By Horacio Falcão

There are key steps to creating value in a negotiation. Knowing them and how to prepare for them is the path to a “win-win” outcome. Start here.
 
Negotiation where both sides win  

Value creation is only consistent in a negotiation when you try to create more value for all parties involved or at least for one without reducing it for the others. Otherwise it becomes an exercise of value claiming. Horacio Falcão, Affiliate Professor of Decision Sciences, who teaches in the program Negotiation Dynamics, explains that value creation is based on identifying and building different opportunities that were not perceived at first.  To create more value you can:

  1.      Prepare the interests of all parties involved
  2.      Build a strong relationship with the counter-party or parties
  3.      Suggest mutual gains options first
  4.      Use different commitment strategies

Interests are the building blocks of any negotiation, as they motivate the parties to keep working together and bringing resources to the table to make things happen.  When there are no more interests to be satisfied, the negotiation is over.  The more interests you prepare, the more ambitious you will be and the more value you will be able to create. 

A strong relationship promotes a more fluid communication.  The goal is to allow the parties to share their points in common as well as their differences. You can discuss interests, relative valuations, forecasts of uncertain events, risk or time preferences, capabilities and resources and allow for different value allocation and trades.  A strong relationship also minimises the risk that one party will try to manipulate information exchange.  It is also very important that the parties build a safe environment to discuss their fears and worst case scenarios to isolate points of conflict and manage them productively. 

When the time comes to discuss options, start with mutual gains options.  In doing so, your counterparty will see by your actions that you care about and are looking to satisfy their interests as well as your own, thus increasing trust and willingness to reciprocate.  If the suggested first option seems too one sided, the other party may find that your actions are not consistent with your collaboration speech and thus fallback to a position that destroys value creation opportunities.  If you feel you have hit a value creation wall, instead of assuming the other party is the reason, identify and offer help to overcome resource constraints, artificial limits or narrow negotiation scopes. 

As the negotiation progresses there are several commitment traps that require different strategies for value creation.  First, commit tentatively to separate elements in a package so as to keep all options open until everything is discussed and understood.  Second, hold your final commitment to the very end when both can assemble a full package that makes sense to you.  Finally, if you identify more opportunities for value creation but they fall outside your negotiation authority, make sure you agree on future steps to take advantage of them.  Value creation goes beyond the four steps described above but it can already be greatly enhanced by making sure that interests, relationship, options and commitment are developed with a clear focus on value. 

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