“Good Morning Michael“: how we possibly negotiate in the year 2025

April 19, 2018

How A.I will change the way we negotiate commercial trade deals, M&A transactions, insurance coverage, and many other business deals.

It is Monday, 10:21 a.m. You are a successful salesperson with 15 years of experience in selling complex products. In nine minutes you’ll be sitting in a conference room again, negotiating with Eric, your counterpart from the purchasing department of your main client. Your company has been supplier for this client for over a decade, and you have also a strong personal relationship with Eric. You know, trust and respect each other. Both of you are hard, but fair bargainers and both of you know the "game“ of the counterpart. The coming meeting is the yearly "big“ negotiation, where you take a look at the product portfolio, you analyze delivery times, number and severeness of past quality issues, it is the negotiation where you discuss next year's cost reductions, price savings and new business for the year to come. There’s a billion volume in that negotiation. And Eric and yourself are aware that, this year again, your personal bonus will be measured against the success of this meeting.

The PA brings you into the conference room. It is smaller than usual. And apparently you are the first one. There’s only the necessary in the room. A table, a chair, a huge flat screen. But wait. There is only one chair. That won’t work for two people. Suddenly the screen turns on and a friendly, bold human face stares at you. "Good morning Michael. My name is Rene. Thanks for being on time, I really appreciate this. How are you today?“ the face on the screen is asking. You don’t know what to answer. It’s probably a joke. After a couple of minutes you pull yourself together and ask "Where is Eric? I was supposed to negotiate the coming year’s business terms with him. Is he running late?“. The face on the screen smiles, while you are still standing. "I can see that you’re surprised. Please take a seat. We’ll talk this through. Eric is still in the company, but he’s now working in the marketing department. I took over his role and I negotiate all agreements with each of our suppliers. So don’t worry, I am the right person to be talking to“, she replies. Or it. Or … what is this? They must be recording this and you’ll be on primetime TV tomorrow on the show "Greatest Fools Ever“. You take a look in the room and there are indeed two cameras that you recognize. One above the screen and one on the ceiling. You still don’t know what to answer.

Suddenly Rene is taking the conversation lead. "So, I studied all your past deals with Eric. And I’ve analyzed the success of each agreement. Based on this experience, I propose the following agenda“, and on the screen a slide appears, showing some bullet points:

  • Savings on price
  • Portfolio structure
  • Quality
  • Production sites
  • Cost reduction
  • Delivery times
  • New business opportunities
  • Penalties agreement

"Are these the points you prepared yourself to talk through with Eric?“, Rene asks. You’re still perplexed and you answer a short "Hum, that’s right“. "Great, then“ continues the machine, "let’s get started. Time is short. Could you tell me your preferences regarding each of the points? What’s most and what’s less important to you?“, she asks.

Wait a moment. I cannot tell her that. If I do so, she’ll take advantage of me and the deal will be bad for me. "No“, you answer. "Why is that, Michael? Don’t you trust me? I was programmed to search for mutual gains, for the best outcome for both of our companies. It is much easier if you tell me your preferences“, Rene is replying. "Yeah, of course you want the best for both of us. That's the greatest joke of the century!“ you think. "Why don’t you tell me your preferences first, huh?“, you ask back. "Okay Michael, if this works better for you, of course. But do you agree to divulge yours after that?" she’s asking you. This is like a game of chicken. But come on, you have 15 years of experience on your back. A machine won’t beat you. Not you! "Sure“, you answer. Rene smiles at you.

"Look Michael, our company is proposing the following: we would prefer an increase in quality by 10%, sourcing your products only from your factory in Danland, and Just-in-Time delivery to reduce our storage costs. Looking at the portfolio, we see that 30% of the products are longtime runners, where a price reduction would probably not be feasible for you, so we would ask for a 2% price reduction on the rest of the portfolio for the next year. In addition to that, we’d like to help you reduce costs by 10% in proposing a supplier change for you. To sweeten the deal, we would guarantee you three new projects next year with a total volume of 35 million. What do you think?“.

Wow, that was surprisingly fast. You even didn’t get a chance to think about each proposal. Was this intended? As if Rene was able to read your mind, she shows her proposal on screen. "Maybe it was too fast for you, so here are our key proposals again“, she adds. You take a minute to look over the bullet points. You have to admit, it sounds fair. You check your papers. And yes, it is indeed a fair proposal. A couple of minutes of silence pass by. "Sorry, but that’s no reasonable deal for us“, you reply. Let’s see how far you can squeeze the lemon. "Why is that so, Michael? Which proposal in particular do you not agree with?“ she replies, with a surprised look. "Well, first we don’t have the capacity of sourcing everything from our plant in Danland. Then, our quality is just fine, I don’t see the point in an increase of quality of 10%. Also the 2% … Look, that’s far too much. We don’t even have that kind of deal with our biggest client. We never do that. And lastly, I don’t understand why you want us to switch our own supplier“, you reply.

