3D Negotiations

1. Negotiation is a Three-Dimensional Game.

So 3-D Negotiation is our effort to crystallize this very different set of insights and skills about setup and deal design, as well as tactics.

Beyond the table. Effective negotiation involves more than just face-to-face interaction and persuasive techniques (tactics). It requires operating in three distinct dimensions simultaneously: tactics (at the table), deal design (on the drawing board), and setup (away from the table). Mastering all three dimensions provides depth perception, allowing negotiators to see and leverage the full complexity of the situation.

Three dimensions defined. Tactics are the familiar moves and processes used directly with the other side. Deal design involves creatively structuring agreements to unlock economic and non-economic value for all parties. Setup encompasses actions taken away from the table to shape the negotiation environment before face-to-face interaction begins, ensuring the right conditions are in place.

Integrated approach. These three dimensions are interconnected and mutually reinforcing. A problem in one dimension may require a solution in another. For instance, a tactical impasse might stem from a flawed setup or a poorly designed deal, requiring moves away from the table or a return to the drawing board rather than just better communication skills.

2. Most Negotiators Operate in Only One Dimension: Tactics.

Most negotiators focus on a single dimension of the bargaining process.

Tactical tunnel vision. The majority of negotiators, whether "win-lose" or "win-win" oriented, primarily concentrate on the tactical dimension – what happens at the bargaining table. Their preparation often focuses narrowly on planning face-to-face interactions, persuasive arguments, and interpersonal skills, neglecting the broader strategic landscape.

Limited effectiveness. This one-dimensional approach is often insufficient for complex or tough negotiations. It can lead to suboptimal outcomes, missed opportunities for value creation, unnecessary impasses, and damaged relationships, especially when the other side holds perceived power or the underlying situation is fundamentally unfavorable.

Stuck in 1D. Focusing solely on tactics means being a "1-D player in a 3-D world." Such negotiators may fail to identify and address the root causes of negotiation problems, which often lie in the setup or deal design, not just the interaction at the table.

3. Start by Conducting a 3-D Barriers Audit.

The very first part of preparation is understanding what you’re really up against.

Diagnose before acting. Before developing a strategy, you must clearly understand what stands between you and your desired agreement. This requires a systematic assessment, or "3-D barriers audit," across all three dimensions: setup, deal design, and tactics.

Identify the obstacles. A thorough audit helps pinpoint specific barriers. Are the wrong parties involved? Are key interests misunderstood? Is the proposed deal structure flawed? Are tactical or interpersonal issues derailing progress? Without an accurate diagnosis, your efforts may be misdirected.

Avoid assumptions. Don't jump to conclusions about the nature of the problem (e.g., it's just about price, or they're unreasonable). The LockStore case showed how assuming the problem was tactical (dull engineers) missed the real barrier: a deal design (hypersensitive sniffer) that created adverse interests for buyers, stemming from a setup failure (not engaging regulators).

4. The Third Dimension: Shape the Setup Away from the Table.

Lax and Sebenius highlight aspects on the negotiation process too often ignored or given insufficient attention by other authors—moves away from the table to set up and reset the negotiation most favorably.

Setting the stage. The setup dimension involves actions taken entirely away from the bargaining table to create the most promising environment for negotiation. This includes ensuring the right parties, interests, no-deal options, sequence, and process choices are in place.

Resetting the table. If the initial setup is unfavorable, a 3-D negotiator actively works to change it. This is crucial because much of the negotiation's outcome is determined before face-to-face tactics even begin. As chess masters know, success flows from advance preparation and strategically positioning your pieces.

Beyond tactics. When faced with a difficult situation, like the venture capitalist "cartel" in the Staples case, the solution wasn't better haggling or empathy at the table. It was changing the setup by bringing in new parties (institutions, high-net-worth individuals) with different interests, thereby improving Staples's no-deal options and worsening the VCs'.

5. Getting the Setup Right Means Getting Parties, Interests, and No-Deal Options Right.

Getting the setup right calls for more than a mechanical list; it requires a disciplined kind of imagination that the 3-D approach will help you develop.

Map all players. A critical part of setup is identifying and understanding all relevant parties, not just the obvious ones across the table. This includes internal stakeholders, influencers, approvers, implementers, and potential high-value players who aren't currently involved but could be. The Glaxo/SmithKline Beecham merger failed partly by neglecting internal interests.

