Creating Value & Principled Negotiation
Session 2 — Interest-Based Negotiation · Investigative Negotiation · Influence · Ethics
The Session 2 Shift
Session 1 was about claiming value inside a fixed pie. Session 2 is about enlarging the pie before you divide it. The BATNA/ZOPA framework gives you the floor — integrative negotiation raises the ceiling. Both skills are necessary; the mistake is applying distributive tactics to an integrative situation.
From Positions to Interests
Three Layers of a Negotiation
Issues — what is on the table for explicit agreement (price, timeline, specs)
Positions — each party's stated stand on the issues ("we need $2M," "delivery by Friday")
Interests — the underlying needs, concerns, and motivations driving positions
Positions are often incompatible. Interests rarely are. The dam example: three incompatible positions, but three compatible interests — water flow, wildlife, green image. One deal served all three.
Why Positional Bargaining Destroys Value
- Locks in on one issue (usually price) and misses everything else
- Each concession is seen as weakness — both sides dig in
- Compromise splits the difference rather than finding the efficient frontier
- Moms.com example: TV runs — 6 vs 8. Compromise = 7. But producer wanted any 6; network wanted any 8. Logrolling = both get exactly what they want.
- Fixed-pie bias makes it feel zero-sum when it isn't
Creating Value — NG Ch. 2
Key Principle
Differences in priorities, timelines, risk tolerance, and resources create opportunities for trades where both parties gain. The goal: reach a Pareto-efficient outcome — where neither side can be made better off without the other being worse off.
Logrolling
Trade issues where your priorities differ. Party A values Issue 1 more; Party B values Issue 2 more. Give them Issue 2 in exchange for Issue 1. Net result: both better off.
Moms.com — TV Runs
Producer: wants any 6 of the 8 episodes aired (cares about which ones). Network: wants any 8 of the 12 available (cares about how many).
Compromise (7 episodes) destroys value for both. Logroll: network airs 8 episodes, producer picks which 6 of their choice count — both win.
Key They had different priorities on the same issue — discover this through questions.
Holbrooke / UN Arrears
US owed the UN hundreds of millions. Impasse: US wanted to pay less; UN needed full payment.
Holbrooke separated size from timing. US pays full amount — but staged over years. UN gets what it needs; US gets fiscal flexibility. Compatible interests behind incompatible positions.
Key What looks like one issue often has two dimensions you can separate.
Adding Issues
More issues = more currency for logrolling. When stuck on price, introduce: payment terms, delivery schedule, quality specs, warranty length, exclusivity, future business, training, implementation support, IP rights, performance milestones.
The Adding Issues Sequence
Don't agree issue by issue — negotiate the full package. Issue-by-issue agreement locks in positional outcomes. Package deals reveal priority differences that enable logrolling.
Contingency Contracts
When parties disagree about future outcomes: don't argue, bet on it. Agree to different terms depending on what actually happens.
- Eliminates a point of contention by deferring it to reality
- Detects bluffing: if they're making claims about future performance, a contingency clause tests sincerity — bluffers refuse
- Example: startup acquisition — pay base price now; if revenue hits targets, pay an earnout. Both sides bet on their own beliefs.
Pareto Efficiency
A deal is Pareto-efficient when you cannot make one party better off without making the other worse off. Always search for Pareto improvements before you finalize. Ask: "Is there any trade we haven't explored that would benefit at least one of us without hurting the other?"
Investigative Negotiation — NG Ch. 3
The Core Insight
Most value is destroyed because negotiators don't ask enough questions. Investigative negotiation treats every demand as a clue — what underlying interest does this reveal? Every "no" is information. Every constraint they name is a puzzle piece.
The 7 Principles
1
Ask WHY, not just WHAT
Their demand tells you what they want. WHY reveals the interest underneath. "Why is that important to you?" is the single most powerful question in an integrative negotiation.
2
Reconcile interests, not demands
Incompatible positions almost always have compatible interests underneath. Stop arguing about positions and start mapping interests.
3
Create uncommon allies from common ground
Co-opetition: sometimes your competitor can be your partner on specific issues. Separate the issues where you compete from those where you share interests.
4
Interpret demands as opportunities
Every demand reveals a need. "We need delivery by Friday" → why? Inventory pressure? Cash flow? Client deadline? The need behind the demand opens solutions you'd never find by negotiating on dates alone.
