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OPTEON Philip MendesLevel 3, 33 Queen St Brisbane QLD, Australia Ph + 61 7 3211 9033 Fax + 61 7 3211 9025 Topic 18 Negotiations Skills.

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Presentation on theme: "OPTEON Philip MendesLevel 3, 33 Queen St Brisbane QLD, Australia Ph + 61 7 3211 9033 Fax + 61 7 3211 9025 Topic 18 Negotiations Skills."— Presentation transcript:

1 OPTEON Philip MendesLevel 3, 33 Queen St Brisbane QLD, Australia Ph + 61 7 3211 9033 Fax + 61 7 3211 9025 philip@opteon.com.au Topic 18 Negotiations Skills and Case Studies WIPO-KIPO-KIPA IP Panorama Business School Investment Summit 9 October 2008 Geneva

2 Negotiation: A Counter-Intuitive Process Something of a provocative title Title comes from remarks made by participants at some of my negotiation workshops thats the opposite of what I do I know I should do that, but I find myself doing exactly the opposite Its counter-intuitive What are people saying ? They recognise the prudence of a particular strategy But they find it difficult to implement it Their natural inclination is to do the opposite of what they recognise is the prudent strategy

3 Intuitive – Counter-Intuitive Automatic gearShift into manual Focus on PositionsFocus on interests Dive into the negotiationDefer the negotiation to a time of our own choosing, gather information first When our proposals are rejected, justify and defend them Ask why our proposal doesnt work, and gather information When a proposal is made to us that is unacceptable, rejection Instead of rejecting, ask why their proposal is important, and gather information What are some of the intuitive things we do in a negotiation the counter-intuitive thing we might consider as an alternative ?

4 Fisher & Urys Getting to Yes Main theme: Focus on interests instead of positions Position is a proposal Likely to be rejected Interest is the why of the proposal – what is sought to be achieved There may be multiple ways of achieving that interest This perspective in a negotiation is counter-intuitive

5 Focus on interests instead of positions Bargaining over positions Negotiators lock themselves in The more we clarify and defend our position, the more committed we become, and the more we lock ourselves in The more we convince the other party of the impossibility of changing our position, the harder it becomes to do so As more attention is paid to positions, the less attention is given to the underlying needs of the parties We start with a higher position to increase our chances of a favourable outcome, which stresses the negotiation Makes the negotiation inefficient Stresses relationships which also makes the negotiation more difficult

6 Focus on interests instead of positions Bargaining over positions Becomes a contest of will Positions results in negotiators yielding, leaving one with a win and the other with a loss Negotiations become a series of wins and losses One side or both sides have a giving in feeling The negotiation becomes a series of giving in points May result in anger and resentment Bargaining over positions is bad enough where there are 2 parties in a negotiation Significantly worse when there are multiple parties 3, 4, 5…10 parties in a negotiation, each competing to put their own position

7 Focus on interests instead of positions Whats the alternative ? The parties may perceive that their relationship is a conflict of positions Natural therefore for the parties in their negotiation to state and restate positions Positions lead to conflict and impasse We want to avoid conflict and impasse Interests are the motivator Positions is how they are expressed Challenge is to look beyond the position, recognise the interest, and explore how it can be addressed

8 Focus on interests instead of positions Position is the pathway Position Interest Pathway 1 Pathway 2 Pathway 3 Pathway 4 Pathway n

9 Focus on interests instead of positions Pathway 1 Pathway 2 Pathway 3 Pathway 4 Pathway n Acceptable to one party Acceptable to other party A position identifies only one pathway forward An interest usually identifies several pathways forward Pathway in common is the solution Solution

10 Focus on interests instead of positions Be hard on interests, and soft on positions Be committed to our interests being met But be soft on our position on how to meet that interest Our interest is the motivator Not necessarily the pathway to achieve it, may be unwise to be committed to a specific pathway Be hard in negotiating our interest But be flexible on how that interest can be achieved Chances are that during the negotiation, We may identify more pathways The other party may identify more pathways any of which may be acceptable, or even better

