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3-d Negotiation: Powerful Tools to Change the Game in Your Most Important Deals

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3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals by David A. Lax and James K. Sebenius is not the book for Gordon Gekko types, practiced in the simple tactics of win-lose haggling. This book is the The Art of War for deal making. Like Sun Tzu for strategy, 3-D Negotiation is the primer on creating deals with lasting value. Anyone that has ever bought, sold, or traded anything will gain something with even the most cursory read of this work.

3-D Negotiation is a book that will become dog-eared, highlighted, notated, and underlined. This is a reference that you will return to again and again. It is very clearly written in a way that is accessible to everyone. Each point is illustrated with a relevant and detailed real-world (and often personal) example from the authors.

The authors are both graduates of Harvard Business School, co-founders of Harvard's Negotiation Roundtable and developed the executive program on strategic negotiation at the Business School. They have decade's worth of deal-making experience and analysis between them.

Lax and Sebenius take a contrarian approach to much of the current thinking and teaching on negotiation. They seek to move us away from the familiar win-win and win-lose tactical approaches and help us understand negotiation along the following dimensions:

* 1-D: At the Table - tactics

* 2-D: Design Value Creating Deals - getting "below the surface to uncover the sources of economic and non-economic value.

* 3-D: Away from the table - the setup - setting the table - "ensuring that the right parties have been approached, in the right sequence, to deal with the right issues that engage the right set of interests, at the right table..., at the right time, under the right expectations, and facing the right consequences of walking away if there is no deal."

This book focuses heavily on the deal design and setup dimensions. Throughout, the authors reinforce the concept that roadblocks in any one dimension may often be solved in another dimension. The focus is on crafting deals that create long-lasting value for all sides.

3-D Negotiation goes well beyond simply waiting for the other side to talk first once you are all sitting together at a table. Negotiation takes work. It takes planning. It takes analysis and research. And most of all you have to listen. If you are serious about learning the craft of deal design that creates lasting value, Lax and Sebenius are here to help.

The authors have created a comprehensive methodology to deal making. To start, they recommend you complete a 3-D barriers audit "to determine what stands between you and the deal you want." An audit consists of the following exercises:

* Assess the barriers to the setup

* Create a detailed "map" of everyone involved, their roles, their full interests and their best no-deal options

* Plan the sequence of events and process choices

* Analyze and understand all the barriers to deal design

* Analyze and understand any "tactical and interpersonal barriers"

They offer the following recommendation: "to help organize the elements of your strategy, map backward from your target deal to the deal/no-deal balance that will most likely induce [the other parties] to make this choice, and then make your way back to the current situation. This enables you to determine the actions you must now take to face them with the right deal/no-deal balance."

As a helpful exercise, they recommend writing the victory speech for your counterparts. The speech should include the reasons "why the agreement they made with you is smart, fair, reasonable, and better than the alternative."

Once you have the end clearly in focus you can then work backward to "craft a 3-D strategy". A 3-D strategy is "aligned combination of moves away from the table, at the drawing board, and at the table in which you":

* Set up the right negotiation

* Design value-creating deals

* Stress problem-solving tactics

In closing, I've had the opportunity to use some of the ideas offered in this book during recent negotiations with a potential vendor. We created a 3-D strategy after we looked at all the players and their no-deal options. We understood as many of the barriers as possible. We quickly identified the ZOPA (zone of possible agreement) and have been living in that zone trying to iron out all the details.) I've found myself picking this book up from time to time and leafing through it. Every time I do, I pull something useful out of it. Their methodology works. We are successfully building a solid partnership that creates and ensures value for both parties for years to come.
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Most books on negotiation that I've read focus on the tactics you use when you're face-to-face with the opponent. But what if you take a step back and shape the negotiation before you even show up? That's the general direction of 3-D Negotiation: Powerful Tools to Change the Game in Your Most Important Deals by David A. Lax and James K. Sebenius. I can see where this would give you a step up in numerous situations...