5
Don't dismiss their problem
Their constraint is your problem too. If they can't get approval from their board, you won't close. Help them solve it. Ask: "What would you need to show your stakeholders to make this work?"
6
Never end on a no
"No" is a position, not an answer. Always respond with "what would it take?" or "if we changed X, would that work?" A door-closing no has a key — find it.
7
Negotiating vs. Selling
Selling is one-directional: here is my offer, take it or leave it. Negotiating is bidirectional: I want to understand your needs well enough that my proposal solves your problem in a way that also works for me. Listen more than you talk.
5 Strategies for Reticent Counterparts
Build Trust First
Share non-critical information to model openness. Trust is reciprocal — people disclose when they feel safe, not when interrogated.
Ask Questions
Especially when surprised or skeptical. "Help me understand why that matters" signals genuine curiosity, not attack.
Give Info First
Disclosure triggers reciprocity. Share something of modest value to prompt them to share in return.
Negotiate Simultaneously
Table multiple issues at once rather than sequentially. Watching their reactions reveals priorities without them knowing they're revealing them.
Multiple Simultaneous Offers
Make two or three package offers of equal value to you. Their preference reveals which issues they value most — information you can use to logroll.
Strategies of Influence — NG Ch. 7
Based on Cialdini's influence principles applied to negotiation contexts.
Reciprocity
People feel obligated to return favors. Give before asking — share information, make a concession, do something helpful. The obligation created is often larger than the favor given.
Commitment & Consistency
Once someone commits — especially publicly or in writing — they want to stay consistent. Get small agreements early that set the direction. A "yes" on principles makes a "yes" on price easier.
Social Proof
People look to others for guidance. Use precedent: "Other companies in this situation have agreed to X." Objective market data is a form of social proof — it says "this is what the world agrees is fair."
Liking
People say yes more to people they like. Build genuine rapport before substance. Find real similarities. Negotiators who skip small talk often leave value on the table — the relationship lubricates the deal.
Authority
People defer to expertise. Establish credibility early. External data, third-party valuations, and expert opinions all function as authority — they shift the burden of proof to those who reject them.
Scarcity
People want what's rare. Deadlines, limited availability, and competing offers create urgency. Use carefully and honestly — false scarcity damages trust permanently.
Defending Against Manipulation
- Name the tactic: "It feels like there's an artificial deadline here — is that real?" Naming it defuses it.
- Separate the relationship from the pressure: "I value working with you. I also need to evaluate this independently."
- Take a break: urgency tactics lose power when you slow down deliberately
- Ask "why now?" — artificial scarcity collapses under this question
Blind Spots in Negotiation — NG Ch. 8
The Core Problem
Blind spots are errors you don't know you're making. Unlike biases (which you can correct for if you catch them), blind spots require deliberate structures to surface — because you can't see what you can't see.
Perspective Failure
Failing to genuinely model how the other side sees the situation. You know your interests but project them onto them.
Do a role reversal: argue their case as forcefully as you can before you sit down.
Motivated Reasoning
Selectively processing information to confirm what you already believe. Their concession is a trick; their flexibility is weakness.
Ask: what would I need to see to change my mind? If the answer is "nothing," that's a flag.
Agency Blind Spots
When negotiating for others (your company, your team), your interests as agent may diverge from theirs. You may settle for less to avoid conflict, or push harder to look tough.
Check your instructions against your actions. Would your principal approve this move?
Cultural Blind Spots
Applying your culture's negotiation norms in a context where they don't apply. What signals respect, seriousness, or flexibility varies dramatically across cultures.
Research norms explicitly before cross-cultural negotiations. Don't assume silence = agreement.
Six Habits of Merely Effective Negotiators
James K. Sebenius · Harvard Business Review · April 2001
The Central Frame
Your negotiation problem is to get the other side to say yes — for their own reasons. The six habits below are the most common ways experienced negotiators undermine this. Each one keeps you focused on your own problem instead of solving theirs.
Mistake 1
Neglecting the Other Side's Problem
Agreement requires that the other side chooses your deal over their best alternative. They will only do that if your deal solves their problem — not just yours. Most negotiators are obsessed with their own interests and barely model the other side's situation.
A tech company developed a gas leak detector 100× more accurate than existing tech. They couldn't sell it. Why? EPA regulations permitted leaks up to 1,500 gallons — their device detected 8-ounce leaks. Customers feared regulatory exposure. The company never asked what problem the customer needed solved.
