Thursday, June 19, 2014

What They Didn’t Teach You at Business School about Negotiation

Guest post from John Graham:

Your daughters are fighting – over an orange. No hitting or hair pulling, just screaming and crying. What do you do? You might get a knife and cut the thing in half. A zero-sum solution, but fair. If you’re smart you ask each of them why they want the orange. If you’re lucky one wants it for the juice, the other the peel for marmalade. They can share it with each getting 100% of their desires. Smart parent!
In business school we call the latter approach integrative or interests-based bargaining. Indeed, we often tell the parable of the orange to demonstrate the thinking behind the process. Rather than a competitive haggling over greedy positions, we’ve been teaching making interests-based tradeoffs that should yield win-win solutions. But in the 21st century, just getting to yes isn’t good enough.

There is a third way. The best negotiators in the world think business-school-taught integrative bargaining is primitive. Jobs and Iger used what we call Inventive Negotiation in devising the Disney purchase of Pixar. They developed a trusting relationship, laid their cards on the table, face up, and walked around Palo Alto trading crazy ideas. Rather than bargaining over film distribution agreements and intellectual property, they combined their imaginations to design an ecosystem of creativity. Using this approach with your daughters, you suggest planting an orange tree.
Inventive negotiation borrows the best ideas from the Japanese, the Dutch, Silicon Valley, Hollywood, brain science, anthropology, and experimental economics. Rather than focusing on disputes or problems, the process begins with a search for opportunities.  Next comes finding the best partners and developing trusting relationships. Those relationships allow for application of tools of invention – using a facilitator, leveraging diversity, getting the team, place, space and pace just right, changing roles, and improvisation.  

Prominent examples of Inventive Negotiation come from industry – Boeing/Mitsubishi, GM/Toyota, Apple/Hon Hai, Philips, and Ford. All have imitated General Electric’s founder. Thomas Edison wasn’t just an inventor. He was an inventive negotiator. Contemplate the array of companies he created – 171 in all. Fifty were in countries ranging from Argentina to Canada, from Japan, China, and India to Italy, Germany, and France. He dabbled with partners in electric cars, batteries, cement, chemicals, and office machines. The creative teams he developed laid the foundations for today’s music, movie, and telecommunications industries.

Historians list 22 inventors of incandescent lamps prior to Edison, but his team’s design improved on the others in three ways: better incandescent material, a higher vacuum, and higher electrical resistance allowing power to be distributed from a centralized source. But the better bulb by itself wasn’t the reason for Edison’s success. He and his partners also developed the basic grid to bring the electricity from a distant generator across the wires to the bulbs. Now GE makes everything from toasters to turbo-machinery.

By the time Thomas Edison applied for patent #223,898 for his version of the light bulb, he had already formed the Edison Electric Light Company in New York City. He’d sold his vision: “We will make electricity so cheap that only the rich will burn candles,” which helped him line up investors like the Vanderbilts and J. P. Morgan. And within a decade, he’d recruited dozens of the smartest engineers in the world and built the world’s first industrial laboratory in Menlo Park, NJ.

He owned the American market (some 60 million at the time), but his dreams were bigger: the entire British Empire (about 400 million). And one man stood in his way.

Joseph Swan held the British patent for pretty much the same technology, and he was suing Edison there. Where others would have seen this as an obstacle, Edison saw it as an opportunity. Soon he had persuaded Swan that partnership was a better idea than litigation—a move that would make both of them enormously wealthy.

So in 1883 the two partners created the Edison and Swan Electric Light Company (Ediswan) to manufacture and distribute the invention in Britain and its vast empire. Though famously “the sun never set on the British Empire,” it apparently set every day on some portion of it. In those places they needed lighting. Thus, Edison’s gamble paid off handsomely.

We have found others that use Inventive Negotiation – George Mitchell brokering a peace in Northern Ireland, Marines drilling water wells in Afghanistan, Father Gregory Boyle creating Homeboy Enterprises, extended families building multigenerational housing. The list goes on and on. There is no limit to human imagination when it’s purposefully applied to finding opportunities, TOGETHER. Try Inventive Negotiation. Go beyond just yes. Plant orange trees!

John L. Graham, co-author with Lynda Lawrence and William Hernández Requejo, of Inventive Negotiation: Getting Beyond Yes (Palgrave Macmillan, May 2014), Professor Emeritus of International Business, University of California, Irvine,

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