enter into a full multiparty process at the outset, an industry association that wants to negotiate a certain set of standards may benefit from first seeking agreement between a few dominant players, which would then serve as the basis for a later deal among the wider group. Or, negotiations to forge a multi-issue strategic alliance between two firms may be dramatically simplified by one side which instead proposes an outright acquisition.”
If you’re interested, you can read further examples of 3-D Negotiation in action.
Summary (TL; DR)
Negotiation will not only serve you well in business, but in life.
I am giving proper space for this incredibly important skill, and as such, I’ve dedicated one newsletter for four weeks straight to the four most powerful negotiation frameworks used in business today (this was part four).
Today’s edition focused on 3-D Negotiation, from the book 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals by David Lax and James Sebenius. It’s a helpful framework to use in designing better deals and setting up the environment for deal success.
It builds upon the other frameworks we learned in part 1, part 2, and part 3. As a thank you for your dedicated attention throughout this series, I want to share a free gift: a cheat sheet with all four frameworks you can use to navigate your own deals.
→ DOWNLOAD THE PDF HERE ←
Hope this series has helped elevate your strategic selling game, especially as we head into the busy and chaotic end-of-year negotiation season.
See you next week!
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