Before every negotiation: write out the deal from their perspective. What problem do they have? What does an ideal outcome look like for them? What constraints are they working within? Then solve for that.
Mistake 2
Letting Price Bulldoze Other Interests
"Reverse Midas" negotiators: touch gold, turn it to price. Price is important but rarely the only thing at stake. Deals involve four nonprice dimensions that often matter more.
The Four Nonprice Interests
- Relationship — crucial in longer-term deals; Latin America, Southeast Asia: relationship often trumps transaction
- Social Contract — the "spirit of the deal"; goodwill and shared expectations about how unforeseen events will be handled
- Process — was it personal, respectful, fair? Tip O'Neill lost a constituent's vote because he never asked for it.
- Interests of all players — internal stakeholders, board members, constituents who can torpedo the deal if ignored
Glaxo / SmithKline Example
Merger announced: $20B market cap gained instantly. Then internal disagreements surfaced about who would run the combined company. The $20B evaporated. The aggregate economics were fine — but the interests of internal players were ignored until they sank the deal.
Keep all potentially influential players on your radar, not just the people across the table.
Treat price as one variable in a multi-dimensional deal. Probe for relationship, social contract, and process preferences early — before price becomes the battlefield.
Mistake 3
Letting Positions Drive Out Interests
Positions are each party's stated stand on the issues. Interests are the underlying needs. Positional bargaining locks in on stated demands and misses the interests underneath — which are almost always compatible even when positions seem irreconcilable.
Environmentalists and farmers opposed a dam. Irreconcilable positions. Compatible interests: farmers wanted water flow; environmentalists wanted wildlife habitat; power company wanted a greener image. A smaller dam with flow guarantees and habitat conservation served all three. No positional negotiation would have found this.
Stop arguing positions. Ask: "What does this position reveal about what they actually need?" Then solve for needs, not positions.
Mistake 4
Searching Too Hard for Common Ground
Counterintuitive. Common interests are useful. But the biggest value creation opportunities come from differences in priorities, timelines, and risk tolerance — not similarities. Searching for common ground leads negotiators to overlook the differences that make trades possible.
Egypt and Israel negotiating over the Sinai. Incompatible positions on where to draw the border. But different underlying interests: Israel cared about security; Egypt cared about sovereignty. Solution: demilitarized zone under Egyptian flag. Neither party's position "won" — both parties' interests were fully satisfied.
Map differences explicitly. Ask: "On which issues do we have different priorities?" Those differences are your logrolling currency.
Mistake 5
Neglecting BATNA
Most negotiators know their own BATNA (sort of). Few truly assess the other side's BATNA — which is often the more important number. Your leverage is the gap between their BATNA and your offer, not between your BATNA and their offer.
Theodore Roosevelt's campaign had 3 million pamphlets with an unauthorized photo by Moffett Studios. Using it: up to $3M in copyright liability. Not using it: lose election momentum. Perkins (campaign manager) contacted Moffett — financially hard up, photographically obscure, facing a $3M liability claim for his own photo. Moffett's BATNA was catastrophic. Perkins paid $250. The campaign workers would have paid thousands, having focused only on their own weak position.
Before every negotiation: what is their real BATNA? What do they actually do if this deal falls apart? Map it honestly — your leverage depends on it.
Mistake 6
Failing to Correct for Skewed Vision
Two systematic biases distort how you see the negotiation — and you can't feel them operating.
Role Bias
Overcommitting to your own point of view and interpreting information in self-serving ways. A plaintiff believes he has a 70% chance of winning; the defense puts it at 50%. Both are looking at the same case. Result: unlikely to settle out of court.
Partisan Perceptions
Painting your side with positive qualities and vilifying the other side. These perceptions become self-fulfilling: if you approach them as adversaries, they become adversaries. Role-plays of the opposition's interests counteract this.
Do a formal role reversal before every significant negotiation. Have someone argue the other side's case as compellingly as possible. If you can't argue their case, you don't understand the negotiation yet.
TKI Conflict Mode Instrument
Thomas-Kilmann Conflict Mode Instrument · Session 2 · Your profile distributed by Prof. Dubey
What TKI Measures
The TKI maps your default conflict response on two axes: Assertiveness (how much you try to satisfy your own concerns) and Cooperativeness (how much you try to satisfy the other party's concerns). Neither dimension is inherently good or bad — each mode has contexts where it excels and contexts where it destroys value.
