In episode 155 of the Negotiations Ninja podcast, Martin Rand—the founder and CEO of Pactum AI—joined me to talk about the future of negotiation. More specifically, we touched on how he’s implementing AI to manage long-tail negotiations for large enterprises. But will AI expand?
The evolution of AI in negotiation
Will AI continue to evolve into something more complex? Will multi-variant negotiations with multiple stakeholders be possible? Martin points out that there are some non-intuitive advantages: People aren’t well-built to think in a multi-dimensional space. They can’t juggle 30 negotiable items. So a human brain picks the three most important things and fights for them. The rest of those items are left by the wayside. But a bot can find the perfect balance for both sides.
The bot can also negotiate parallelly, not sequentially. It can hold simultaneous negotiations that are all intertwined. The value depends on simultaneous negotiations that are impossible for humans to do.
Martin says to imagine Pareto Optimality being plotted on a graph. Once you add the benefits, you get a dot on the graph. If the dot is on the frontier of Pareto Optimality, one side cannot get a better deal without hurting the other side. Every negotiation should end on the Pareto frontier. Computers/AI/bots are simply better at landing at Pareto Optimality efficiently.
A computer has far more capacity than the human brain
Most deals are re-negotiated annually. But Martin points out that maybe they should be renegotiated frequently. A computer is certainly capable of negotiating a deal every day. The world would become immensely more efficient.
Think about this: What is your capacity as a negotiator to manage multiple negotiations? Let’s say you’re managing 5-6 negotiations at once. At some point, you can’t take on much more within your category, sales vertical, etc. That is your parallel limit. Artificial intelligence doesn’t have those limits.
Every single deal relates to the other deals. So the AI can optimize the best possible solution for the business overall. Getting to that optimal distribution makes your deals unstoppable. You’ll get to the best deals and the best terms for your business. But there’s one looming question: Will people be resistant to negotiating with AI?
Do people want to negotiate with a bot?
When most people call their phone company and end up with a bot responding to the phone call, they hate the experience because the bot is stupid. But in the case of Pactum—depending on the project—Martin shares that 74-82% of vendors prefer talking to the bot and would do it again over a human. Why?
Martin thinks it’s for a number of reasons. Firstly, people hate to negotiate, right? Most people don’t thrive in high-stress situations. If you’re a small vendor negotiating with a procurement professional who’s done this their entire life, they’re likely way better than you. You feel that you’re being pressurized into concessions and rushed through the negotiation.
Secondly, since the computer has unlimited amounts of time and unlimited access to data, it can deliver value. Vendors feel they have the human ingenuity on their side to get the best deal that works for them. These two dynamics create satisfaction with the bot.
Pactum works with large enterprises, their largest customer being Walmart. They already see other large vendors taking notice—poised and ready to implement AI. The acceptance of automation in other industries is growing—why should it be any different for procurement? AI is going to be integrated sooner versus later. Are you ready for it?
To learn more about the future of AI in negotiation and how Pactum provides value for large enterprises and small vendors, listen to episode 155 of the Negotiations Ninja podcast!