An RFP at Hyperactive Technologies

Posted on October 30, 2007 | Filed Under Value | Leave a Comment

Is a Request For Proposal (RFP) a valuable offer to buy, or an attempt by the buyer to commoditize your offering?  An October New York Times article about artificial intelligence software for restaurant order flow management contained an interesting comment: “Just last week, [founder Joseph] Gagnon [said] the company received its first ‘request for a proposal’, an overture from a possible buyer of its products. ‘That we got an RFP tells me I made it’, he exults.”

How does a negotiator feel about it?  Mr. Gagnon is counting his chicken orders too soon.  In many commercial transactions, an RFP is a method of commoditizing buyers, so that all appear to provide the same function / feature / benefit / solution, and price is the only differentiator.  Unless Mr. Gagnon shaped the RFP specifically to match his, and only his, offering it is now a price war between the set of vendors that can offer the solution.  In fact, RFPs often intentionally omit differentiating factors between vendor solutions.  The result is predictable.  One firm that called K&R for consulting services to improve their sales negotiation success had responded to 193 RFPs in the prior calendar year – and won none of them.

The answer to our opening question in this news item: When the RFP they publish was “pre-written” by you, it is an offer to buy.  If not, it is probably an attempt to commoditize your solution. (TD)

Joe Torre and the Yankees

Posted on October 29, 2007 | Filed Under Motivations, Objectives, Requirements | Leave a Comment

When is an offer not an offer? Joe Torre, an extremely successful (and the highest-paid) baseball manager, failed to bring the Yankees to the Divisional Playoffs in the final year of his contract.  Yankees management made him a non-negotiable offer for next year of $5 million, with “earnable bonuses” of up to $3 million more.  Joe turned it down.  It is unlikely that this offer was expected to be acceptable.  Joe, coming off a 12-year run, shouldn’t need the money. So what motivates him? As in many businesses, status, recognition and the appearance of success are key factors in the negotiation process.  If you want to close a deal, you should understand what the other side needs to get to be able to agree to that deal. The Yankees’ management team knows Joe well.  They could accurately predict that he wouldn’t take it.  This makes us think (as good negotiators do) about their motivations as well. (TD)

BEA and Oracle (Part 2)

Posted on October 28, 2007 | Filed Under Tactics | Leave a Comment

Carl C. Icahn goes over the BEA management team’s head.  Hard on the heels of BEA’s rejection of Oracle’s $17/share buyout offer, BEA’s largest shareholder Carl C. Icahn has sued BEA to force a shareholders’ meeting to vote on the offer.  The negotiations implications are interesting.  BEA now has an internal conflict – Icahn arguably has similar (but not exactly aligned) motivations to those of BEA management.  At the same time, his threat undercuts the strength of BEA’s position that a price of $21 per share is the right one, and supports Oracle’s position that $17 per share is fair.  Interestingly, this would seem to work against Mr. Icahn.  If $21 per share were possible, his benefit would be nearly 25% greater.  What is BEA to do?  Is this pressure (called Negotiations Leverage) real?

Threatening to go “over their head” is a common tactic.  In the real world, these kinds of conflicting motivations within a single “team” are common, and have to be managed.  If you don’t, it will be expensive to your side – it this case, it could cost up to $6 billion.  This is a simple example of the power of negotiations.  Ask us how to avoid losing 25% on your next deal. (TD) 

BEA and Oracle (Part 1)

Posted on October 26, 2007 | Filed Under Negotiation Success Range™ (NSR™) | Leave a Comment

In recent articles, it was reported that BEA “spurned” a $6.7 billion offer from Oracle to purchase the company.  It amounted to $17 per share.  BEA countered with a statement that $21 per share would be a more reasonable figure.  These actions established a “Negotiation Success Range™” (NSR™).  Negotiation skill will determine at which end of the range the deal closes (if it does).  Beyond skill issues, BEA also may feel pressure to answer to stockholders who may find the offer attractive as a share price.  So BEA’s counter-offer could have one of several meanings, including:

  1. A deal can be struck, probably at some intermediate price between $17 and $21.  The parties must find compelling arguments to make the other side move closer to closing.
  2. BEA may have no intention of accepting.  If a seller makes an offer that is too high, buyers often walk away, and BEA might want this.  It depends on BEA’s knowledge of their own value.
  3. BEA may need to convince their shareholders that BEA’s value is far above the offer.  In this case, the counteroffer may be more an argument to convince their shareholders than a real counteroffer.

In the same article, Oracle was reported to give BEA a deadline to decide, or Oracle would directly approach the shareholders.  This is an attempt, common enough in negotiations, to apply pressure by escalating to a “higher power” (shareholders, in this case).

These tactics are the same ones that are used in everyday commercial negotiations: escalation, creation of an NSR™ within which a deal can be struck, and appealing to people with different motivations than the ones you are presently dealing with.  You should be prepared to see them in your negotiations.  We can help.  We bring superior knowledge of negotiations to add to your superior knowledge of your negotiating counterpart at your client or supplier. (TD)

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