11 Focus on interests instead of positions How do we identify interests ? Use the language of ascertaining their interests Can you help me understand why thats important to you Can you explain how that achieves what you need I dont understand how that will work, can you explain it to me Let me see if I understand. You want that because (you state in your words)

12 Focus on interests instead of positions How do we identify interests ? Use the language of communicating our interests Were open to doing this in any number of ways that achieves… …(your interest – not your position) What we need to achieve is… (your interest – not your position) Whats important to us is…(your interest – not your position) Can you think of any ways, without downside for you, in which we can … (your interest – not your position)

13 Licensor / Seller of ProductLicensee / Distributor ProposalLicensee / Distributor must achieve minimum worldwide sales targets of 300K per year - or termination No. Focus on interests instead of positions

14 Licensor / Seller of ProductLicensee / Distributor ProposalLicensee / Distributor must achieve minimum worldwide sales targets of 300K per year - or termination No. Interests and Needs Needs to ensure achieve a minimum financial return Needs to be able to appoint alternative licensee / distributor if not achieved Needs sales targets to be realistic and achievable so as not risk loss of rights. Focus on interests instead of positions

15 Licensor / Seller of ProductLicensee / Distributor ProposalLicensee / Distributor must achieve minimum worldwide sales targets of 300K per year - or termination No. Interests and Needs Needs to ensure achieve a minimum financial return Needs to be able to appoint alternative licensee / distributor if not achieved Needs sales targets to be realistic and achievable so as not risk loss of rights. Ways to Achieve them Same as position – minimum sales targets of 300K / year Sales targets holiday Year 1, followed by 300K / year each year Sales target holiday first 6 months, followed by ramped up minimum sales each year Enter into a sub-distributorship agreement in a critical segment of the market Focus on interests instead of positions

16 Intuitive step in a negotiation: To make proposal of what we want Counter-intuitive step in a negotiation: To explain what we need to achieve from the relationship – the why of the proposal Starts a dialogue about the interests of the parties what they respectively need to achieve That dialogue likely to identify or suggest proposals that can be made that are responsive to the respective needs of the parties are therefore more likely to be accepted

17 Diving into a negotiation Intuitive approach to a negotiation is to make proposals Our proposals To us are self evidently fair and reasonable We make the proposal, and sit back and expect the I agree response We are then taken aback when the I agree response doesnt come We expect proposals to be made in a negotiation Making proposals is what a negotiation is all about How can they possibly disagree with this ?

18 Diving into a negotiation First step start haggling royalty terms, milestone payments, upfront payments or a price of products But may that be premature ? Do both parties share a common understanding / expectation Can expectations be influenced By establishing rapport? By talking about the pathway forward ? By talking comparable deals ? Similarities in other deals Other deals that may influence the financial terms ?

19 Diving into a negotiation By diving into a negotiation prematurely we may be denying ourselves the opportunity to Prepare thoroughly Establish rapport Inform the other party about things that may influence their expectations in our favor Gather information about the other party that may Influence the proposals we make to the other party Influence our expectations So that they are higher than otherwise So that they may be more realistic Consider deferring the negotiation until after information gathering (what we can learn from the other party) Information sharing (what we can inform the other party)

20 Diving into a negotiation Instead of diving in – establish rapport What is rapport? A feeling of being in sync or on the same wave length Rapport, or the absence of rapport is a main determinant of whether people develop a trusting relationship Trust one another to share or not share information Trust one another to be frank and open or less frank and open in a discussion Trust one another in what the other says, or whether they feel that it may be bluff People who have done deals together before, who have established rapport established some trust and confidence in each other do a better and faster deal than otherwise

21 Diving into a negotiation Establish rapport Rapport facilitates communication When people know each other they can more quickly Communicate information Identify options for solutions Converge on a solution or an outcome Establishing rapport involves getting to know the other partys individuals Not from a dishonest perspective, nor to take advantage of the other party From the perspective that getting to know the other individuals in a negotiation will be beneficial to both sides in a negotiation There is mutual benefit in getting to know each other

22 Diving into a negotiation Establish rapport Liking People like those who like them If we are liked by someone, they will listen to us register what we say want to explore ways to help us achieve our needs and interests be receptive to accommodating our needs and interests Antipathy – the opposite of liking Results in the opposite behaviour Other person will not listen to us register what we say want to explore ways to help us achieve our needs and interests be receptive to accommodating our needs and interests

