Thursday, October 31, 2013

What Will You Do After You Get Punched in the Mouth?

The Deal Whisperer posted its 50th article in September, all based on my ongoing experiences leading sales teams in pursuit of outsourcing, BPO, SI and consulting engagements. My goal is to help business people drive greater value and stronger relationships in their deal-making. For the next 10 weeks I am offering a retrospective, posting the 10 "Most Widely Read" pieces from the last several years. Here is "What Will You Do After You Get Punched in the Mouth?". As always, your questions and comments are welcome and appreciated.

What Will You Do After You Get Punched in the Mouth?

"Everybody has a plan 'til they get punched in the mouth." Mike Tyson

Hard to believe a Mike Tyson quote would have relevance to a discussion of negotiation. Yet we often have moments in negotiations when we get "punched" or hit by a sudden act of the other party and we don't know what to do. All the planning and strategy goes out of our heads and we reel about, trying to figure out how to respond.

When we look back on the events that occurred, though, we discover that they should not have come as a shock; we just weren’t ready for it when it happened. Think of it in Mike Tyson’s context: shouldn’t a boxer have a plan that includes getting hit in the mouth? It is likely to happen! So when you prepare for your own meetings and negotiations, make a plan that includes what you will do after you get punched in the mouth.

A Deal Whisperer thinks of this as planning for surprises. Sounds counter-intuitive because a surprise, by its nature, is something we can’t plan for. With a few exceptions, however, there are not a lot of things that happen in negotiations that are real “surprises.” Walking into your house and having 50 people yell “Happy Birthday” is a surprise. You don’t usually expect to find 50 people in your house when you come home. You should expect in the course of trying to close a deal that the other party might say, “I’m withdrawing”; “Your price is too high”; “Your offer is too low”; or “I chose another supplier”.

So how do you plan for surprises? Walk through the “what if”s. After a milestone in your negotiation, take time to consider all the possible ways the other party might respond and what you will do next. If you just submitted a bid, the customer could 1. Reject the bid, 2. Offer a counter-proposal, 3. Not respond, 4. Accept the bid. There are variations on those possibilities but those are, in essence, the broad categories of outcomes to consider.

Make a plan for each. Write the plan down. And then discuss that plan with your team so everyone knows what the next steps will be. To become a Deal Whisperer, you always have to be so well prepared that a punch in the mouth is part of your plan.

Tuesday, October 22, 2013

The 'Five Hows' of Sales

The Deal Whisperer posted its 50th article in September, all based on my ongoing experiences leading sales teams in pursuit of outsourcing, BPO, SI and consulting engagements. My goal is to help business people drive greater value and stronger relationships in their deal-making. For the next 10 weeks I am offering a retrospective, posting the 10 "Most Widely Read" pieces from the last several years. Here is "The 'Five Hows' of Sales". As always, your questions and comments are welcome and appreciated.

The 'Five Hows' of Sales

“Mr. Gitou, my team worked really hard on this proposal,” said Verdi. “It was a huge disappointment when the client chose our competitor. But our team did really well going from last place to second. Do you really think we could have known we were going to lose before we made our proposal?”

“Yes, Verdi, I do,” Tyler Gitou said. “As I mentioned last time, being told you finished in second is meaningless if in the end you don’t get any business. Second place is last.”

“I get it,” Verdi said. “So help me understand how I predict in advance the outcome of a selection process involving multiple bidders, multiple decision makers and millions of dollars at stake.”

“It requires detailed analysis, Verdi. But a great way to start that analysis is by asking the ‘Five Hows’. If you don’t know the answers to the ‘Five Hows’ it is not likely you will make a sale.”

Verdi pulled out a pad and a pen. “OK, Deal Whisperer, let’s hear the ‘Five Hows’.”

Tyler laughed. “I appreciate your enthusiasm, Verdi. The ‘Five Hows’ are:
1. How does the client buy?
2. How does the client decide?
3. How else can the client achieve its goals?
4. How can we compete?
5. How can we win?