Contents:
Part 1 - Overview: Negotiate in Three Dimensions; Do a 3-D Audit of Barriers to Agreement; Craft a 3-D Strategy to Overcome the Barriers
Part 2 - Set Up the Right Negotiation: Get All the Parties Right; Get All the Interests Right; Get the No-Deal Options Right; Get the Sequence and Basic Process Choices Right
Part 3 - Design Value-Creating Deals: Move "Northeast"; Dovetail Differences; Make Lasting Deals; Negotiate the Spirit of the Deal
Part 4 - Stress Problem-Solving Tactics: Shape Perceptions to Claim Value; Solve Joint Problems to Create and Claim Value
Part 5 - 3-D Strategies in Practice: Map Backward to Craft a 3-D Strategy; Think Strategically, Act Opportunistically
Notes; Authors' Note; Index; About the Authors

Lax and Sebenius have extensive experience in working with corporations negotiating multi-million dollar deals, and from that base they have evolved the idea of 3-D negotiation. Basically, you need to look at your deal-making in a multidimensional way instead of just trying to hammer the side across the table. In some cases, this may mean that the party you're trying to do the deal with isn't even the right customer you should be approaching. Or perhaps the no-deal option of the other side is still better than what you have to offer. What then? These guidelines, if followed, can make your time at the table much more productive, and allow both sides to come away with what they need and/or want in the deal.

The authors don't completely ignore the strategy of what plays out when the parties are face-to-face. Such things as understanding the Zone Of Possible Agreement (ZOPA) and being aware of the reciprocity factor will keep you from giving up too much too soon. But keeping the deal from quickly becoming a value-claiming effort can lead to possibilities that aren't necessarily envisioned up front. There are plenty of examples from real companies and real deals so that you can see how it works in real life...

An excellent read that will allow you to look at your next deal as more than a win-lose proposition...

As a very fast-moving entrepreneur, I have to negotiate constantly. I'm
always on the lookout for good ideas to improve the deals I make. Frankly,
I don't need yet another book proclaiming that "win-win" is the answer or,
alternatively, that everything "starts with no." Obviously "no" has its
role and you're looking for an agreement that works for everyone and that
makes others want to keep on dealing with you. But I'm getting a little
tired of negotiation books with these obvious messages. So, when I picked
up 3-D Negotiation, I realized that it represents something different. Not
just war stories and platitudes, but a very practical approach, clearly
expressed and based on a lot of experience. The authors stress the
importance of the right "setup" moves away from the table before you even
begin the process at the table. They offer lots of examples to clarify
what they mean. This book is a standout.

Einstein said something to the effect of "make things as simple as possible, but no simpler." The authors of 3D-Negotiation have done just that.

They give appropriate credit to deft tactics at the bargaining table, but make a real contribution by illuminating the importance of setting up the optimal conditions for successful negotiation. If you're looking for cheerful cliches about win-win negotiation, you won't find them here. Nor will you find chest-thumping stories about winning through intimidation or brute force. Instead, you'll get insightful analysis of complex business and diplomatic cases, all of which have a mix of competitive and cooperative elements. Anyone who thinks that negotiation is only about who makes the first offer (or for that matter, who's adept at creating a trusting relationship) will get eaten for lunch by readers who master this book.

During a recent conversation with former Disney General counsel Lou Meisinger about negotiating the resolution of commercial litigation, he suggested breaking impasse during the mediation of high-stakes litigation by "transforming the litigation into an opportunity to make a deal."

This is the precise advice (in great depth and thorough scope) given by Lax and Sebenius in their terrific new negotiation text, 3-D Negotiation, Powerful tools to Change the Game in Your Most Important Deals.

The three dimensions they refer to are tactics, deal design and set-up, tactics being strategies exercised at the bargaining table; deal design involving the invention and structuring of agreements that create greater value for all parties; and, set-up, the architecture of the deal, including selection of parties, sequencing of negotiations among them, addressing the right issues at the best time and considering all no-deal options.

The earliest example that make me read hungrily on, concerns Staples' post-start up quest for venture capital. I'll briefly tell the tale stripped of texture and nuance (the more interesting, in-depth account can be obtained by buying the book).

Staples, the original big-box office supply store, attracted a formidable competitor early on -- Office Depot. To survive in the newly competitive market, Staples needed expansion capital and it needed it fast. All of the venture capital firms and the investment bankers were valuing Staples at pretty much the same price point, a point unacceptable to Staples' founder. At a loss for new ideas, he called Harvard Business School Professor Bill Sahlman, an expert on venture firms and start-up financing.