The Five Conflict Modes
Competing
High assertive · Low cooperative. Win-lose orientation. Pursue your goals at the expense of the other party. Firm, directive, uses power.
Zero-sum situations; emergencies requiring fast decisions; protecting legitimate interests when others exploit cooperation.
Collaborating
High assertive · High cooperative. Win-win orientation. Dig into both parties' concerns to find solutions that fully satisfy both. Time-intensive.
Issues are too important to compromise; you need buy-in from both sides; relationship is long-term; learning each other's perspective has value.
Compromising
Medium assertive · Medium cooperative. Split the difference. Partially satisfies both parties. Quick but often Pareto-inefficient.
Goals are moderately important; time pressure; temporary solution needed; collaborating has failed; parties are of equal power.
Avoiding
Low assertive · Low cooperative. Sidestep the issue. Neither pursue your concerns nor the other party's. Diplomatic, delays conflict.
Issue is trivial; cooling-off period needed; gathering information is more important than deciding; others can resolve it more effectively.
Accommodating
Low assertive · High cooperative. Selfless; yield to the other party's concerns. Preserves relationship at cost of outcome.
You're wrong; issue matters more to them than you; preserving goodwill is worth more than the outcome; building credit for future negotiations.
How to Read the Modes in Your Counterpart
| What you observe | Likely mode | Your response |
|---|---|---|
| Hard anchors, refusal to explore interests, "take it or leave it" | Competing | Don't match aggression. Ask questions. Map their interests. Show them the ZOPA. |
| Open questions, interest in your needs, proposes multiple options | Collaborating | Reciprocate fully. Share interests. Make multiple simultaneous offers. |
| "Let's split the difference," rushing to a midpoint | Compromising | Slow down. Explore whether logrolling can beat the midpoint for both parties. |
| Deflecting, changing subject, "let's revisit this later" | Avoiding | Name the issue explicitly. Create a safe space to address it directly. |
| Quick agreement, "that works for me," excessive agreeableness | Accommodating | Be careful — you may be getting too good a deal to sustain. Check if they're building credit. |
Mode Overuse — When Each Mode Backfires
Overusing Competing
Winning battles while losing relationships. Creates adversaries. Misses integrative opportunities. Closes doors that stay closed.
Overusing Collaborating
Wastes time in purely distributive situations. Others may exploit your openness. Signals weakness to competitive counterparts.
Overusing Compromising
Leaves value on the table in integrative situations. Trains counterparts to anchor extreme (knowing you'll split). Becomes a reflex, not a strategy.
Overusing Avoiding
Issues fester. Lose ground through inaction. Others perceive lack of commitment or interest.
Overusing Accommodating
Others stop taking your interests seriously. Builds resentment. Poor outcomes over time. May signal weakness and invite exploitation.
Your TKI Profile
Profile Pending
Populate with your actual TKI results when distributed by Prof. Dubey. For now, review the inferred strengths and development areas in your negotiator profile.
Inferred Dominant Modes (Pre-TKI)
Based on background and communication style: likely skews Competing and Collaborating — direct, assertive, comfortable with conflict, experienced in B2B negotiations.
Validate against actual results. Overconfidence in ZOPA estimates and under-weighting of face-saving dynamics are common blind spots for this profile.
Development Areas to Watch
- Accommodating: using it strategically (not instinctively) to build credit
- Avoiding: knowing when not to engage is as important as knowing when to push
- Compromising: resisting the instinct to split when logrolling would create more value
TKI & Negotiation Type Matching
| Negotiation Type | Ideal Mode | Mode to Avoid |
|---|---|---|
| One-shot, single-issue price deal | Competing | Accommodating (leaves money behind) |
| Multi-issue, long-term relationship | Collaborating | Competing (destroys value and trust) |
| Time-pressured, equal power | Compromising | Avoiding (creates impasse) |
| Intra-org / hierarchical dispute | Accommodating or Avoiding | Competing (damages relationships with people you still need) |
| Multi-party coalition negotiation | Collaborating + strategic Competing | Compromising (lowest common denominator) |
D-Loyal
In-class simulation · Session 2 · Your role: Chief Strategic Innovations Officer, Regal Fashion
The Setup
You are the Chief Strategic Innovations Officer at Regal Fashion — a 100-year-old luxury fashion brand, best-known in Europe and Asia. Your mandate from the CEO: digitize the business. Primary objective: revamp the customer loyalty program using ML and data analytics. You've identified D-Loyal as the top acquisition target. Today you meet their team to negotiate terms.
