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The power of (selectively) showing your cards
Dear Remora - I’m actively negotiating a large deal with a partner and my boss is insisting that I not share any details about our company’s priorities, our unit economics or our product roadmap. “Keep your cards close to your vest,” he keeps telling me. But how can I gain insight into their priorities and create value in the deal with this partner if I’m unable to provide them with insight into our priorities?
Dear Tight-Lipped - great deal-makers always hold their cards close to their vest, right?
The story Dan Rose shared recently on the ‘Invest Like the Best’ podcast helps to answer to your question. Today Dan is chairman of Coatue Ventures but he previously ran Business Development at Amazon and Facebook. His story is from his time at Amazon negotiating with book publishers for the launch of the Amazon Kindle.
Amazon’s lesson from partnering with book publishers
“I cannot overstate how difficult it was to convince book publishers to put real energy into digital books”
Back in 2006, Jeff Bezos tasked Dan Rose with a key piece of the Kindle launch - securing a massive selection of digital books that users could read on the Kindle upon purchase.
After meeting with book publishers, Dan realized he had problems.
To start, book publishers’ entire business model was built on selling physical books. And producing digital books was a new, unfamiliar and costly process.
Also, book publishers had tried to sell digital books before … and failed.
Plus, Bezos wanted to surprise the world with Amazon’s first ever hardware device. So Dan wasn’t allowed to tell publishers the reason behind Amazon’s push for digital books.
Dan took numerous from Seattle to New York to convince book publishers to digitize their books. And each time he heard the same thing: no, we will not digitize our books for you.
Finally, Dan convinced Bezos to let him show the book publishers a prototype of the Kindle.
“[The book publishers] suddenly went “OHHH” now I understand why you’re being so persistent on this.”
By showing book publishers the Kindle they were able to grasp why Amazon cared so much about digital books. This understanding helped them find a path forward together.
Sharing was the unlock
In the end, book publishers still refused to digitize their books for Amazon. But with an understanding of why Amazon was so focused on digital books, the publishers agreed to provide Amazon with the rights to digitize their books.
I went in asking them to publish these books digitally and I came out asking them to give us the rights to publish the books ourselves. And that was a great outcome for them because they didn’t have to do the work themselves. And it was a great outcome for [Amazon] because we couldn’t do it without their permission.
Thanks to Dan’s negotiation, early Kindle users had 100,000 book titles to choose from.
Great negotiators keep digging
Explaining his approach to partnerships, Dan shared that it all comes down to a classic exercise used in negotiations classes. In class students get into groups and must negotiate how to divide up an orange. In most cases students agree to slice the orange into two equal parts.
“But great negotiators are able to get to a solution where it turns out one party is looking for the meat of the orange and the other party is actually looking for the rind,” Rose explains.
How do you do that?
It’s not always possible … but a lot of times if you keep digging … what it takes ultimately is just dialogue. It takes time getting to know somebody and really understand their motivations. Not their surface-level motivations but the much deeper-level motivations.
How to selectively show your cards in 3 steps
Step 1: Sit down and draft three lists:
What do you want to know about your partner?
Be ambitious with this list. It should include things like their CEO’s strategic priorities, the business metrics they track closely, your negotiating partner’s compensation structure, how decisions are made within their organization, their key timeline and milestones, etc.
What CAN share with your partner at no cost?
Be expansive here. Do not assume they have done their homework: - include publicly available information. Be sure to include what a successful outcome of the deal will look like for you. How will you measure success? This information is too often unnecessarily guarded by one or both sides in a negotiation.
What should you NOT share with your partner?
This sound straightforward but different stakeholders within your organization may view this list differently. Ask yourself what the downside is of sharing? How could it be used against you?
Step 2: Share these lists with your deal team - the internal stakeholders whose buy-in you will need to finalize the deal. Collect their feedback on they think can and cannot be shared with the partner.
Step 3: Show your boss the structured approach you’ve taken to the deal and the buy-in you have assembled from internal stakeholders. Explain to him that you will be methodical in your negotiations - only giving out information as you gather information from your partner.
Building a partnership is an exercise in trust-building. To craft a successful agreement you need insight into what success means to your partner. For that, you’ll need to share … selectively.
Here is Dan’s interview (Feb 2023) on Invest Like the Best with Patrick O’Shaughnessy.
After thoughts …
h/t to @vollerian_steel for this one above