“Let’s start with the first,” Tyler said. “‘How does the client buy?’ This is a question about the buying and contracting process. Who runs that process? Is it procurement? Do individual executives have the authority to buy directly? Do those individuals have limitations on the sizes of deals they can commit to? These are all important questions because if you do not understand the process, you don’t know the rules of the game.”

Verdi nodded. “That seems pretty logical.”

Tyler continued. “The second is ‘How does the client decide?’ While this is another process question, it is focused on the client’s internal process as to how selection decisions are made. For example, does the client have a culture of consensus? If so, you need to understand who those decision makers are, their relationships and how that consensus decision gets made. If the client has a more entrepreneurial or hierarchical environment, key executives may be the final decision makers without the use of advisory committees. Also, it is important to know whether board approvals are required. You don’t want to hit the end of your sales quarter and discover the board meets in two weeks to approve your deal.”

“Oh, I have lived that nightmare before,” Verdi said.

“The third is ‘How else can the client achieve its goals?’ This is a BATNA question: what alternatives does the client have to signing a contract with you? Can they perform the work you are pitching on their own? Or can a competitor do it just as well as you? This can be a vital question if your solution is unique in its ability to achieve the client’s goals. If the client does not have a strong BATNA, that should influence your negotiation strategy, particularly around legitimacy.

“The fourth is ‘How can we compete?’ This question is tied to BATNA and probes how well we understand the client’s interests or ‘buyer values’. It also asks what levers we can pull to make ourselves more competitive. What are the limits for us on price, scope, risk and time? If we need to move one lever, how will it affect the other levers?”

“That’s a great question,” Verdi said. “Client’s always pull on the ‘price' lever and we often fail to consider the impacts on scope. We are so focused on ‘winning’ that we make price concessions without seeking some form of relief from the client on another lever.”

“Exactly,” Tyler said. “The last one is ‘How can we win?’ This is a complex question that really pulls in the answers to the other four questions and tests the level and quality of relationships with the client. Let’s talk about your last proposal. You said you started in last place and finished in second. Why do you say you were in last place?”

“We really had no track record with this client,” Verdi said. “We were trying to get a foothold against the incumbents.”

“What you’re really saying is you had no relationships with the decision makers,” Tyler said.

“At first,” Verdi said. “But I developed a great relationship with Larry, the head of procurement. In fact, Larry’s sister went to the same college as me and he’s a huge Jets fan like me, so we had a lot in common.”

Tyler nodded. “Building affiliation with a decision maker or influencer is a great way to start. Did Larry trust you? Did he trust your company?”

“I think he trusted me. I mean, I didn’t give him reason to not trust me. But my company? I don’t know.”

“That’s the point when you needed to ask yourself ‘How can we win?’ Not having relationships, not having trust, not knowing the buying process or decision-making process suggests you were destined to lose the bid. Larry may have liked you, but do you think that was enough for Larry to award you with a $5 million project?”

“I see your point,” Verdi said.

“Lesson learned,” Tyler said. “Unless you can use the ‘Five Hows’ to build an aggressive strategy that is going to result in a realistic chance of being chosen, you may be better served spending your sales pursuit budget on other potential clients.”

“Thanks for the advice,” Verdi said. “I never realized how much analysis I should be doing on my sales opportunities.”

“You’re welcome,” Tyler said. “Being a Deal Whisperer means being outcome driven. It’s important to have goals in closing deals with clients. It’s more important to know in advance how those deals will get done.”

Wednesday, October 2, 2013

Change Your Attitude!

The Deal Whisperer posted its 50th article last month, all based on my ongoing experiences leading sales teams in pursuit of outsourcing, BPO, SI and consulting engagements. My goal is to help business people drive greater value and stronger relationships in their deal-making. For the next 10 weeks I will offer a retrospective, posting the 10 "Most Widely Read" pieces from the last several years, beginning with number 10: “Change Your Attitude and You’ll Change Your Relationship.” Your questions and comments are welcome and appreciated.