Key Facts
| Factor | Detail |
|---|---|
| Your Role | Chief Strategic Innovations Officer — CEO-backed mandate to build digital & innovation capability |
| Problem | Existing loyalty program outdated; large customer base under-exploited; need ML/data analytics capability now |
| Why D-Loyal | Most mature tech startup of 3 candidates; strong founder track record; 15K+ LinkedIn following; positioned exclusively with luxury brands |
| Valuation | Internal team valued D-Loyal at €1,200,000 — also the CEO's authorized maximum |
| IT Consulting Cost | Additional integration cost on top of acquisition price — unquantified but significant; use this to justify a lower acquisition price |
| Session 2 Lens | This is an interest-based, multi-issue deal — not just a price negotiation. The goal is to find a package that serves both sides' underlying interests. |
BATNA Analysis
Your BATNAs (Ranked)
- Hire Accenture/Tata to build fully custom: €2,500,000 over 1–2 years. Differentiated but slow and expensive.
- Buy branded solution with light customization: €1,600,000 total. Faster but team is not enthusiastic — poor fit for Regal's upscale image.
Best BATNA €1,600,000 (branded solution) — but quality-adjusted, €2.5M custom may be preferred by the team.
Any D-Loyal acquisition below €1.6M beats your BATNA financially. But you're buying capability, not just code.
D-Loyal's Situation
- Has been prospecting buyers for months — time pressure on their side
- Positioned exclusively with luxury brands — Regal is the ideal acquirer
- D-Loyal's BATNA: sell to a mass-market buyer — against their positioning and brand identity
- Experts suggest Regal may be the only acquirer in the luxury category
- Founders likely want: prestige association, role post-acquisition, IP credit, cultural fit
Their weak BATNA = your leverage
Estimated ZOPA — D-Loyal (acquisition price)
D-Loyal RV (est.) ~€400K
Your ceiling €1.2M
ZOPA
€200K€500K€800K€1.1M€1.4M
Your Anchor
€700–800K
First offer
D-Loyal Likely Ask
€1.2M+
Their opening bid
Target Settlement
€1,000–1,100K
Walk-away at €1.2M
Accommodating (76%) Risk of jumping to €1.0M+ early to signal goodwill. The first offer must be €700–800K with justification: integration risk, IT consulting cost, market comparables for early-stage SaaS. Hold it through the first reaction.
Competing (10%) Risk of collapsing to a price deal and ignoring the multi-issue structure. D-Loyal cares about brand association, founder role, and IP credit — these are non-cash concessions that reduce the pressure on price. Use them.
Pre-commitment "I will not reveal the €1.2M ceiling. Every price concession is conditional on a non-price concession (earnout structure, founder role, co-branding). I present a package — not a number."
The Interest-Based Lens (Session 2 Upgrade)
This Is a Multi-Issue Deal
Treating D-Loyal as a pure price negotiation misses the integrative opportunity. D-Loyal's founders care about far more than the acquisition price — and Regal has non-cash currency to offer. Explore these before price becomes the battleground.
D-Loyal's Likely Interests (Beyond Price)
- Brand association — being acquired by Regal is a story they can tell for life. Offer this explicitly.
- Founder involvement — do they want to stay and lead the new digital unit? Or exit cleanly?
- IP and credit — will the technology be acknowledged as D-Loyal's? Or absorbed anonymously?
- Culture fit — luxury brand culture vs. startup culture — what are their expectations post-close?
- Timeline — do they need a quick close for personal reasons? Or prefer a longer earn-out structure?
Regal's Non-Cash Currency
- Regal's brand name and luxury positioning — an asset D-Loyal cannot buy
- Guaranteed leadership role for founders in the new Digital Innovation unit
- Co-branded technology launch (D-Loyal attribution in press releases)
- Earnout structure tied to loyalty program performance — lets founders upside on success
- Exclusivity agreements — D-Loyal's IP stays within luxury sector
- Integration support — Regal funds the IT consulting cost, removing D-Loyal's integration burden
Strategy
Key Tension
Your ceiling is €1.2M (CEO-authorized). Your best BATNA is €1.6M (branded solution). Any acquisition under €1.6M is technically better than your BATNA. But don't lead with your ceiling — anchor well below it and use non-price terms to bridge the gap.