Sahlman recommended breaking the impasse by changing the deal-design and set-up by finding new players and re-sequencing the negotiation. Together, he and Staples' founder identified investors who were flush with money and potentially interested in better ways to deploy it. These new investors were the limited partners of the old venture capital firms that we're holding firm on pricing. The limited partners, Sahlman suggested, might well pay more for the opportunity to obtain a piece of Staples' action that the investment firms would.

Because the VC firms charged hefty management fees (usually 20% of the profits) if Staples offered the deal directly to the VC's investors, those investors could reap 100% of the profits for the same share of the Staples' pie rather than the 80% offered by the VC's. This had the effect of increasing the actual value of each share by 20%.

As Lax and Sebenius stress, this result could not have been achieved by negotiations "at the table" or even with the originally identified stake-holders. What Staples did was to "favorably reset the table with right new parties whose interests were far more aligned with the deal he wanted to do." Then it sequenced the process by going back to the VC's and the investment banks, saying, "this thing is filling up fast; do you guys want to play or not?"

Every lawyer litigating a "bet the company" case needs to buy this book and read it. You can't leave this one unread on the shelf next to your yellowing copy of "Getting to Yes." The business people are at least a generation ahead of the lawyers in deal making. Let's learn everything they have to teach us!

For more negotiation advice from master negotiators and academics like Lax & Sebenius (and a bit of my own) see [...]

Victoria Pynchon, Settle It Now Dispute Resolution Services, 499 North Canon Drive, Suite 400, Beverly Hills, California 90210 T.323.217.5162 F.323.852.1535 vpynchon@settlenow.com www.settlenow.com

Finally, the negotiation book we've been waiting for -- sophisticated, practical, multi-dimensional, and effective in the real world of commercial deals and disputes. Lax and Sebenius avoid the one-dimensional approach of the chest-thumpers, game-theorists, and idealists and demonstrate how the best negotiation results can be achieved by any serious bargainer who takes the time think through the problem, prepare, and apply a complete set of strategies and tactics. This is a giant step forward in the negotiation field, but also a magnificant contribution to those of us who work in the middle between negotiators who too often fail to find the deal or the best deal.

Eric D. Green, Professor of Law, Boston University; co-founder and principle Resolutions, LLC and EnDispute, Inc. (now JAMS).

Most books on negotiation combine the hardball win-lose tactics with the more effective win-win approach. 3-D Negotiation is different: it adds a new third dimension to negotiation, mainly the need for developing a dynamic strategy on how to set up and shape the optimum situation and overall conditions for negotiations (away from the table), and well before negotiations start. Of course, the authors believe that negotiators must employ all three dimensions as needed during most negotiations.

This new third dimension includes, among other things, "acting to ensure the right parties have been involved, in the right sequence, to deal with the right issues that engage the right set of interests, at the right tables, at the right time, under the right expectations, and facing the right consequences of walking away if there is no deal."

Here is real-world example of acting to ensure the right parties and the right sequence: A US firm was looking to establish a joint venture in Mexico and had identified three potential partners (one excellent, one good, and one that barely meets the set criteria). Should this firm start negotiations with the best prospect, and if those negotiations fail, then move to the next, and so on? Or wouldn't it be far better if this US firm makes it known in the industry (in Mexico) that they are looking for a joint venture partner, and induce these three prospects to come to the US firm? Negotiating simultaneously with the three potential partners was indeed better, especially that the US firm set up the negotiation conditions whereby the three Mexican prospects were rushing to compete for the joint venture!

Although this book introduces a third dimension to negotiation, the other two dimensions are also well covered by the authors, with a large number of real-world examples. The second dimension covers designing value-creating deals, including the traditional concept of enlarging the pie, and how to make lasting deals. The first dimension focuses on the tactics at the negotiation table, including problem-solving tactics such as shaping perceptions, setting ambitious target prices, interpersonal skills, cultural empathy, and many other tactics familiar to those who have read traditional negotiation books.

In short, 3-D Negotiation is a welcomed addition to the topic of negotiation, especially due to its strategic approach to negotiations. I particularly like the idea of backward mapping the negotiation process, starting with the desired target or outcome, then mapping all the parties, their interests, no-deal options. I was also intrigued by the authors' philosophy and the 3-D strategy of: "Let them have your way", as well as their concept of "Zone of Possible Agreement".

