Negotiating in the fourth dimension- A use case for Artificial Intelligence

Negotiating in the Fourth Dimension- A Use Case for Artificial Intelligence

Importance of  negotiations to keep costs under control

Most organizations run internal projects aimed at keeping costs under control and to maintain a cost leadership position vis-a-vis their competitors. These projects could be anchored on a variety of ideas including those based on price negotiations and development of more competitive suppliers. Organizations therefore need, and also seek, a framework or a body of knowledge using which they can impart negotiation skills to their managers. Different frameworks of this knowledge exist that try to provide some kind of a structure within which negotiations with partners could be carried out, to achieve maximum benefit for the enterprise.

A framework of three-dimensional negotiations.

While different thinkers and academicians have created various approaches to the subject, one framework that stands out in its ability to provide effective tools that can be deployed while negotiating deals is one which is called ‘3-D negotiations’. Developed by David A. Lax and James K. Sebenius and published as a book by Harvard Business School Press, it is a must-read for anyone who is likely to be involved in any kind of a commercial bargaining process. While many other frameworks also exist we can use this concept to explore the boundaries of engagement for an organization.

The concept starts with the focus being on ‘win-win versus win-lose ‘face to face process that is carried on at the negotiating table. Called the first dimension of negotiation the objective here is to claim a larger share of the pie or the value on the table as compared to the other party.  Trying to maximize your takeaway to the value of the deal is the objective here. This is a very tactical approach and without the correct skills, it becomes a bargaining session often ignoring long-term implications for the organization and leaves unclaimed money on the table.

The first dimension, however, does provide the tools for making a correct assessment of your walk-away value and the zone of a possible agreement with your customer or supplier. The Second dimension of the concept deals with something called ‘Deal Design’. The objective of deal design is to find ways to maximize the value on the table by going back to the drawing board. The idea is to probe for real interests behind stated positions and try to understand the real value for the negotiators instead of seeing the negotiation as a ‘pure price deal’. The next part of the framework is called the third dimension and it deals with the ‘set-up of the table’. The process is to ensure that the right set of parties are involved in the right sequence to deal with the right issues that deal with the right set of interests. A 3D architect tries to achieve a good set up of the table thereby also getting the maximum benefit from the tactics at the table. The above multi-dimensional approach provides a fairly logical and exhaustive framework for structuring and evaluating the results of the negotiations.

The framework, however, relies on the skills of the individual to pick up the signals during the negotiations especially when trying to probe behind the stated and visible positions for real interests. This key requirement falls under the domain of communication skills. Probing for real skills is like trying to understand what is below the iceberg based on what is visible behavior and stated demand. Improving communication skills even outside the realm of commercial negotiations is an area of interest, and also a concern, for most organizations. Cross-functional collaboration between teams within an organization is as important as collaboration with external strategic partners. Ineffective communication skills can lead to conflicts and breakdown of dialogue. Failure to allow real needs surface implies missing of opportunities to maximize the value for the collaborating partners or negotiating parties. Only when real needs are identified can correct values be assigned to what helps meeting those needs.

Non Violent Communication.

A related approach to effective communication that has developed over the years and which organizations are adopting for enhancing communication between individuals or teams is called ‘Non-Violent Communication’. There are four components to the Nonviolent Communication (NVC) model, as developed by Marshall Rosenberg beginning in the 1960s. Over the years NVC has been applied in organizational and business settings, in parenting, in education and in mediation and conflict resolution among other areas. Rosenberg takes the concept of communication out of its conventional framework dealing with clear sending and receiving of information and introduces the concept of identifying needs and fears of the individual as the key to successful communication.

The concept places importance on “Observations, Feelings, Needs and Requests” as against importance to “Judgement, Thoughts, Strategies and Demands”. In the workplace, NVC aims to develop, through an emotional vocabulary, effective interpersonal skills to improve workplace morale, better teamwork and conflict resolution. The key concept here is that underlying emotional needs are paramount over anything else in any communication and if that is identified the conversation can shift to how the need can be expressed, acknowledged and eventually met. Empathy, both for the self and others, forms a big part of NVC. This key understanding if skilfully incorporated in business settings can greatly enhance the outcome of any discussion. NVC over the years has also developed effective tools of conversation that can be taught to managers through coaching.

A framework for use of Artificial Intelligence in negotiations

Coming back the area of business negotiations, the requirement of the second dimension of the 3D framework, called deal-design, is having the ability to understand what lies below stated or visible positions of the negotiation parties. Understanding of the real need helps in the development of effective strategies instead of getting stuck with discussions on value. Many times the value being discussed is just a manifestation of, or a number being put to, an underlying need. Incorporating the skills of NVC in business negotiations can greatly enhance the value of the deal and ensure that the parties do not let money lying on the table. Organizations have been training their managers on NVC for many years now. It should not be very difficult and measure its effectiveness if the correct research tools are deployed.

If we were to take this discussion one level further, then the next question to be asked is, if in the future it would be possible to teach machines, negotiation skills that involve empathy and capabilities that involve an understanding of human needs and values? There have been many discussions about the use of Artificial Intelligence in negotiations but here the challenge is to teach machines concepts beyond those of price and value and give it the ability to understand the entire canvas incorporating hard data like market intelligence and soft data like human emotions.  Therefore the discussion here is about Artificial Emotional Intelligence and not just Artificial Intelligence.

One piece of the puzzle would involve picking up human signals on the negotiating table. Signals that help the machine gauge the mood or the emotional state of the human based on inputs such as gestures, facial expressions, and tone of voice etc. AI would need to keep on developing emotionally intelligent interfaces. Voice and facial reaction recognition technologies and their databases will help here. The above technologies can surely assist in monitoring, recording and also improve customer experience. But the emotionally intelligent machine alone would not be able to contribute to the negotiating process. It has augmented it with market and price data and the ability to process it in order to be an effective negotiating machine. Even then, these technologies will assist only at a very tactical level. At the negotiating table or what we can call the first dimension of negotiation.

Machines do have an advantage in their ability to churn huge amount of data, which they can use to run predictive analytics on the values, beliefs and emotional needs of the negotiators.  One does not have to strain the mind too much to imagine what the possible sources of such data could be. Combine this knowledge with the financial tools of unlocking value in business deals and a whole new universe of the second dimension of negotiation opens up.

Creating the third dimension of the architecture of a multi-party negotiation should be relatively the easy part for the machine. A simulation algorithm using game theory can possibly solve the problem.

If machines can combine the capabilities it is acquiring in emotional intelligence with a framework for business negotiations and non-violent communication, it would be one quantum leap for the subject.  It can then be said that we have learned to negotiate in ‘The fourth dimension’, that of Artificial Emotional Intelligence.’