SMARTnership: Unveiling a Novel Negotiation Approach for Vendors: A Briefing
Dr. Keld Jensen (DBA)
World’s Most Awarded Negotiation Strategy ?? | Speaker | Negotiation Strategist | Global Gurus Top30 | Author | Professor | Home of SMARTnership Negotiation
In this article, I am excited to unveil the briefing we employ to introduce vendors to an innovative negotiation methodology tailored for engaging with procurement teams. This approach may initially provoke confusion or even suspicion among participants, hence why we supplement it with live Q&A sessions and presentations. These elements constitute integral components of the negotiation strategy implementation work we conduct with our clients.
In a SMARTnership, every negotiation is considered to be a collaboration. As we see it, the purpose of negotiation is to bring about the best possible results for our suppliers, though not to our own disadvantage. The ultimate objective is the best possible results for both parties —the buyer, and the supplier, too.
This can be achieved through applying the principles of SMARTnership, and the use of NegoEconomics (Negotiation Economics).
What is SMARTnership?
?SMARTnership is, for some industries, a new and untried form of cooperation; one which challenges traditional mindsets regarding interaction between customers and suppliers. Whenever we engage in a SMARTnership-style negotiation – one based upon openness, honesty, and trust – we open the proceedings with a call for agreement upon the tenets of the Negotiating Code of Conduct, which appears near the end of this document.
Award winning
In 2017, Denmark’s IKA (Association of Public Procurement) honored the concept of the SMARTnership model as the best tender/negotiation model. In that same year, the International Organization of Contract and Commercial Management awarded us its annual Innovation Award for our pioneering efforts in the creation of added value in negotiations through SMARTnership, transforming negotiations into collaborations rather than adversarial contests.
The focus of the buyer in their upcoming negotiations will be on assisting the supplier to reduce his costs and risks, and to increase his profits. At the same time, the buyer trusts that the supplier will reciprocate – looking for ways to reduce the buyer's costs and risks and increase its profits, as well as his own. It is our belief and experience that these expectations and actions are not mutually exclusive.
The buyer will be always open to discussion, and forthcoming about what it considers its variables in any negotiation. We expect that suppliers will be ready and willing to share their corresponding information.
If, in our query, you find specifications or requirements that would greatly increase your risks or expenses, limit your revenue potential, put you at a disadvantage or give rise to uncertainty, please tell us so and provide as much detail as you can. Our intention in the upcoming discussions is to examine how we might amend our specifications and requirements, within the framework of our joint action plans, to improve the overall project economy.
For optimum results, it is necessary that both parties agree upon certain rules before negotiations commence. In some cases, it may be necessary to engage in “pre-negotiations” – discussions prior to the commencement of major scheduled negotiations – to come to an agreement on how the major negotiations will be conducted.
Listed below are the rules and prerequisites to the game. The list is not necessarily final and unchangeable; we recognize that no two negotiations are identical, so adjustments may occasionally be needed to fit the circumstances.
CHECKLIST OF PREREQUISITES AND RULES
To be agreed upon and followed by both parties
1. Establishment of strategy to be followed: SMARTnership
2. Transparency, honesty (if there is anything about which you cannot be open, explain this to the counterparty)
3. Agenda and structure of the proceedings
4. Overview of variables
5. Order of variables (relative importances)
6. Distribution of NegoEconomics results realized
7. Ethics and morals: boundaries to be observed during discussion
8. Time to be allocated for the debate
9. Costs and respective values of each variable
10. Use of AV aids (tablet, flipchart, PowerPoint, etc.)
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Examples of variables
Payment terms: Buyers costs? Supplier’s costs?
Delivery time: Advantages or gains for the buyer? Costs for supplier?
Warranty: Advantages or gains for the buyer? Costs for supplier?
Cost for the buyer? Cost for supplier???
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Examples of how NegoEconomics is created in negotiations
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? NegoEconomics is created when negotiating parties have different costs and physical conditions/situations.
? NegoEconomics is created when negotiating parties are able to document their revenues, freed resources and beneficial effects in different ways.?
? NegoEconomics is created when negotiating parties have different expectations, and different attitudes toward risk.
? NegoEconomics is created when your own costs for making an extra effort are lower than the advantage or utility the other party derives from that effort.
? Synergy constitutes NegoEconomics.
? NegoEconomics is created when misunderstandings are clarified.
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NegoEconomics – Example 1
?A producer and a customer enter into negotiations, under the following circumstances: The producer has been supplying the customer with a component needed for a manufacturing process. In order for his production to run without interruptions, the customer must have 10,000 units of the component readily available. This ready supply also allows him to vary his production rhythm daily.
Stocks of the component have traditionally been stored on the manufacturer’s premises, and rapidly shipped to the customer as called for.
Suppose the customer’s costs for maintaining a storage facility of his own would amount to $250,000 per year. His cost for using the supplier’s storage instead is only $150,000. By storing the components in the facility with the lowest cost, the parties create NegoEconomics, which they can share. In this instance, the shared amount is $100,000.
NegoEconomics – Example 2
A negotiation concludes with the buyer stating, "This looks pretty good. It’s an agreement we should be able to live with. I feel sure my colleagues will welcome it. You can expect to receive the final order on Friday."
Friday morning, the buyer calls the seller: "I’m sorry, but the order I promised you is going to another supplier."
"But, we had an agreement!"
