In the pharma industry the one business dynamic we can all be confident in over the coming years is change. Political change, market disrupters such as the way we utilise technology and the innovation of new market solutions. Operating in a forward-thinking industry requires not only strong business acumen but the foresight to recognise the critical changes ahead, the enablers which are often business partnerships, relationships or contracts and how as a business leader you can best prepare your teams for such inevitabilities.
If we accept that our job is to realise strategies which will nearly always require change you may start to understand my case for presenting this obvious fact. The future success of your business will be as much to do with the agreements you make, renegotiate and the partnerships you invest in as it will have to do with your product pipeline, infrastructure growth or the external political or tax changes which you will need to adapt to. Your team’s negotiation capability will prove pivotal to how you navigate the opportunities that you are actively instigating.
If your pharma business is involved in funding new start-ups, building relationships which support your digital health strategy, developing big data solutions with technology partners, involved in the acquisition of complementary operators, R&D into new ways of working or solutions or perhaps all of the above then the agreements you and your team will be responsible for will play a significant part in the success that follows. Without the appropriate skills, planning and capability you may get a great price but a lousy deal, a great agreement which just doesn’t perform, more risk than you had anticipated or a lack of ROI clarity on the effort to get the deal across the line. Either way whatever your strategy, if it involves change it will depend on great negotiators. As a skill along with relationship building it remains the key performance interface which will differentiate success from failure.
Why bother negotiating?
There is no other skill set that can have such an immediate and measurable level of impact on your bottom line than negotiation. A small adjustment to the payment terms, the specification, the volume threshold or even the delivery date will all impact on the value or profitability of the agreement.
Understanding the effects of these moves, and the values they represent to you from the outset, is why planning is fundamental to effective negotiation. The skill in building enhanced agreements through trading off against different interests, values and priorities is negotiation. In the business context it is known as the skill of profit maximisation.
So, effective negotiation provides the opportunity to build or dissolve value - but what does value really mean? It can be too easy and is too often a focus on price. The question of ‘how much?’ is one, transparent, measurable issue and, because of this, is also the most contentious issue in the majority of negotiations.
Yet price is but one variable you can negotiate over. It is possible to get a great price and feel as though you have won and yet get a very poor deal at the same time.
For example, if the item did not arrive on time, it fell apart after being used twice, or it had no flexibility, and so on. (Ever heard the saying ‘you get what you pay for’?)
In negotiation, your ego and your competitiveness might fuel the need to ‘win’, especially when you allow a sense of competition to become involved. However, negotiating agreements is not about competing or winning; it is about securing the best value. This means understanding:
As a Complete Skilled Negotiator your focus needs to be on what is important to the other party: his interests, priorities, options (if any), his deadlines and his pressure points. Try to see the deal as he sees it. If you set out to understand him and his motivations, you may be able to use these insights to your advantage and, ultimately, increase the value of the deal for yourself. Being driven to beat the other party will distract you from your main objective, which is usually to maximise value from the agreement.
Proactivity and control
Your first task is to be proactive - to take control of the way you negotiate. To map out the issues, formulate an agenda which helps you to negotiate agreement in a way that will serve your objectives. Try to be honest with yourself when deciding or agreeing on what these are. Remember, price is only one element of the deal and winning on price may not result in your attracting the best deal. You may need cooperation to the point where the other party not only agrees to go ahead but is also prepared to honor his commitment. There is absolutely no place for your ego in your negotiations. The single thing that matters is the total value over the lifetime of the agreement.
Comfortable with being uncomfortable
The person on the other side of the negotiating table may well take up a tough position, which could make you feel challenged or even competitive. Becoming more comfortable with being uncomfortable in situations like this, where you are also likely to experience pressure and tension is one of the most important prerequisites of a skilled negotiator. Without this, our ability to think and perform can become compromised. So you need to recognise that, by negotiating, you are involved in a process and the people you negotiate with need time to adjust as part of engaging in this process. Typically this is when:
In business meetings, people can become frustrated, emotional and upset if they feel that you are simply being irrational or unfair with your proposals. Some will even walk away before considering the consequences. For this reason, the more experienced the negotiator you are working with, the less chance you will have of a deadlocked conversation. They are more likely to understand that they are involved in a process and that nothing is agreed until everything is agreed and sometimes the process can be frustrating. In fact, their experience can result in you attracting a better deal than when you negotiate with an untrained negotiator. Many of my clients insist that their suppliers attend the same training in negotiation as they do, as part of ensuring that both parties work towards maximising total value rather than becoming distracted by short-term gains and/or trying to ‘win’.
Steve Gates is founder and director of The Gap Partnership