New Approaches to Procurement Negotiation – Download our New Paper

Our last BravoSolution Real World Sourcing event looked at the latest thinking in behavioural psychology and how it might impact negotiation strategy, approaches and ideas. We looked in particular at the work of Dr Daniel Kahneman, who won the Nobel Prize for Economics, despite being a psychologist, not an Economist!

He won the prize for showing that humans do not behave rationally in an economic sense when we make decisions. That blew big holes in many economic models and theories, which assumed consumers always behaved logically. No they don’t, said Kahneman and his collaborators in the field of behavioural psychology, they often behave very illogically.

The session went down very well, so we have turned some of that material into a new briefing paper, titled “New Approaches to Procurement Negotiation – Dr Daniel Kahneman and Behavioural Psychology Suggest Some Winning Techniques” . You can download it here, free on registration.

In our paper, we look at a brief background to Kahneman’s work and his ideas on System 1 and System 2 thinking, then we get into three concepts that are areas of interest to negotiators – Priming, Anchoring and Risk. We’ll be featuring a few excerpts here in the days to come, and we’ll start today with some of that background related to Kahneman's work.


Thinking Fast and Slow

Kahneman’s book, published in 2011, “Thinking, Fast and Slow”, brings together his life’s work in a highly readable (but not dumbed down) manner, and aims to explain, basically, how we think. It is brilliant and highly recommended to anyone remotely interested in how our thought processes work and how we make decisions. At the heart of it is Kahneman’s concept of System 1 and System 2 thinking.

System 1 is the easy, automatic, intuitive, rapid thinking that gets us through most of life. Driving to work without thinking about the route. Answering most emails. Skim reading documents. Recognising our families and close friends.

System 2 is the harder, out of our comfort zone, thinking. Answering difficult maths problems, responding to a tricky interview question, thinking hard about future procurement strategies perhaps. Because System 2 is difficult, our brains will do everything possible to stick with a System 1 approach, which leads it to seek all sorts of short cuts in the way we think day by day, minute by minute. We don’t have a lot of conscious ability to change that, and this phenomenon has a number of consequences and implications that affect every aspect of our lives.

Because we rely on System 1 most of the time, we are vulnerable to making errors, and that includes in our jobs, whether procurement or any other field. We are easily manipulated, we are suggestible, we jump to conclusions, fail to calculate risk or probability properly, we are influenced by irrelevant factors. That list starts to suggest some immediate issues in terms of business, procurement and negotiation activities.

Download the whole paper here .

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