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How To Create Value In Negotiations, Ep #107

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One of the reasons I’m happy to have someone like Stephen Kozicki on the podcast is because he brings an entirely different perspective to the process of negotiation through his approach to discovering and creating value. Stephen takes a very data-based, provable approach that serves incredibly well because it removes egos from the process and demonstrates tangible outcomes that offers of lower price alone cannot overcome. Listen to hear Stephen’s detailed approach to working out, discovering and creating value in negotiations.

 

Outline of This Episode

  • [0:43] The fascinating history of Stephen’s negotiation experience
  • [3:37] Discovering new value in negotiations that you don’t know exist
  • [5:15] Why is it important to demonstrate value tangibly?
  • [7:20] The reason measurable value is incredibly important
  • [10:55] How to discover additional value available in a negotiation
  • [12:30] 4 elements of creating value
  • [17:15] How to think about false beliefs surrounding value
  • [20:23] The vital importance of discovery sessions and the questions to ask
  • [28:02] What Stephen would force everyone to change regarding value (if he could)

Three questions you need to ask about every offer you make in a negotiation

Stephen is very savvy when it comes to evaluating the offers his negotiations team makes to those seated at the other side of the negotiation table. They make it their goal to be super clear and specific when it comes to answering the following three questions…

  1. What are we asking them to do?
  2. What risks are we asking them to take?
  3. What is the value we will deliver in this negotiation?

Again, those questions must be answered clearly and specifically. It’s vital because the answers will enable the negotiation team to demonstrate the value they bring to the table in tangible, measurable, and tradeable terms that can’t be argued with. Listen to hear Stephen explain how the concept works.

3 essential elements that comprise value in negotiations

How do you know if something you’re offering at the negotiation table is truly going to add value to those you’re negotiating with? Stephen says that true value is comprised by three things…

1 – It must be tangible

C-suite gets excited about the size of the business or how strong the brand name and reputation are. But those are not tangible things that can be assessed in a practical way. Neither is there a tangible way you could demonstrate that you would add to the business in those ways. That’s why the offer you make must be tangible.

2 – It must be measurable

One of the ways that Stephen comes to understand what is truly valuable to those he’s negotiating with is to meet with their top customers. When he does, he asks them, “What do you value about what Company X provide you, and why?” He’s looking for the things the brand is delivering to customers already in search of ways he can add to it. If you can tangibly present the value you’ll provide with evidence (the measurable part) then you’ll have more leverage at the negotiating table.

3 – It must be tradeable

This one is a bit more nuanced and difficult to understand but it bascially means that any value you’re offering in a negotiation must be something you can trade to work out a deal between yourself and the other part. Stephen provides an illustration from a deal he just closed that makes it crystal clear. Listen to hear the details.

Four ways to discover value in your negotiations

When brainstorming your offer, you want to discover the untapped value propositions you can make that will increase the value of what you’re offering. Stephen suggests four approaches to discovering that value to help you.

Reduce: Ask, “What can we reduce for this client?” (existing costs, operations, manpower, etc.)

Increase: Ask, “What can we increase for this client?” (Delivery time or turnaround, procedures or process steps, etc.)

Create: Ask, “What can we create for this client?” (New customers? New revenue? New aspects of profitability?)

Eliminate: What can we take out of their process to produce more value?

Beware of the false perceptions of value that enter into negotiations

Many people believe they are bringing actual value to a negotiation when that belief is only based on a hunch or gut feeling. That’s not a good way to prepare for a negotiation. Stephen says he won’t go to the negotiation table unless he’s had discovery meetings with the other side to establish ground rules, and among those is guidelines for how value will be determined. He says it’s the most telling question he can ask.

When he asks that question, most negotiators he’s run into say, “We haven’t thought about it.” The more they work through the question together, the more Stephen is able to put himself in a stronger position by educating them on what equates to true value and thereby making his offer stronger when he does get to the table because it matches what they have learned true value to be. Listen to learn more about creating value and to gain great insights from Stephen.

Resources & People Mentioned

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