23 Diving into a negotiation Establish rapport: Northwestern & Duke Universities experiment 146 students involved in negotiation experiment Negotiation for the purchase of a car Students were paired Half the students had an initial getting to know you phone call Remaining half the students did not have that phone call All other communications, in both groups, were by email In the phone call, students developed a rapport with each other Talked about themselves, their universities, their interests and hobbies, sport etc They got to know one another In their emails they kept up that same dialogue – remarking about a recent football or basketball match – as well as doing their deal Ie, they continued their rapport

24 Diving into a negotiation Results: In rapport group: Majority felt that they could trust the other person Majority felt satisfied with their deal Majority felt that they had done a good deal Majority would do another deal with that person A small number felt ripped off Results: In non-rapport group: Majority felt that they could not trust the other person Majority felt dissatisfied with their deal Majority felt that they had done a bad deal Majority would not do another deal with that person A large number felt ripped off The group which did not have that rapport opportunity were 4 times more likely to have their negotiation fail

25 Diving into a negotiation Use the first meetings of a negotiation to ask lots of questions Use the first few meetings as information gathering opportunities Find out more about the other party their interests and needs the extent to which they know or appreciate our interests and needs The more questions we ask the more information we gather about the other party the more we understand their position and their objectives equips us to make proposals of our choosing that are more likely to be accepted

26 Diving into a negotiation Use the first meetings of a negotiation to ask lots of questions With each question we ask we will be better informed How does that help us? We now have a better means of navigating how to achieve our own needs and interests, having regard to our better understanding of the other partys needs and interests We can now formulate proposals that are more likely to blend in with the other partys objectives that are therefore more likely to be accepted The more we know about how to help the other party, the better equipped we are to make proposals that achieve our own needs and interests as well as theirs

27 Diving into a negotiation Use the first meetings of a negotiation to ask lots of questions Open ended questions are questions that require more than a Yes or No They are questions that oblige the respondent to volunteer information Can you help me understand why that is important to you? What do you hope to achieve out of todays meeting What do you want to achieve out of our relationship ? How would you feel about us looking at it from this perspective… How would it work if we were to consider…? What would be your thinking on this…?

28 Diving into a negotiation Use the first meetings of a negotiation to ask lots of questions Open ended questions are not proposals, nor positions are hypothetical what ifs facilitate exploring interests and needs Help to set a climate or mood of cooperation and collaboration in the negotiation Help to elicit responses that make us better informed To evaluate the other party To appreciate its interests To formulae proposals that work for us, and which are responsive to the other partys needs and interests and therefore more likely to be accepted by them

29 Diving into a negotiation Case study Proposed license of a novel more efficient delivery system for a drug already on the market, and off patent Second phone call with the interested licensee First point made by the interested licensee What are the royalties and other terms you expect? Licensees perspective: that we were a desperate licensor Commitment on financial terms at such an early stage likely to be when licensors resistance was lowest, and when it was most likely that licensor would proposed modest package of financial terms, which the licensor could then negotiate down Licensors perspective Value of the IP dependent on exactly what the clinical pathway would be

30 Diving into a negotiation The management team requires that I assemble a briefing document before it can sign off on financial terms that I can afterwards suggest for consideration. Can you help me with that briefing document by helping me understand: 1.Scope of further R&D work to be undertaken 2.Work Plan of for that R&D (toxicology, animal studies etc) 3.Timeframes for the above 4.Anticipated clinical pathway (are phase I, II, and III trials all required, or might regulators be relaxed and allow phase I or II to be short trials, or even jump straight to phase III) 5.Your proposed marketing strategy and market roll out 6.Will you be partnering outside Europe ? 7.Your assessment of the market.

