|
|
|
|
        |
 |
|
NEWSSo What's The Big Deal? Part 3by Kim Meredith, Managing Director of Spectrum Solutions In my last two articles, I spoke extensively about trading, or giving to get, or quid pro quo. As you have probably realized, these three concepts all amount to the same key idea. To be a great dealmaker, you need to embrace the principle of "give to get". This becomes even more important if you are in a weak position when doing a deal. The weaker your position, the more you need to focus on trading. Do you think that a dealmaker can actively create or influence power in a deal? The good news is that the answer to this question is a resounding "yes"! Imagine, for a moment, that you need to close an important deal but you feel you don't have as much power as the other party. This will definitely compromise your position in the deal, so how can you create power? Planning The first and most important step in increasing your power is proper planning. Planning is a huge subject (one which will be addressed in next month's article), but relative to power, planning needs to be your starting point. If you fail to plan around the power aspect of negotiation and dealmaking, don't be surprised when - not if - you end up with a less than favourable deal. In planning, you need to assess your power vs the power of the other party and then address all the possible elements that impact power. Incentives Your planning will soon reveal to you that the other party needs to have some interest in doing the deal with you. Can you create this interest? If so, how? The answer lies in incentives. If you have had the opportunity to read Freakonomics, the fascinating book by Steven D. Levitt & Stephen J. Dubner, you will have realized that incentives make the world go round - especially in negotiation and dealmaking! The more incentives you can find to entice the other party, the more interest they will have in doing the deal with you. Remember that disincentives are also a form of incentive - the person with whom you are doing the deal may get to avoid a consequence by doing a specific deal. For example, a buyer for a large retail organisation may avoid a disappointing bonus (the disincentive) if they can negotiate a significant discount from an important supplier. Incentives and disincentives are referred to as "hot buttons" or "wins" in selling parlance. Incentives are undoubtedly the most immediate way of improving your power in a deal. Trading There is immense power in the trading process, and trading is driven by proposals. To be a powerful dealmaker you need to make proposals and respond to proposals - and this means having a lot more than just one or two items (typically incentives and disincentives of varying values) with which you can trade. It is very easy to fall into haggling, rather than trading, if you have only a few variables with which to trade. The skilled dealmaker will always come to the table with lots and lots of variables in their back pocket - and be prepared to trade them. Don't shy away from making trading-based proposals - it is one of the most effective tools you can use to gain, and keep, control of the dealmaking process. Who Needs the Deal? Another very important element in determining power is establishing which side needs the deal more. It obviously stands to reason that the side needing the deal more is in the weaker position. Sometimes there is little you can do to change this situation, so if it is you that needs the deal more than the other party, you need to spend as much time as you can looking at all the ways of improving your power. The Team vs The Lone Ranger There are plenty of pro's and con's in being part of a team vs doing deals on your own. You need to assess which option will give you the bigger advantage. A rule of thumb is where you can, take a person you trust along with you to keep track of the deal - that is, make notes, watch for signs of flexibility from the other side, figure out the other side's agenda and so on. Be very careful, though, as you don't want to take someone to a deal who gets too involved in the proceedings and loses all your hard won ground! If you are dealing with a team, you may want to go in on your own and play divide and conquer with the other side. Equally, you may want a team of your own to give you support or to equalize the numbers. The team you use (or don't use, as the case may be) can and will influence your power position. Perceptions of You The more legitimacy and authority - as recognized by other party - you have, the more power you have. Remember that perception is reality. If the other party does not see you as having the necessary authority, your position is immediately undermined, reducing your power. Another two important influencers of power are credibility and appearance. I was lecturing to a group of executives from a company employing over 100,000 people in the USA recently and I stated during the lecture that personal credibility and appearance impact a person's position in a deal. This is, apparently, not a politically correct thing to say! But, as harsh as it may seem, if you don't look and act the part, if your credentials are not up to scratch, your power is damaged. This is the nature of human nature! Word Power The language and words you use when doing deals, particularly when negotiating, are of paramount importance. When we are coaching dealmakers, my colleagues and I invest a substantial chunk of time teaching dealmakers the power in words. This is a subject in its own right but, for starters, get used to using the word "if". "If" suggests conditions, "if" suggests trading. It is, for us professional dealmakers, the most powerful word in the deal world. At our company we believe "if" to be the meaning of life! Hard Work There is no substitute for commitment and hard work - in dealmaking, effort is rewarded with results. The time you invest in planning, getting information, preparing questions, selecting and briefing your team, practicing your opening positions, etc. will always pay dividends. Have you ever heard the saying "knowledge (or information) is power"? In a deal, nothing could be more true. Unfortunately, though, this means hard work - research, reading, discussions and the like. Sole Supply vs Competition There are two sides to this coin - the seller's use of sole supply vs the buyer's use of competition. In the world of deals, these situations arise every day. If you want to understand the power in of the seller's use of sole supply, you have only to think of monopolies. Monopolies can hold their customers to ransom. Why? Because they have the power to do it. But what happens to these monopolies when the tide turns and competition enters the market? Imagine what we would be paying in cellphone charges if there was only one provider? The opposite of the monopoly is the person who can choose from many suppliers and then proceeds to play one supplier off against the others in order to drive down price or improve the terms of a deal. A graduate of one of The Dealmaker programmes decided, after a course, to play this game with low cost insurance providers. She managed to secure an outrageously low premium in the end. So, to increase your power, consider if you are able to use sole supply or competition to improve your deal. This may not seem fair, but it is used every single day by companies and individuals alike to strengthen their position of power. You may be thinking by now that power can be used to gain unfair advantage. This may be true. The reality, however, is that power is created and improved and used. What are you doing to improve your position of power in a deal or are you simply reactive to the power play? What is the person you are dealing with doing to adjust their power? If you do not use the power available to you, you will not be able to maximise your deal. No skilled dealmaker will ever allow this to happen. So, to improve your power in a deal:
Good luck with adjusting your power. It is within your hands to change. Kim Meredith ABOUT THE WRITER
Home • About Us • Programmes • Course Dates • Coaches • References • News • Contact Us |
|
|
|
|