Change Your Attitude and You'll Change Your Relationship

Want to improve your relationship with a business partner? Try this exercise with your negotiation team:

List five adjectives to describe what it is like to work with the other party. Chances are you will produce a list that includes words such as stubborn, frustrating, confrontational, or one-sided. Then ask the team why, if those words are accurate, they would continue doing business with such a difficult party! Maybe they should focus on building a relationship with someone else.

The truth is that parties in a relationship, whether business or personal, will eventually develop negative perceptions of one another. The problem arises when those perceptions overshadow every interaction with the other party such that we wonder why we are together in the first place.

This is the challenge of “persistent perception”. We reach a point where we perceive another party in such a negative light that no matter what they say or do, we only recognize the negative behavior that is consistent with our perception.

Imagine, for example, you join a team and your colleagues tell you to go meet with Marty. “Good luck,” one says. “Marty is a jerk.” You now have a loaded perception seeking confirmation: when will Marty be a jerk to me? And, despite all of Marty’s efforts to be collaborative and positive, when he makes that one unreasonable request you rejoice internally: “JERK!” You return to your team and share with them Marty’s jerk-like behavior, largely dismissing all of his positive behavior.

Time for a change of attitude.

Put together a list of the adjectives you and your team believe the other party would use to describe working with you. Don’t be surprised if it is not terribly different from the one you created describing the other party. Now make a list of the adjectives you would like the other party to use to describe your relationship. Ask your team what needs to change in how they talk to and work with the other party to achieve those adjectives. If your goal is to get the other party to change their behavior, you must change yours. Model the behavior you desire from others. If your team refuses to change their behavior, how can they expect the other party to change theirs?

Change your attitude and you will change the relationship.

Monday, September 16, 2013

Who is Driving?

“Verdi, haven’t you been working on closing that same deal for months?” asked Tyler Gitou.

“Yes I have, Mr. Gitou,” said Verdi.

“Why has it been so slow to close?”

Verdi sighed. “I have been struggling to get buy-in from the client around the deal. I am meeting with the people who run the client’s logistics department and trying to explain how the new system will function. But they all have different requirements for what they want the system to do.”

“Really? I would have thought those requirements would have been decided when they chose the system.”

“That’s the problem,” Verdi said. “The logistics department didn’t choose the system. The client’s new ‘business optimization’ group picked it.”

“Interesting. So one group in the company has chosen how another group will operate and did not ask their opinion?”

“That’s right,” Verdi said. “The business optimization group was tasked by the CFO with finding a software product that would drive greater efficiency and save as much money as possible. We showed that our product would reduce manual and redundant functions and potentially save the client thirty percent in the first year. So they chose us.”

“I’m glad they recognize the great value of your product,” Tyler said. “So after three months the logistics department is just getting introduced to the product?”

“Yes. The logistics department is now starting to understand what the software does and how this system will change the way they do business.”

“Sounds like you’re still selling, but now to the actual users.”

Verdi sighed. “It feels that way. I don’t understand why it’s taking so long. It’s a great product.”

“The problem is a process issue, Verdi,” Tyler said. “You never ‘sold’ the product. Instead, someone in the company chose a product for another department to use, and now they are just getting familiar with it. To reduce this type of inefficiency, a Deal Whisperer always identifies the key executive in the buying process. Ask yourself: Who is driving?”

“What does that mean?”

“Someone on the client side has to care that the deal is going to go through and the program be successful. That has to be a senior executive high enough to influence what is happening at the negotiation table. Think of it this way: if the client gets up from the negotiations and walks away, do you know who you will call to get them back to the table?”

Verdi thought for a moment. “No. I don’t know who would have that authority.”

“That’s your problem. You have no deal driver on the client side. That’s why you have struggled to drive the deal to closure.”

“So how do I fix that?” Verdi asked.

“For this deal you may not be able to. You need to have some high-level relationships on the client side who will reach out and help.”

“We don’t have any. This is a new client.”

