Negotiation Mastery Blog

3-D Negotiation – A Book Review

 

There are a huge number of books on negotiation out there, many of which either promote quite unhelpful tactics or promote useful tactics but don’t say anything new.

“3-D Negotiation” is a book that progresses the thinking on the field and is well-written too. Its from a good source, as well; its authors, David Lax and James Sebenius, are both key faculty members of the Harvard Negotiation Project, the de facto Centre of Excellence when it comes to negotiations.

So what are these 3 dimensions in which they claim the deal takes place?

The first is our classic understanding of the negotiation – two people sitting across the table from each other, trying to find the right tactic to get their best deal.

The second is what they call “Deal design”. In this dimension, the counterparties focus on how they can maximise value for all parties.  By working together, they can find ways to “create a bigger pie” so that everyone is better off. Creativity and collaboration are key to find ways of structuring the deal in the most profitable way. Then, once the value is maximised, it can be distributed amongst the parties according to the tactics of the first dimension.

I think the best thinking in the book, though, comes when they look at the third dimension, which they call “Deal set-up”. This, they say, is about everything that takes place outside the meeting room.

In other words, what needs to be in place before the deal? Who can we talk to that might expedite a solution? Who else can we talk to that will add even greater value? Who can stop it, that we need to bring on board?

They give many examples throughout the book but the very first one they give is instructive by itself. When Thomas Stemberg, the founder of the office supplies retailer, Staples, was in negotiations with Venture Capitalists for funding his growth strategy, the talks met a brick-wall when it came to the valuation of his company. No matter what tactics either side used (1st dimension), nothing was getting them beyond the impasse.

So Stemberg got on the phone – who else could help? This is the 3rd dimension in practice. He called Professor Bill Stahlman at Harvard, an expert in the field. He advised Stemberg to sidestep the VC’s and go directly to the pension funds and insurance companies who would be happy to put up the money and avoid paying the exorbitant “2 & 20” fees the VC’s demand. He called these guys and, as Stahlman predicted, they jumped at the chance.

Which didn’t mean he cut all ties with the VC’s. Quite the contrary, he continued his talks with them but now on much better terms. The deal freed up, Stemberg got his money and the funding became available. The VC’s benefitted too – their investment grew nicely with Staples’ ensuing growth; Mitt Romney, then a founding partner of Bain Capital, was on Staples’ board for many years.

 

In summary, their message is that the typical negotiator operates predominantly in the first dimension; the best, however, work in the second and third. When taken together, these can make great deals happen. Deals that seemed impossible or where one’s gain can only be at the other’s cost, become fruitful and mutually beneficial when moving in the 2nd and 3rd dimensions.

Authoritative, readable, and nicely structured with summaries at the end of each chapter, it is a highly recommended addition to the canon.