1
Anchor low with justification
Open at €700–800K. Justify: integration risk, unquantified IT consulting cost, market precedents for early-stage SaaS acquisitions. Never reveal your €1.2M ceiling or your €1.6M BATNA.
2
Lead with investigative questions
Before price, understand their interests. What does success look like post-acquisition? Are the founders planning to stay? What's their timeline? This intelligence shapes your package offer.
3
Make a package offer, not just a price offer
€800K acquisition + €200K earnout + founder leadership role + co-branding rights + Regal-funded integration support. The total value exceeds the number — and most of Regal's "cost" is in non-cash items D-Loyal values highly.
4
Use Regal's prestige as currency
D-Loyal wants to be acquired by a luxury brand. Make that part of the deal explicitly — not just a side benefit. "We're offering you the Regal platform. That's worth something to you — and we expect it to factor into your pricing."
Investigative Questions to Ask
- What does success look like for you and your team 18 months after close?
- Are you planning to stay involved post-acquisition — and if so, in what capacity?
- What's driving your timeline for a transaction?
- Have you had other acquisition conversations, and what made those not work out?
- What parts of the integration process concern you most?
- How important is the brand you'd be acquired by to your founders and team?
Concession Plan
€700–800K
→
Opening anchor + full package. Justify on integration risk and market comparables.
€900–1,000K
→
First move — only after they move. Add earnout to bridge gap: €800K cash + €200K performance-based.
€1,000–1,100K
→
Landing zone. Hold here. Add non-cash terms (leadership role, co-branding) to close the last gap.
€1,200K
→
Your ceiling. Do not go here. Any deal at €1.2M is barely better than your BATNA and leaves no buffer for integration cost overruns.
Bias Watch — This Simulation
Fixed-Pie Risk
This looks like a price deal. It isn't. There are at least 6 non-price issues on the table. Identify them before you sit down.
Positional Drift
Don't let D-Loyal's opening anchor pull you into a price debate. Keep returning to the package — interests, not positions.
Overconfidence
You don't know their minimum price or their actual BATNA quality. Stay curious — the investigative questions are more valuable than any tactic.
Letting Price Bulldoze
Session 2 mistake: get so locked on €1.2M ceiling that you ignore the non-cash deal structure that could get both sides what they want.
MedLee
Outside-class simulation · Complete before Session 3 · Role details distributed by Prof. Dubey
The Setup
You are Pat Armstrong, Director of International Strategic Market Research at MedDevice, Inc. CEO Ralph Thompson has tapped you — in your boss's absence — to negotiate the preliminary terms of the MedLee joint venture with Lee Medical Supply (Thailand). The JV will be called MedLee, Ltd.: a Bangkok-based sales office for MedDevice's CAT scanners, MRIs, and pacemakers across Southeast Asia. MedDevice contributes 60% of capital; Lee Medical 40%.
Key Issues & MedDevice's Positions
| Issue | MedDevice Position | Rationale |
|---|---|---|
| Board Control | 3 of 5 seats; majority-rules voting | Proportional to 60% capital contribution |
| GM Appointment | MedDevice appoints GM | Quality control + product expertise |
| Staffing | Lee appoints local Manager + 3 of 4 sales reps + 2 secretaries | Local knowledge; MedDevice appoints 1 sales rep + GM's assistant |
| Profit Reinvestment | No profit withdrawal for 5 years | Long-term market investment; MedDevice financially stable |
| Dispute Resolution | Escalate to Thompson + Lee; then California courts or international arbitration | MedDevice prefers home-court jurisdiction |
| Timing | Preliminary proposal in 3 weeks; Board capital request in 8 weeks | Thompson's fiscal year deadline |
Issue Map & Logrolling Opportunities
This Is Not a Price Negotiation
MedLee has no monetary ZOPA — it's a multi-issue governance negotiation. The six issues have different priority weights for each side. Those differences are the engine for value creation through logrolling.