“Fair enough. So let’s talk about some strategies to move more efficiently given your situation. But next time you are scoping out your deal, make sure you think about who is buying and develop a strategy to turn that buyer into your deal driver. To make an engagement successful, both parties need to have a shared interest in that success. With that shared interest there must be a shared passion for getting the deal done. Find out who on the client side is the source of that passion for success and you have your deal driver.”

Friday, June 14, 2013

An Expensive Relationship

“The client asked us to start the work because they had a ‘burning platform’. So we started even though we did not have a signed agreement.” Verdi sighed. “I know that was a mistake.”

Tyler Gitou shrugged it off. “It’s easy to spot our mistakes in hindsight. The key is to learn and not make the same mistake twice. So what’s the problem?”

“Well, the client had budget cuts and had to cancel the project, so they never signed the deal,” Verdi said. “Meanwhile, we already completed phase one and had billed the client $500,000 for it. The client is now challenging the invoice because the project was canceled.”

“So how much has the client offered to pay?”

“Zero,” Verdi said. “They said the work we did has no value to them without the project going forward.”

“Regardless of the value, do they recognize that they asked you to start the work, incur the costs of paying your people all on the basis of trust?”

Verdi nodded. “Yes. They said we should treat this as an investment in the relationship. They have a lot of other projects in the pipeline that they said we will be able to bid on to make up the loss.”

“What do you want to do, Verdi?” Tyler asked.

“My management is saying we should focus on the relationship. This is a client we are trying to grow so they see this as an opportunity to develop that relationship.”

“I see.” Tyler said. He locked his eyes on Verdi and said in a stern voice, “Verdi, give me $20.”

Verdi looked surprised. “Give you… why?”

“Because I asked you to. Verdi, you and I have been friends a long time and if you say ‘no’ to me, that is going to really impact our relationship. It’s just $20. Give it to me.”

Verdi sat back in his chair. “I have to admit, Mr., Gitou, I am confused.”

“What are you confused about?” Tyler asked. “I am asking you to ‘invest’ in our relationship. If you give me $20 it will be a better relationship.” Tyler let the silence overtake them both, and finally he smiled. “It’s awkward, isn’t it?”

Verdi sighed. “Yeah, really.”

“If you give me the $20 what type of relationship will we have? It will be a relationship where I ask you for money and you give it to me and get nothing in return. That’s not a ‘relationship’ that’s called being a sucker. And that’s an expensive way to try and develop a relationship.”

“So you’re saying we should never take anything less than the $500,000?”

“No, I am asking you to think about what you will get in return for the concession. For example, you said they have other projects. What if they awarded those projects to you?” Tyler asked.

“Well, they said we can bid on them.”

“Verdi, I can bid on them too. The janitor can bid on them. That is a valueless option. But if they awarded those projects to you, wouldn't that have value?”

“We’d save a lot of money in sales expense if we don't have to compete for the project,” Verdi said.

“Exactly. Maybe they don’t have $500,000 now to pay you because the budget was cut. But they have other things of value to offset your loss. Ask them to award that work to you and you can reduce the $500,000 to perhaps $200,000. A Deal Whisperer always gives to get. If we make concessions in negotiations for which we do not get value in return, we are training the client that we do not respect our own business and we will give money away because they say the magic word, ‘relationship’. A Deal Whisperer builds relationships on mutual respect and trust. Client’s don’t respect us if we give away money and they are wise to keep asking us to do it until we say ‘no’.”

“Thanks for the advice, Mr. Gitou,” Verdi said. “I am going to sit down with my team and put together some options to address their financial limitations and also make us whole on the sunk costs of the project.”

Tuesday, March 5, 2013

What's the Problem?

