Entrepreneurship 101: Negotiations

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Part of the MaRS Entrepreneurship 101 Event Series
"It's Negotiable" -- Michael will discuss the art of effective negotiation; how to build lasting agreements without becoming either a bully or a wimp. Case studies will focus on issues situations most entrepreneurs will face: research projects, starting a business venture, obtaining investors and licensing a product or invention.
Download the audio presentation and post questions on the MaRS blog:
http://blog.marsdd.com/2006/11/08/entrepreneurship-101-negotiations/

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Entrepreneurship 101: Negotiations

  1. 1. It’s Negotiable: A Guide for Entrepreneurs Michael Erdle, Managing Partner
  2. 2. Introduction <ul><li>Negotiation Problems and Opportunities </li></ul><ul><li>Negotiation Case Studies </li></ul><ul><ul><li>Research Collaborations </li></ul></ul><ul><ul><li>Business Partnerships </li></ul></ul><ul><ul><li>Technology Licensing </li></ul></ul><ul><li>Dispute Resolution </li></ul>
  3. 3. What is Negotiation? <ul><li>Everything is negotiated. </li></ul><ul><ul><li>Family and personal </li></ul></ul><ul><ul><ul><li>“ Where should we go for lunch?” </li></ul></ul></ul><ul><ul><ul><li>“ Can I borrow the car?” </li></ul></ul></ul><ul><ul><li>Academic research </li></ul></ul><ul><ul><ul><li>“ Fund my project.” </li></ul></ul></ul><ul><ul><ul><li>“ Publish my paper.” </li></ul></ul></ul><ul><ul><li>Business ventures </li></ul></ul><ul><ul><ul><li>“ I want a raise.” </li></ul></ul></ul><ul><ul><ul><li>“ Invest in my company.” </li></ul></ul></ul><ul><ul><ul><li>“ Pay me a license fee or I’ll sue you.” </li></ul></ul></ul>
  4. 4. Negotiation Goals <ul><li>Distributing Value vs. Creating Value </li></ul><ul><ul><li>Opportunistic </li></ul></ul><ul><ul><li>Problem-solving </li></ul></ul><ul><li>Identify Issues </li></ul><ul><li>Consider Interests </li></ul><ul><ul><li>Mutual </li></ul></ul><ul><ul><li>Complementary </li></ul></ul><ul><ul><li>Conflicting </li></ul></ul>
  5. 5. Negotiation Styles <ul><li>Assertiveness vs. Empathy </li></ul><ul><li>Three common negotiation styles: </li></ul><ul><ul><li>Competitive </li></ul></ul><ul><ul><li>Accommodating </li></ul></ul><ul><ul><li>Avoidance </li></ul></ul><ul><li>Effective negotiator is both assertive and empathetic. </li></ul>
  6. 6. Effective Negotiation <ul><li>Interests vs. Positions </li></ul><ul><ul><li>“ Needs” vs. “wants” </li></ul></ul><ul><li>“ Separate the Person from the Problem.” </li></ul><ul><ul><li>Soft on the person </li></ul></ul><ul><ul><li>Hard on the problem </li></ul></ul><ul><li>Consider other Options </li></ul>
  7. 7. Negotiation <ul><li>Use Objective Alternatives </li></ul><ul><li>Look for a “win-win” solution </li></ul><ul><li>Determine BATNA </li></ul><ul><ul><li>Best Alternative to Negotiated Agreement </li></ul></ul>
  8. 8. Negotiation Traps <ul><li>Classic “Hard Bargaining” Ploys </li></ul><ul><ul><li>Extreme claims, small concessions </li></ul></ul><ul><ul><li>“ Take or leave it.” </li></ul></ul><ul><ul><li>Unreciprocated offers </li></ul></ul><ul><ul><li>Threats and warnings </li></ul></ul><ul><ul><li>Attacking the alternatives </li></ul></ul><ul><ul><li>Good cop, bad cop </li></ul></ul>
  9. 9. Ways to Respond <ul><li>Extreme claims, small concessions </li></ul><ul><ul><li>Tit for Tat – make equally small concessions </li></ul></ul><ul><li>“ Take or leave it.” </li></ul><ul><ul><li>Make a counter offer </li></ul></ul><ul><ul><li>Offer an alternative </li></ul></ul><ul><ul><li>Don’t be afraid to walk away. </li></ul></ul>
