Spend Matters welcomes this guest post from Jatan Shah, of GEP.
In the Super Bowl 50 final between Denver Broncos and Carolina Panthers on Feb. 7, the Broncos achieved a 24–10 win over the Panthers and captured the Lombardi trophy. This series was a key milestone for the Broncos also in the sense that Payton Manning, the quarterback, announced his retirement soon after the victory. The Broncos have been looking for a new quarterback and according to the current reports, Colin Kaepernick, the San Francisco 49ers quarterback, could be a potential option. The Broncos are hoping to persuade Kaepernick to restructure his contract so he can serve as Manning’s replacement in 2016. As Manning retired and the Broncos look for a new quarterback, let’s analyze Manning’s last rodeo.
Wade Philips, the defense coordinator for the Broncos, crafted a perfect plan against Panthers’ offense and to neutralize Cam Newton, the quarterback. Philips knew that in man-to-man coverage he’d have two or at least one extra defender. He had these extra defenders blitz. This tactic is basically an all-out assault on the quarterback. When safety T.J. Ward was asked if Panthers did anything that surprised them, he said, “No. We read them like a book.” In addition, the linebacker Brandon Marshall mentioned, “They did everything that we saw on the film. Nothing new. Their passing game is pretty much what they show you in their previous weeks.”
The Broncos did a lot of background research in terms of watching films of past games and analyzing those matches to plan their defense in advance of the big game. Come to think of it, as procurement professionals, what if we also do a great deal of research in advance of negotiating with suppliers? In advance of the negotiations, understand what it is that we can or cannot agree to. What if the current negotiations fail? What are the alternatives?
Let’s explore a few negotiation concepts which can help us plan our negotiations:
- Best alternative to a negotiated agreement (BATNA): BATNA is your backup plan should the parties not reach an agreement with the current negotiations. The better alternatives you have to the current negotiations, the more aggressive you can be during the negotiations. If you're trying to settle a legal dispute, your BATNA could be "go to court." If you're negotiating an acquisition, your BATNA could be "invest the money organically" or "buy a different company."
- Zone of possible agreement (ZOPA): ZOPA is the range of possible agreements from which both parties benefit. If ZOPA exists, there is a good chance that both parties will be able to reach an agreement. Both parties will have their own most desired outcome (MDO) and least acceptable agreement (LAA) which they expect from the negotiations and if there are deals which fall between MDO and LAA for both of these parties, then ZOPA exists. Again, you can be more aggressive in deciding your MDO and LAA if you have a BATNA. For example, if Mike wants to buy a used car for $5,000 or less, and Mary wants to sell one for $4,500, those two have a ZOPA. But if Mary will not go below $7,000 and Mike will not go above $5,000, they do not have a zone of possible agreement.
If Procurement professionals conduct enough research and plan their negotiations in advance just like how the Broncos planned their defense, there is a greater possibility that they will achieve wins during the negotiations. As Chester Karrass mentioned in his book, in business as in life, you don't get what you deserve, you get what you negotiate.
For more strategic thinking on Procurement, visit the GEP Knowledge Bank.