Verdi was surprised to see Tyler Gitou in his office.
“Mr. Gitou! How nice to see you. You’ve been gone for a while.”
“Hello Verdi,” Tyler said. “I have been. Come in and visit with me for a bit. How have you been?”
Verdi sat down. “I’ve been great. Very busy with a bunch of new deals and I could really use your help. Where have you been?”
“I was away getting some sales and negotiation training,” Tyler said. “The best program I have ever had in my career.”
“Really?” Verdi said. “You go to sales training? But you’re the Deal Whisperer! What would anyone have to teach you? You’re the best in the business!”
Tyler laughed. “Thank you, Verdi. That’s very kind. But do you know why I am so good at sales and negotiation? Because I take training. Refresh myself. Learn new ideas and recall some I had forgotten. Practice.”
“You have to practice?”
“Absolutely,” Tyler said. “What do the best athletes do when they are not competing? What do football teams do in between Sundays or golfers do when they are not on tour? Train. Practice. Get better and be ready for bigger challenges.”
“That’s terrific. Did you learn anything you can share?”
“I learned a great deal, Verdi, and over the next few weeks I will share as much as I can with you. Why don’t you tell me about your deals?”
“OK,” Verdi said. “The biggest one I have is with a client that wants us to build a new software platform to run its retail operations.”
“Why do they want the new platform?” Tyler asked.
“The one they are using is old technology and getting expensive to maintain. The client has asked us to build something that is easier to upgrade in the future, so they want us to use all off-the-shelf software.”
Tyler nodded. “That sounds like an exciting program.”
“Well, it gets better. We figured out that if we build this we can actually turn it into an offering that we would sell to other clients. There are lots of retail operations out there that could benefit from this. This could develop into a billion dollar business for us. Our senior management is really excited.”
“It sounds like you have identified a problem that the client needs our help with and a solution for that problem. What’s the issue?” Tyler asked.
“It’s the revenue sharing.”
Tyler cocked his head to one side. “Revenue sharing? Where?”
“In the new business,” Verdi said. “We are trying to figure out how to share the revenue from the new offering. The client is asking for a large sum up front because, they say, they will have helped us build the business. We are proposing a revenue model that tracks to the growth of the business.”
“This is a very interesting discussion,” Tyler said.
“Interesting but a little contentious. The client’s leadership is starting to get involved and feels we are not moving enough to make the deal happen.”
“Which deal?” Tyler asked.
“The deal for the new business.”
“What business?” Tyler asked.
“The one that leverages the new software offering.”
“What software offering?” Tyler asked.
Verdi sighed. “Come on, Mr. Gitou! I just told you. The software offering we are going to build for the client.”
“Going to build?” Tyler asked. “So let me ask you this: how is it you are negotiating for what revenue the parties will share for a business that doesn’t exist that is to be built on a solution that has not been designed, developed or delivered?”
Verdi was silent for a moment. “You are suggesting we are putting the cart before the horse?”
“No,” Tyler said. “I am saying we don’t even have a cart OR a horse. We have an idea of what a cart and a horse might look like someday and we have described it to the client and gotten them all excited about something that could happen in the future. What about solving the client's problem?”
Verdi shrugged. “What problem?”
“The problem that the client asked us to help solve. Replace their legacy environment with a lower-cost and easy to upgrade system.”
“Yes,” Verdi said. “We’re still going to do that.”
“I know, but my point is you haven’t done it yet. And now the notion of creating a billion dollar business has everyone so excited that our team has lost sight of the underlying problem.”
“But Mr. Gitou, this is a really big deal.”
“No it’s not, Verdi. Right now it’s a thought. You have a deal on the table to help the client. Focus on the deal that the client needs, not the deal we want. Otherwise, your conversations about how to split non-existent revenue from a business that hasn’t been created will destroy the potential to really help our client.”
Verdi nodded. “I see what you mean. So what do I do next?”
“We need to change the conversation. Let’s strategize about who we need to speak with at the client and what we need to say. You are in a very precarious situation now having built expectations. We need to reset those expectations and re-frame the outcomes that we can achieve. As Deal Whisperers, our goal is always to focus on what we can legitimately achieve for our clients right now and bring them into a spirit of collaboration. As we develop the relationship, and we discover we can find more value in our work together, then we can decide how to optimize that value and the appropriate way to share it. But before we do that we have to demonstrate that we can both solve the critical problem that we all identified in the first place.”