  10. 10. Ways to Respond <ul><li>Unreciprocated offers </li></ul><ul><ul><li>Don’t negotiate against yourself. </li></ul></ul><ul><ul><li>Wait for a counter offer. </li></ul></ul><ul><li>Threats and warnings </li></ul><ul><ul><li>Don’t make a counter-treat. </li></ul></ul><ul><ul><li>Challenge the underlying assumptions . </li></ul></ul>
  11. 11. Ways to Respond <ul><li>Attacking the alternatives </li></ul><ul><ul><li>Ask for an explanation. </li></ul></ul><ul><ul><li>“ Why do you have a problem with…?” </li></ul></ul><ul><li>Good cop, bad cop </li></ul><ul><ul><li>Negotiate with the boss. </li></ul></ul><ul><ul><li>Use the “good cop” to your advantage. </li></ul></ul>
  12. 12. Case Studies <ul><li>Research Projects </li></ul><ul><li>Business Partnerships </li></ul><ul><li>Technology Licensing </li></ul>
  13. 13. Research Projects <ul><li>Academic Interests </li></ul><ul><ul><li>Publication </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul><ul><ul><li>Increase knowledge </li></ul></ul><ul><ul><li>Obtain funding </li></ul></ul><ul><li>Commercial Interests </li></ul><ul><ul><li>Confidentiality </li></ul></ul><ul><ul><li>Exclusivity </li></ul></ul><ul><ul><li>Develop product </li></ul></ul><ul><ul><li>Generate revenue and profits </li></ul></ul>
  14. 14. Business Partnerships <ul><li>“ Senior” partner </li></ul><ul><ul><li>Expand the business </li></ul></ul><ul><ul><li>Maintain reputation </li></ul></ul><ul><ul><li>Short-term focus </li></ul></ul><ul><li>“ Junior” partner </li></ul><ul><ul><li>Expand the business </li></ul></ul><ul><ul><li>Build reputation </li></ul></ul><ul><ul><li>Long-term focus </li></ul></ul>
  15. 15. Technology Licensing <ul><li>Licensor </li></ul><ul><ul><li>Access to markets </li></ul></ul><ul><ul><li>Guaranteed revenue </li></ul></ul><ul><ul><li>Minimum continuing obligations </li></ul></ul><ul><ul><li>Low risk </li></ul></ul><ul><li>Licensee </li></ul><ul><ul><li>Access to technology </li></ul></ul><ul><ul><li>Low up-front cost </li></ul></ul><ul><ul><li>Guaranteed continuing support </li></ul></ul><ul><ul><li>Low risk </li></ul></ul>
  16. 16. Negotiation Skills <ul><li>Listening </li></ul><ul><ul><li>Develop “active listening”. </li></ul></ul><ul><li>Understanding </li></ul><ul><ul><li>Understand the other person’s perspective. </li></ul></ul><ul><li>Flexibility </li></ul><ul><ul><li>Be open to other options. </li></ul></ul><ul><li>Pragmatism </li></ul><ul><ul><li>Be ready to accept the best available option. </li></ul></ul>
  17. 17. Dispute Resolution Arbitration or Litigation Mediation Negotiation
  18. 18. Mediation <ul><li>Interest-based Mediation </li></ul><ul><ul><li>Mediator is a facilitator </li></ul></ul><ul><ul><li>Focus on interests, not legal rights or obligations </li></ul></ul><ul><ul><li>Options for creative solutions </li></ul></ul><ul><li>Evaluative Mediation </li></ul><ul><ul><li>Neutral evaluation </li></ul></ul><ul><ul><li>Based on legal rights & obligations </li></ul></ul>
  19. 19. Mediation <ul><li>Qualities of a successful mediator </li></ul><ul><ul><li>Negotiation & mediation process skills </li></ul></ul><ul><ul><li>Subject area knowledge </li></ul></ul><ul><ul><li>Lets parties make key decisions </li></ul></ul><ul><ul><li>Creative approach to the problem </li></ul></ul><ul><ul><li>Patience </li></ul></ul>
  20. 20. Resources <ul><li>Cohen: You Can Negotiate Anything , Bantam, 1980 </li></ul><ul><li>Fischer, Ury and Patton: Getting to Yes , Penguin, 1991 </li></ul><ul><li>Ury: Getting Past No , Bantam, 1993 </li></ul><ul><li>Mnookin, Peppet and Tulumello: Beyond Winning , Harvard University Press, 2000 </li></ul>
  21. 21. Questions?

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