Negotiations about technology need clarity.
Clearly in most negotiations involving technology it is becoming harder for negotiators on the supply side to show the strategic value of the technology to organisations on the buying side.
Clarity is required not around the features and benefits but around the value piece.
Who are the stakeholders in the organisation and what are their real interests? This is a valid question in identifying the first step in the value process. Our experience is that most companies on the supply side do too much work on the features and benefits and not enough on the results that will be delivered. So, suppliers focus on impressing the end users instead of the decision makers. The consequences of focusing on end users instead of decision makers is someone will reduce the whole negotiation to a spread sheet.
The second mistake with stakeholders is not being clear on who will ultimately be at various meetings and the final negotiation. We recently went to the final negotiation for a key customer and in the final meeting, the head of procurement put up a slide showing my client was the most expensive and insisted on an immediate reduction of 30% before the real negotiation would start.
I asked this question, “Tomas you have put a lot of work into this project. Help me understand how the successful supplier will fit into your 3 year strategic plan?”
His response at first was aggressive, then confusion and finally resignation: “My role is to get the lowest price, not to connect with the strategic direction of the business! “
We took a time out and worked on the connection of future value with him and the decision maker. Interestingly this different approach built up momentum and flow, he helped us develop measures that would be used in the final agreement to identify real value to the business.
The focus that he and the procurement team had was around our competitors being cheaper. Only looking at one year their offer was cheaper, but over three years our clients offer was better value. We had enough data to know that their technology was around a quick transactional fix and did not connect to the strategic future of the business. Our research before starting the negotiation allowed us to be more agile under pressure and not to fall into a negotiation on price. If we had negotiated on price then the competitors would have won.
We were successful because we could link the value of strategic results to our technology. We could prove value beyond the product and stood our ground. Too many people go to water, if you know value and can prove it, be courageous.
The negotiation was successful because the clarity was around something tangible, value. Any objection that he raised at a technical level was dealt with by the technology team. Value at the business level was managed by us obtaining a clearer picture of the customers’ future and what results we could deliver.