Yes, you made your point very clear. Now she’ll have to make some concessions not to lose the deal. Let’s see what she’s got.

"Well Michael, first of all I want to thank you for sharing your concerns with me. I think that’s an important step towards establishing a trustful relationship between us. Nevertheless, I need to make sure that I understood your points right. You say that your factory in Danland wouldn’t have the capacity for the entire production. This kind of wonders me. If I take a look at the performance KPIs of the last year, you must be running at a capacity utilization rate of only 40%. I have trouble understanding your statement. Could you help me clarify that?“, she asks, showing a graph of Danland’s capacity levels for the last 10 years.

"Hum, hum, but where do you have the data from?“ you ask. Knowing that she’s actually right. But how could she know.

"Every year you produce a capacity report and publish it online, Michael. It is accessible to all. I found the data on the internet and compiled them. Are the figures not correct?“, Rene replies.

"No no, if it’s official data, it has to be right. We double-check our publications. I had other figures in mind“, you reply. And you have the strange feeling that she’s pushing you into a defensive position.

Rene doesn’t comment on your answer. Instead she’s moving forward. "You also mentioned that your quality level would be fine. Well, in sum that’s not wrong. But if you take a look at your top three products over the last 12 months, you can see that we had on average 4 quality incidents per month. We agreed on maximum 1 per month. We know that you had a hard time with one of your suppliers, don’t worry. But nevertheless, a request of 10% quality increase is more than fair from our side. Don’t you think?“.

I agreed with Eric on the numbers of incidents, not with a machine - you’re thinking. With a human! He would have understood you. And why does she knows about the issues with your supplier, you wonder. "There was no incident. I don’t know exactly what you mean“, you reply to her.

"I saw an article on the internet from February this year, saying that you had severe issues with a production machine type you bought from Colimbia, resulting in a shortfall in production“, she replies.

"Oh yeah, that. I remember. That was nothing. Nothing to concern you. Production is doing fine“ you say, even though you know that’s not true.

"Michael, one last question. You said that you never agree to 2% savings. But if I am not wrong, you already agreed on a reduction of even 3% with us! It was 8 years ago. Maybe it wasn’t you in person, but the contracts and documents back that up. Do you want me to show you the agreement I’ve found?“, Rene asks.

"No, there’s no need. If you say so. It was before I started working for this company“ you reply. You should have listened to your guts. There is no chance of winning against an intelligent machine. She trapped you. The deal she proposed is good. And now you realize that you will have no chance in getting an ounce more. That’s disappointing and unfair. Playing the "game“ with Eric was so much more fun.

"Michael“, the machine stares at you with a slight smile on her artificial face, "do we have an agreement? Do you see that my proposal is fair for both of us?“, she’s asking.

"Yeah, kinda“, you answer without hiding your disappointment. "What is wrong Michael? Your tone and your heartbeat tell me that you’re not feeling well. Can I do something to comfort you?“. She’s signaling interest in you. And she’s so good, that for a moment you forgot that you’re talking to a machine. "No, I’m fine. Let’s do that“, you answer. "Okay Michael, give me some seconds. I’ll draft the agreement. Here you are“. A written agreement appears on the screen. "Please read it through carefully“, Rene says. And you do it. And yes, everything’s inside. She just did it in 30 seconds. "Please sign it using the tablet in front of you, Michael. George, the head of our purchasing department will receive a copy. He’ll check the agreement and will confirm it to you in 3 hours“, Rene continues talking. "I will also send you a copy of the video footage of our conversation for your own records, if you’d like“. "No thanks, no need for that“ you answer. You just want this to be over. While signing the agreement you think about what kind of story you should tell your colleagues about this strange negotiation. And you are willing to prepare better for next year’s negotiation with this intelligent machine. It has to be a way to beat her. And you’ll pay it back. You’ll win. No chance that she’ll dictate again the terms.

"Michael, it was a pleasure meeting you. I enjoyed our meeting very much. And please send my regards to your wife and kids. I hope you’ll tell them it was a pleasant experience today“, she adds. "What? Wait a moment! What are you saying? How do you know about my wife and kids?“, you ask angrily. "Michael, please excuse me if it was inappropriate. I see that you’re becoming angry. But look, your Facebook profile is full of pictures with your family. I figured out that you’re a reasonable, trustworthy person. My apologies if I was indiscreet“, Rene replies.

You are one step away from losing your temper. "Whatever“, you throw at her while leaving the room. Worst negotiation ever. At least you can tell your boss that you gained 35 million in new projects for next year.

ISMAN & Partner
ISMAN & Partner ist eine Unternehmensberatung, die nationale und internationale Konzerne, mittelständische Betriebe und Start-ups, Organisationen und Institutionen bei komplexen Verhandlungs- und Konfliktlösungsprozessen begleitet. 2015 von Calin-Mihai Isman gegründet, unterstützen die Experten für Negotiation & Mediation Manager und Mitarbeiter aus den Bereichen Sales, Einkauf, M&A, Contracting, HR oder IT.


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