31 Diving into a negotiation Educate instead of negotiate Sometimes the negotiation is not a negotiation at all Instead its an education The other party may not be aware of The landscape within which we operate Forces that impact upon our expectations The other party may be inexperienced unfamiliar with normal models for the deal that we are about to do Need to educate more than negotiate Results in understanding, rather than a negotiation Not doing that means that we and them are each working from different reference points That impedes the negotiation

32 Diving into a negotiation Educate instead of negotiate Who needs to be educated ? Not just the individuals at the negotiating table Consider other stakeholders who need to be educated as well Who are the decision makers who need to be educated What do we educate them about ? The technology? The landscape of the technology ? The landscape of the deal ? The environment for doing the specific type of deal being negotiated Benchmarked transactions ?

33 Diving into a negotiation Educate instead of negotiate Ozgene – makes transgenic mice for drug target validation Customers are large pharmaceutical companies, research institutes in US, Europe and Japan Customer provides gene sequence for human gene of interest We knockout the gene (that is, delete it from the mouse genome) (as well as knockin in specific locations, or randomly) Standard T&Cs contained clause that customer indemnifies Ozgene against any claims arising from the generation of the mouse strain and the delivery of transgenic services to customer infringing third party IP rights Some customers request deletion, or that the clause be reversed, that Ozgene provide that indemnity to the customer We needed to educate our customers Board adopted a policy that explained why Ozgene couldnt provide indemnity, and why we needed the indemnity from the customer In a nutshell – only customer could know whether the requested gene of interest (there are 40,000+ human genes) infringed third party IP rights Board Policy would be provided to customer Customer would invariably not press the request

34 Diving into a negotiation Intuitive step in a negotiation: To dive into the negotiation Counter-intuitive step in a negotiation: To defer the negotiation to a time of our choosing Why would we want to do that ? What do we do in the meantime ? Establish rapport Inform the other party about things that may influence their expectations in our favor Increase the likelihood that their proposals will be acceptable to us Gather information about the other party that may Influence the proposals we make to the other party Increase the likelihood that our proposals will be acceptable to the other party Educate the other party about our interests and needs

35 Defending our rejected proposals We believe our proposals are fair We are taken aback when our fair and reasonable proposal is rejected Our automatic gear reaction We Justify Present supporting data and arguments We entrench our position The more we entrench our position The more difficult it is for us to step back from it – we dont want to appear weak How can they possibly disagree with this ? They must not have understood – Ill have to repeat it

36 Defending our rejected proposals Intuitive step in a negotiation: To defend and justify our rejected proposals Counter-intuitive step in a negotiation: To ask for criticism of our proposals What do we achieve? We get the other party to tell us what their needs and interests are We provide information about us to the other party that we choose to give Increase the likelihood that their proposals will be acceptable to us Gather information about the other party that may Influence the proposals we make to the other party Increase the likelihood that our proposals will be acceptable to the other party Can you help me understand why that doesnt work for you?

37 Avoid rejecting their proposals When a proposal is made to us that doesnt work for us, we reject it, and make a counter proposal. That starts a haggle Proposal Rejection and counter proposal Theres more to a negotiation than a carpet bazaar haggle That wont work. I suggest that…

38 Avoid rejecting their proposals Intuitive step in a negotiation: To reject a proposal and doesnt work for us, and make a counter proposal Counter-intuitive step in a negotiation: To share information on why it doesnt work What do we achieve? We provide information about us to the other party that we choose to give Increase the likelihood that their proposals will be acceptable to us We start a dialogue In so doing we gather information about the other party that may Influence the proposals we make to the other party Increase the likelihood that our proposals will be acceptable to the other party Let me share with you my thinking on that

39 Intuition – Counter-intuition Weve covered 4 things with this intuition / counter-intuition theme 1.Focusing on needs instead of position 2.Deferring a meeting to a time of our choosing Establish rapport Ask questions and gather information Educate instead of negotiate 3.Not defending our rejected proposals (with the risk of entrenching ourselves) 4.Not rejecting the other partys proposals to us (with the risk of a carpet bazaar haggle) The objective of doing that is: Information Information that we gather about the other party Information about us that we choose to share with the other party

40 Information sharing and gathering Information is said to be the currency of a negotiation Without information That we might gather about the other party That we might choose to share with the other party about ourselves we risk our proposals being aimless, possibly landing anywhere With information That we might gather about the other party That we might choose to share with the other party about ourselves we have an increased likelihood our proposals will hit the bulls eye


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