"In principle, yes, but this morning, one of your competitors called and offered us sixty days of credit on the same purchase. The extra thirty days are so valuable to us that we could not refuse. However, if you can also give us sixty days, we would prefer buying from you."
After a short break to consider the situation, the seller decides to agree. The buyer is satisfied – the additional thirty days is worth $20,000 to him. He obtained this valuable concession without the seller requiring anything in return. The buyer's tactics were not uncommon, but was the result actually beneficial to him? Let’s take a closer look.
If the extended credit terms increase the interest the seller will have to pay by $30,000, what does the whole deal look like now? Not very good: thanks to the last-minute change to their contract, both parties have now lost $10,000.
This aspect of negotiations is called NegoEconomics . NegoEconomic factors can be found in all negotiations. They can occur in any element of a deal, from payment terms to service and warranty agreements, and many, many more. A majority of negotiations involve hundreds of variables with value-creation potential, when viewed in terms of NegoEconomics. Each such variable is a point of asymmetry between the negotiating parties. At any point where one party's projected costs are less than the counterparty's projected profits, there is NegoEconomic potential.
In traditional negotiations, the negotiating space takes into account only a few basic variables and values. Such a simplistic approach allows numerous asymmetric values – which become apparent when a broader range of variables is considered – to go completely unutilized. Such NegoEconomic values can only be found by considering the traditional negotiating space and discovering the asymmetric values involved. When you take care to seek out a transaction’s NegoEconomic values, two things can be expected to happen:
?1) The negotiation becomes easier, because more areas of common interest and potential value come into view
2) As the newly expanded negotiating space is explored and exploited, results are enhanced for both parties
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Here is a list of variables that can often carry asymmetric value
? Payment terms
? Conversion?
? Price
? Production scope
? Image use
? Technical specifications
? Legal issues
? Volume
? Weight
? Enhanced storage level
? Contract length
? Transportation
? Insurance
? Marketing contributions
? Guarantees
? Specifications
? Production location
? Warehouse size
? Batch sizes
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? Service
? Documentation
? Incentives
? Acquisitions
? Test certifications
? Factory balance
? Location parameters
? Time
? Effective date
? Start date
? Time to completion
? On-site availability
? Delays
? Time of acquisition
? Warranty
? Responsibility
? Warranty of availability
? Warranty of energy consumption
? Escalation
? Employees
? Payment terms, advances, progress, etc.?
? Commitment to performance
? Risk and reward in general
? Currencies (exchange rates)
? Contract award
? Service and warranty periods
? Exclusivity
? Royalties
? Ending?
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NEGOTIATING CODE OF CONDUCT
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We will not:
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? We will not lie or bluff
? We will not deliberately bring time or other pressure to bear on our counterparty
? We will not make inflated offers
? We will not engage in emotional manipulation
? We will not engage in aggressive or hostile conduct
? We will not hold back relevant information
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We will:
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? We will do our utmost to build and maintain a high level of trust between parties
? We will refrain from any form of bribery, information abuse or espionage
? We will "walk the talk," doing everything we agree to do
? We will be open about variables and their values or costs, sharing this information freely
? We will exercise fairness, making every effort to optimize NegoEconomics for both parties
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We believe:
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? We believe that honest, mutually beneficial cooperation is superior to “winning” at a counterparty’s expense
? We believe in the value of maintaining and operating upon high ethical and moral standards
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If you find or feel that we are not following this Code of Conduct, please call it to our attention immediately.
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?More info:
Watch these videos for further description of the SMARTnership and NegoEconomics concept:?
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Keld Jensen: Innovator of SMARTnership Negotiation and Thought Leader in Collaborative Strategy
Keld Jensen stands at the forefront of negotiation strategy, having pioneered the concept of SMARTnership — a transformative approach that transcends traditional negotiation tactics. Based in the vibrant and innovative hub of Southern California, Keld has dedicated his career to reshaping how businesses think about collaboration and mutual gain.
With a rich background in marketing, sales and management, Keld has brought the SMARTnership negotiation model to the world stage, advocating for strategies where all parties come out ahead. His philosophy hinges on the power of cooperation over competition, a mindset that has revolutionized partnerships across industries.
As an author, Keld has penned influential works on the subject, distilling complex negotiation dynamics into accessible and actionable insights. His books are considered essential reading for anyone looking to navigate the intricate world of business negotiations with a fresh, ethical, and effective perspective.
Beyond writing, Keld is a dynamic TEDx speaker and consultant, sought after for his ability to transform and empower organizations through SMARTnership principles. His workshops and seminars are not just learning experiences but incubators for innovative ideas where leaders come to forge the future of business strategy.
Keld's impact is not confined to the boardroom; his approach has been adopted by NGOs, governmental agencies, and multinational corporations, all seeking to create value through collaborative success. His work has earned him numerous accolades and a reputation as a visionary in creating sustainable, profitable business relationships.
Keld's academic rigor informs his practical applications, making him a unique bridge between theory and real-world success. He is teaching at four prestigious universities in the US and Europe and his commitment to education is also evident in his mentorship of up-and-coming professionals, whom he guides with a blend of wisdom and innovative thinking.
Keld Jensen's journey with SMARTnership continues to evolve, as he constantly seeks new avenues to promote shared success in an increasingly interconnected world. His upcoming initiatives promise to further cement his role as a catalyst for change in the way we think about and engage in negotiation.
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