A few weeks ago, I sat down with Angus McIntosh of Total Negotiation (a negotiation consultancy based out of the UK) and we had an amazing discussion about procurement specific negotiation. In that discussion, Angus revealed some gems of wisdom that I’ve pulled out into an actionable summary that you can use right now to improve your negotiation game.
When you get advice from someone who is one of the most well known procurement experts from the world, you need to take time to dwell on it and listen for the gems of wisdom that come out. In the episode , Angus addressed some things that if you listened to the podcast, your response may have been, “that’s cool” and not have given it another thought, but that’s where the magic is. And so what I’m going to do in this post is attempt to draw out that wisdom for you so that it becomes obvious what you need to take action on.
Over the last 20 years, there has been an enormous shift to the way companies approach that external spend and in a vast majority of big companies. Much of the spend in large organizations is now being managed by professional procurement teams and there have been significant advances in technology and process improvement. But while there has been significant improvement in these areas, there still seems to be some significant gaps in negotiation skills and the execution of outstanding procurement strategy. The development of good negotiation skills almost seems to be in danger of becoming neglected. And so there are still enormous opportunities to add value to the company by integrating good negotiation practices. The return on investment of developing good negotiation practices is significant!
THE CREATION AND DIVISION OF VALUE
A win-win approach to negotiation is too simplistic. As procurement professionals we need to be very clear about how we approach market. It’s tempting to default to a win-win approach, but that’s likely not the best approach. In order to be more strategic, you need to think about how you create value with the supplier in negotiations through the exploration of the possibilities and the potential. And once you’ve uncovered the true value and you’ve determined how to create more value, then how do you divide that value? The division of value and determining the division of value is a critical conversation and often it gets forgotten.
DON’T LET YOUR EGO GET IN THE WAY
Nobody cares how smart you think you are. And how smart you think you are can be a hindrance into being humble enough to learn or re-learn skills. Don’t let your ego get in the way of making the business better. When you fail at something, and you will, spend time to reflect on what you could have done better to improve that situation and what you could do differently next time. Once you take responsibility for the failure, you can begin to determine what needs to change.
GO BEYOND THE OBVIOUS
Think smartly about the category and understand the category inside out. If you look at procurement as simply as sourcing process and you simply approach that market with an RFP, that may be the right process for a lot of fairly mundane categories, but it’s not the right process for categories that have a fundamental impact on your business. Look at that market, look at how your competitors source in that market. What are your relative advantages and disadvantages? How can you organize your demand in that market? How can you segment the value chain and at what point can you contract the value chain? Will you go global or local? Will you look for multiple points of supply? Will you bundle or un-bundle? Look deeply into the category and go beyond the obvious.
IT’S NOT ABOUT YOU
It’s not about you and your status or being the ‘face’ of the process. And it’s not about you in the sense of how clever you can be. Nobody cares how clever you think you are. It’s about the relationship with the supplier. It’s about the business issues and it’s about getting the result that you need for the business.
THERE’S MORE THAN YOU THINK
There’s more value on the table than you think. In order to find that value you need to disrupt your approach and change your approach in unexpected ways. Disrupt the rules of the game. Now, that sounds aggressive. It’s not necessarily. It’s really about changing your approach in unexpected ways. For example, if you have a well-established sourcing process for a particular category, with a very regular and predictable rhythm it’s likely that your suppliers have learned how to anticipate that process and play it. Everybody has become habituated to the process and it’s lost the power to surprise. Change the way you behave! Move to a bid summit approach or something else that will generate surprise to generate incremental value. If you really shift the approach and change what your suppliers are expecting from you, you’ll get incremental value. And once you’ve been doing that for five years, move back and try the original way or something new. If you’re negotiating at a country level, negotiate regionally or globally. If you’ve been negotiating globally, break it back and go to country. Change something. Disrupt something and there’ll be some value there.
YOU’RE MISSING SOMETHING
You’re missing something in the deal. I don’t know what it is and you don’t know what it is but there’s something you’re missing, so go and listen for it. And there will be something there in the supplier’s business, in the competitor’s business, in the way you’re operating together, in their business plans for the future, in changes taking place in the market. There’ll be something that you are missing which you can use to make the deal work.
These gems of wisdom are actionable. There are things in each of these areas that you can do right now to change the way you approach negotiation. I encourage you lo listen to the episode that Angus did with me, take notes and dive deep into what is being said because this advice is priceless.