When engaging in business negotiations, the Negotiating Matrix offers a systematic approach that can ensure your achievement of the best outcome and will help keep you focused on your primary goals. Not only does this matrix address what is most important to you and what the other party is after, but also what you can give and what the other party can offer.
In a prior IOI Partners article, I addressed some common mistakes made in negotiations and proposed this useful matrix to help guide negotiations. In particular, the matrix is focused on:
- What do we want?
- What can we give?
- What do they want?
- What can they give?
In this article we will look at an example as to how a negotiation was able to use this matrix and move forward as a strategic alliance.
Divestiture or Strategic Alliance?
A major corporation with numerous product lines going to the same call point was considering a carve out of one of the product lines which had a large installed base of instruments. It was very clear from the beginning that the key want of the seller was to have their former customers’ instrument service needs met given that the seller’s field service personnel were not included in the deal. Any failure on the part of the buyer would reflect badly not only on the buyer but also on the seller and would have the potential for spill over brand damage on the seller’s remaining product lines going to the very same customers.
This issue is almost always of critical concern to the seller in corporate carve outs to a smaller, more focused buyer.
During the preliminary discussions, the buyer determined it could give this away as they already had an installed base of instruments with the same call point and therefore could easily handle this responsibility. The trick was to convince the seller that they would take good care of the customers. Of significant concern to the buyer, not being as well known as the seller and with a meaningfully narrower product line, was whether these customers would continue to buy from them following the sale. The buyer wanted to have these customers feel that this transaction was in their best interests and that they weren’t being abandoned.
It occurred to the buyer that a strategic alliance between the parties would be of great value to customers, the seller, the buyer, and the seller’s employees. The buyer proposed that the parties announce they had entered into a strategic alliance where the buyer would be the seller’s preferred partner for this product area. This solution proved to be a win for all parties.
- Customers win because they would see that they still have the same breadth of products available as before, plus the buyer’s focus on this product area will assure them they would not be abandoned or neglected as was becoming apparent from the seller’s consistent underinvestment.
- The seller wins because they would be able to assure their customer that they had placed the product line in the hands of a capable and focused organization.
- The buyer wins in that they address one of their key concerns: “Will customers continue to buy the product line from the buyer after the carve out?”
- The seller’s employees win because they now have a future with a focused organization committed to success in this product area that had been the focal point for many of them for their entire careers.
The “cost” of the strategic alliance to the seller is zero unless the buyer failed to support the customer. However, this was the same risk the seller had anyway. The lesson here is to keep focused on the intersection between what you can give and what the other party wants and vice versa. You often will find the other party is looking for deal points that don’t “cost” you much but are of great value to them, thus paving the way for a successful strategic alliance.