Probe beyond positions. Understanding interests means going deeper than stated bargaining positions to uncover what parties truly care about – economic and non-economic factors, tangibles and intangibles. The "Fluffy" case showed how a hidden interest (a pet's grave) could block a major development, while the Egypt-Israel talks revealed security and sovereignty interests behind incompatible border positions.

Assess no-deal options. Each party's best alternative to a negotiated agreement (BATNA) sets their walk-away point and influences their power. Understanding your own BATNA and the other side's is vital. The Staples case demonstrated how improving your BATNA (finding alternative financing) and worsening theirs (creating competition) can dramatically shift the deal/no-deal balance in your favor.

6. Master the Sequence and Basic Process Choices.

If the setup at the table isn’t promising, the 3-D Negotiator doesn’t merely resort to bullying... Instead, he or she takes action away from the table to reset the table more favorably.

Order matters. The sequence in which parties are approached and issues are addressed can significantly impact the negotiation's trajectory and outcome. The U.S. coalition building before the first Gulf War showed that getting internal congressional approval after building external support was more effective than the reverse.

Design the process. Basic process choices define the "rules of engagement." This includes decisions about:

• Whether to involve third parties (like mediators)
• How information will be shared
• Whether the process is public or private
• How decisions will be made

Avoid pitfalls. Failing to consider sequence and process can create unnecessary barriers. The U.S. auto parts firm in Mexico learned that a serial approach to potential JV partners weakened its position with each failed negotiation, whereas a parallel approach would have created competition and leverage. Consciously designing the process, rather than letting it happen ad hoc, is key.

7. The Second Dimension: Design Value-Creating Deals.

The 3-D Negotiator is a master at the kinds of cooperative, problem-solving skills that uncover joint gains, and thereby create value for all sides relative to no deal.

Expand the pie. Deal design is the art and science of crafting agreements that create value, often unexpectedly, for all parties involved. It moves beyond the zero-sum mindset of simply dividing a fixed pie to actively making the pie bigger.

Move northeast. Visualize negotiation outcomes on a chart where your value increases moving North and their value increases moving East. Value-creating moves push the outcome Northeast, benefiting both sides simultaneously, unlike compromises along a fixed "Battle Line."

Beyond price. Value isn't just economic. It can include security, sovereignty, relationships, reputation, fairness, or even how the other side feels about the process. The dam case showed value created by addressing security (stream flow), environmental (habitat), and economic (power, trust fund) interests.

8. Unlock Value by Dovetailing Differences.

Deal designers know how to probe below this surface to uncover the sources of economic and noneconomic value.

Differences as assets. While common ground helps build rapport, the most significant opportunities for creating value often arise from differences between parties. These differences aren't obstacles but raw material for joint gains.

High benefit, low cost. Dovetailing involves finding differences where something is relatively easy or cheap for one party to give but highly valuable for the other to receive. Examples include:

• Different interests/priorities (Egypt-Israel: security vs. sovereignty)
• Different forecasts (Entrepreneur/Buyer: earn-outs based on future performance)
• Different attitudes toward risk (Restaurant sale: risk-averse buyer, less risk-averse seller)
• Different attitudes toward time (VC/Biotech: impatient VC gets early returns, patient pharma gets later returns)

Beyond simple trades. Dovetailing extends to differences in tax status, liquidity, capabilities, and even constituencies. Identifying and leveraging these complementary differences through creative deal structures is a core skill of a 3-D negotiator.

9. Design Deals for Sustainability and a Strong Social Contract.

Their chapters on the art and science of deal design go well beyond anything yet written on just how to create value on a lasting basis, including both the letter and spirit of the deal.

Beyond the handshake. A deal isn't truly successful if it doesn't last or adapt to changing circumstances. Designing for sustainability means anticipating predictable changes (like market shifts or evolving relationships) and building flexibility into the agreement.

The social contract. Beyond the formal "letter of the deal" (economic terms, legal clauses), there's the "spirit of the deal," or the social contract. This includes shared expectations about:

• The fundamental nature and purpose of the agreement (e.g., transaction vs. partnership)
• How parties will interact, communicate, make decisions, and handle disputes

Aligning contracts. Problems arise when the social and economic contracts are misaligned or when expectations are implicit. The hospital joint venture failed because
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Last updated: July 9, 2025