| Issue | MedDevice Priority | Lee Priority (est.) | Logrolling Opportunity |
|---|---|---|---|
| Board Control (3/5 seats) | HIGH | HIGH | Non-tradeable — proportional to 60% capital. State at outset; frame as structural, not political. |
| GM Appointment | HIGH | MEDIUM | Trade: Lee gets Manager appointment + full staffing control in exchange for accepting the MedDevice GM. |
| Lee's Son Role (staffing) | MEDIUM | HIGH | High-value give for Lee, low-cost for MedDevice. Trade against profit timeline or dispute resolution. |
| Profit Reinvestment (5 yrs) | HIGH | HIGH conflict | Both sides care — but differently. Concede 1 year (5→4) only after Board seats + GM are locked in writing. |
| Dispute Resolution | MEDIUM | MEDIUM | Thompson wants California courts; Lee will prefer neutral arbitration. Trade for profit timeline — low cost to MedDevice. |
| Timing (8 weeks) | HIGH | LOW | Thompson's fiscal deadline is real. Frame as mutual benefit; use to create momentum toward agreement. |
Investigative Questions — Pat Armstrong
- What does success look like for Lee Medical two years into this JV — revenue source, long-term platform, or something else?
- What role do you envision for your son in MedLee's operations, and what geography or function would make him most effective?
- How do you currently handle disagreements with your existing distributorship partners — what mechanisms have worked?
- What concerns you most about a foreign company holding majority board control — is it process, speed of decisions, or cultural fit?
- How much of MedLee's culture and management style do you want to resemble Lee Medical Supply vs. a MedDevice office?
Bias Check — MedLee-Specific
Cultural Blind Spot
Lee Medical is 50% family employees — for An Lee, family appointment is not nepotism, it's trust. Anti-nepotism language will land as a direct attack on his core values.
Lead with the son's role. Frame MedDevice's anti-nepotism policy as applying only to future GM-level positions — not to the founding staffing of MedLee.
Stand-In Risk
You are not the intended negotiator. Your boss returns in weeks and may override any commitment you make. This creates pressure to over-commit to prove competence.
Every agreement is framed as "preliminary subject to Thompson and Lee review." This is factually true — and a legitimate tactical pause when needed.
Common Ground Trap
Both sides want the JV to succeed. That shared goal makes it tempting to search for common values rather than exploiting priority differences across the six issues.
Map the differences deliberately. Lee's lower interest in dispute resolution = a cheap concession. MedDevice's urgency on timing = Lee's leverage. Trade these explicitly.
Fixed-Pie Risk
This can look like a governance standoff (who controls what percentage of what). It isn't — each issue has different weights for each party, making all six tradeable simultaneously.
Don't negotiate issue by issue. Table a complete package so priority differences become visible and logrolling becomes possible.
Package Offer Design
Lead With a Package — Not a Series of Positions
Issue-by-issue negotiation hardens positions. A simultaneous package reveals priority differences and enables trades. Present the full proposal, then listen: where they push back hardest reveals where their real interest lives.
MedDevice Receives
- Board: 3 of 5 seats, majority-rules — framed as proportional to 60% capital, not as control
- GM: MedDevice-appointed — essential for product quality and technical oversight
- Profit: No withdrawal for 5 years — MedDevice is financially stable; reinvestment maximizes long-term return for both
- Timing: Preliminary proposal in 3 weeks, Board capital request in 8 weeks
Lee Receives
- Staffing: Lee appoints Manager + 3 of 4 sales reps (including son as named Thailand sales rep) + 2 secretaries
- Dispute resolution: International arbitration preferred over California courts — low cost to MedDevice, high value to Lee
- Role framing: Manager described as responsible for "client relationships and local knowledge" — explicit respect for Lee's strength
Concession Sequence
Opening
→
Present the full package. Don't negotiate piece-by-piece. Rationale for each element is proportional capital, product expertise, and local knowledge — not power politics.
First concession
→
If they push on profit timeline: move 5→4 years — only after Board seats and GM are confirmed in writing. Label it: "I can move here because we've resolved the structural questions."
Walk-away signal
→
Any proposal reducing MedDevice's Board majority (below 3/5) or removing GM appointment requires Thompson. Use "I need to take this back to the CEO" — this is true, not a bluff.
BATNA & Power Analysis
Your Side (MedDevice / Pat Armstrong)
BATNA Find a different SE Asian JV partner, or delay market entry. Neither is attractive — Thompson has already committed publicly to MedLee.
Mandate Thompson's memo is specific. You cannot deviate from Board seats (3/5), GM appointment, or 5-year profit lock without going back to Thompson — and he's unavailable. Use "I need to check with the CEO" as a tactical pause.
Hidden Risk You were not the intended negotiator. Your boss may return and override any commitments you make. Scope your commitments carefully — frame everything as "preliminary proposal" not final agreement.