Although this excellent book is written with important and complex deals in mind, the 3-D approach can be indeed applied to simpler deals and negotiations. In fact, the reader will find a large number of examples of negotiations ranging from the simple ones such as buying a car or a house, to the more complex ones such as negotiations between countries, or among large international organizations.

I thought that this book was going to be about negotiations.

It's a lot more than that. After years of doing negotiations, I was skeptical that a new concept could emerge. I was very surprised by the concepts not because it was incredibly revolutionary, but because it had a lot of common sense.

The book teaches business strategy and negotiations. It forces you to look at your business and focus on the right partners and business channels to be able to successfully negotiate.

This book has been invaluable to me and would recommend it to any business person.

Not as readable as "Getting to Yes" or "Getting Past No", but very well-written. Not too academic, but deep enough for the professional negotiator. Accessible for those first being exposed to the topic.

Davis A. Lax and James K. Sebenius are both graduates of Harvard Business School, co-founders of Harvard's Negotiation Roundtable in the 1980s, and developers of the Business School program for top executives entitled "Strategic Negotiation: Deal Making for the Long Term." They are also the co-authors of a book that many readers will know, The Manager as Negotiator.
James Sebenius is the first Gordon Donaldson Professor at Harvard Business School and also serves as Vice Chair of the Program on Negotiation at Harvard Law School.
David Lax, formerly on the Harvard Business School faculty, is Managing Principal of Lax Sebenius LLC, a strategy firm founded by the two men that advises both and governments and major corporations on their most important negotiations.
This work is the product of their "over two decades of deal-making experience ... study" and collaboration in the field of negotiation (p. x). It is first-rate.
"This is a book," the authors tell us, "about seeing the world in three dimensions ... [rather than] ... the alternative, which we'll refer to as one-dimensional negotiation (p.7)." The writers then go on to explain their work is unlike the two types of negotiation that dominate the seminar and the written products of the field today (the win-lose and the win-win views of negotiation) with their concentration on face-to-face approaches and tactics.
Lax and Sebenius view negotiation quite differently from the focus on table tactics used in many popular seminars today. Their approach examines negotiation far more than as a tactical table encounter, but rather as focusing on three distinctive but inter-related negotiation activities (p. 37):
* Setting-up the right negotiation
* Designing value-creating deals
* Stressing problem-solving tactics
If you've been to a seminar lately or read much of the face-to-face tactical material streaming out of the publishing houses, you will find this book a refreshing look at the breadth and depth of the negotiator's over-all task and a far cry from the negotiator who asserts that given a topic they can "just wing it" effectively. Every negotiator needs to read this book and learn the three dimensional nature of the craft. You will be hard pressed to find a better resource for the job.
Readers will learn how to get all the interests right and position their advocates either at the table or in the "wings" as powerful influencers of the negotiation. You will in sum, learn how to set the most promising table and how to best utilize the full cast of actors.
You will learn to develop lasting deals through finding and creating value so that each party is strengthened in its implementation by significant value through the new agreement. Here, as so often in this carefully crafted work, the authors have drawn on both their own experience and the work of experimental psychology to illustrate their findings. This incorporation of the dual thrust of experience and research is one of the book's hallmarks.
In this case, the authors explore a wide-spread skepticism of some negotiators that "pie-growing stuff is realistic" and has real potential (p.128). The authors also acknowledge that psychologists confirm that "adversarialism is a pervasive and deep-rooted human tendency." Additionally, the writers also cite a survey of some 5,000 persons involved in over 32 negotiating studies, fifty percent of whom failed "to spot and take advantage of value-creating issues" (p. 129).
All this explored, the writers conclude:
* "Learning to negotiate effectively takes time and effort."
* "It can be done. Half of the people ... did find the value-creating issues."
* "Psychological biases ... have to be recognize[d] and worke[d] to overcome them."
In many ways, this illustration forms the theme of this most valuable book. This reviewer fully concurs that negotiation is a complex, learnable skill acquired by anyone who works at it, but it needs to be viewed as truly an art form. Art, of course, is part inspiration, part skills and part perspiration. So is effective negotiation.
If you're looking for a solid work on negotiation, you can't go wrong on this one.

First rate. This is a book for all negotiators. It includes a full and valuable index.