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Entrepreneurship 101: Negotiations


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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.
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Speaker: Michael Erdle from Deeth Williams Wall

Published in: Business
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Entrepreneurship 101: Negotiations

  1. 2. ` Negotiations Presented by: Michael Erdle, Managing Partner, Deeth Williams Wall LLP December 6, 2007
  2. 3. It’s Negotiable: A Guide for Entrepreneurs Michael Erdle, Managing Partner
  3. 4. Introduction <ul><li>Negotiation Problems </li></ul><ul><li>Negotiation Skills </li></ul><ul><li>Dispute Resolution </li></ul><ul><li>In theory there is no difference between theory and practice. In practice, there is. -- Jan van de Snepscheut </li></ul>
  4. 5. 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>
  5. 6. 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>
  6. 7. Negotiation Goals <ul><li>Successful relationships are built on communication and trust. </li></ul><ul><li>Negotiation is one way of creating trust – or deciding whether trust is justified. </li></ul><ul><ul><li>Example: “The Prisoner’s Dilemma” a classic negotiation game </li></ul></ul><ul><ul><li>One-time deal vs. continuing relationship </li></ul></ul>
  7. 8. 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>
  8. 9. Negotiation Skills <ul><li>Communication is the key to effective negotiation. </li></ul><ul><li>Understanding and recognition do not mean compromise and concession. </li></ul><ul><li>What you say is often less important than how you say it. </li></ul><ul><ul><li>Tone </li></ul></ul><ul><ul><li>Body language </li></ul></ul>
  9. 10. Negotiation Skills <ul><li>Listening </li></ul><ul><ul><li>Develop “active listening”. </li></ul></ul><ul><li>Understanding </li></ul><ul><ul><li>Acknowledge 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>
  10. 11. 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>
  11. 12. 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>
  12. 13. 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>
  13. 14. 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>
  14. 15. 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>
  15. 16. 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>
  16. 17. Case Studies <ul><li>Research Projects </li></ul><ul><li>Business Partnerships </li></ul><ul><li>Technology Licensing </li></ul>
  17. 18. 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>
  18. 19. 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>
  19. 20. 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>
  20. 21. Dispute Resolution Arbitration Litigation Mediation Negotiation
  21. 22. 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>
  22. 23. 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>
  23. 24. 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>
  24. 25. Questions?