Their Side (Lee Medical)
Key Interest Lee wants the JV for access to MedDevice's product line in SE Asia. Without MedDevice, Lee has no product to distribute.
Pain Point Thompson hinted Lee wants his son involved. This is leverage: offering the son a named role (in staffing) gives you something to trade on Board seats or profit timeline.
BATNA Find another medical device company to partner with. Weaker than MedDevice — SE Asia distribution for CAT scanners/pacemakers requires a strong brand.
Estimated ZOPA — MedLee (profit reinvestment period, years)
Lee Medical floor (est.) 2 yrs
Your anchor 5 yrs
ZOPA
1 yr2 yr3 yr4 yr5 yr
Your Position
5 yrs
No profit withdrawal
Lee's Likely Ask
1–2 yrs
They want earlier returns
Target
3–4 yrs
Walk-away: below 3 yrs
Accommodating (76%) Risk of conceding profit timeline early to build goodwill. This is a CEO mandate — you cannot move it unilaterally. Any movement on profit timeline requires reciprocity (Board seats held, GM confirmed). Name this explicitly.
Competing (10%) Risk of soft-pedaling MedDevice's Board control (3/5 seats) and GM appointment to seem collaborative. These are structural requirements from Thompson's memo. State them clearly at the outset — not after relationship-building.
Pre-commitment "Board seats, GM, and profit timeline are linked. I will not agree to any single issue independently. The entire package must be reviewed by Thompson before I commit."
Journal — Session 2
Capture material for your reflective journal during and after class
Prof's Rule
Use theory to analyze, don't lecture about theory. Show the reader you can think with the frameworks — not that you read them.
What to Capture During D-Loyal
During the Simulation
- Did the conversation stay on price, or did you expand to other issues?
- What investigative questions did you ask — and which ones unlocked new information?
- What did you learn about their interests that you didn't expect?
- Did you make a package offer or a single-issue offer?
- Where did you feel the pull toward positional bargaining — and did you resist it?
- What was the final deal structure — price + any non-price terms?
After the Debrief
- What was the range of outcomes across the class — on price AND on non-price terms?
- Which pairs created the most value? What did they do differently?
- Did any pair find a logrolling opportunity others missed?
- Which Six Habits mistakes showed up in your negotiation?
- What would you do differently with the session 2 frameworks?
Strong Theory Connections for Session 2
| Concept | Where It Might Appear |
|---|---|
| Logrolling (Ch. 2) | Did you find and exploit a trade — price vs. earnout, cash vs. prestige, role vs. timeline? |
| Adding Issues | Did you expand the negotiation beyond acquisition price? What issues did you introduce? |
| Contingency Contracts | Did you use an earnout structure? What performance trigger did you agree on? |
| Investigative Negotiation (Ch. 3) | Which of the 7 principles did you apply? Which did you forget in the heat of negotiation? |
| Neglecting the other side's problem (Sebenius) | Did you understand D-Loyal's interests before anchoring, or did you lead with price? |
| Letting price bulldoze (Sebenius) | Did relationship, prestige, and process factor into the deal — or did it collapse to a number? |
| TKI Mode | What conflict mode did you operate from? What mode was your counterpart using? Did you adapt? |
| Fixed-Pie Bias | Did the negotiation feel zero-sum? How did you or they break that frame? |
Real-World Connection Prompts
The Stutern acqui-hire by Jobberman is the richest real-world material available for this session. Consider:
- Was that negotiation positional or interest-based — and what happened when it drifted toward positional?
- What non-price issues mattered to the founders (team retention, IP, culture, timeline)?
- Which of Sebenius's six habits showed up in that deal — on your side or theirs?
- What would the investigative negotiation principles have changed if applied before the first meeting?
Real-world application with personal stakes = the kind of journal entry that hits 60% on insight + 20% on creativity.
Journal Grading (Remind Yourself)
| Criteria | Weight | What It Means |
|---|---|---|
| Insight, reflection, analysis | 60% | Did you understand why things happened? Did you turn experience into learning? |
| Creativity | 20% | Surprising connections, unexpected angles, non-obvious analogies |
| Writing quality | 20% | Clear, concise, no padding, no MBA-speak |
Avoid These Journal Mistakes
Describing what happened without analyzing why · Listing theory definitions without applying them · Generic insights that could apply to any negotiation · No personal implication or "what I'd do differently" · Theory not integrated with specific moments from the simulation