This month, I couldn’t possibly choose any topic other than the $50 billion submarine deal, between France and Australia. Professional Negotiators often say: “Deals are like planes, they only make the news when they crash.” Well, this deal is clearly an exception! Everyone in Australia, US, France, Germany and Japan is talking about it, due to its economic and political impact.
This week, the Australian PM, Malcolm Turnbull, announced the winner of the $50 billion submarine mega bid. As David Wroe (@davidwroe), the national security correspondent for The Age and Sydney Morning Herald, sums it up in his article titled “Risk and reward: the challenges and the payout of the submarine deal”: “it will be the single most expensive thing Australia has ever done”. (David’s full article is an excellent read for those who want the details).
French company DCNS won the tough global race for the multibillion dollar contract for Australia’s next fleet of submarines, in which all the 12 ships will be built in Adelaide using local steel and labour.
Needless to say that personally, being a Frenchman living in Australia, who was formerly a DCNS submarine negotiator, albeit in a different global region, this deal grabbed every bit of my attention and curiosity.
So let’s look under the hood of this “high-stakes for all parties” deal, above and beyond what’s generically covered in the papers. I’d like to focus my analysis on two aspects that are rarely looked upon at in dealmaking:
1. You Cannot Control All The Aspects Of The Negotiation, So Stop Trying!
Very early in the bid process, Japan received former Prime Minister Tony Abbott’s formal endorsement, which subsequently positioned the Japanese as the deal “favorite”. The Japanese negotiation team was well prepared, politically supported, with a strong value proposition. However, I do believe that a number of things outside their control derailed their lead, particularly Japan’s stance on a seemingly unrelated issue – whaling.
Amongst all the other press articles and analysis, one commentary I have really enjoyed reading is from Captain Paul Watson (@CaptPaulWatson) of Sea Shepherd, titled:“Killing Whales Has Just Cost Japan $50 Billion Dollars”. Please take 2 minutes for this well worthwhile perspective.
Of course, Paul Watson is biased in his analysis. And of course, he has a personal interest in savouring Japan’s losing performance in this bid. Without taking sides on the whaling issue per se, I do support his analysis in saying that even when the stakes are extremely high and we believe that the bid process is governed and awarded on rational basis, let’s admit it! When it’s “crunch time”, the lead negotiator, the bid manager or even the head of a nation will always remember how you, your colleagues or… your co-nationals “made them feel”.
Once again, I say with more conviction than ever that emotions are at the core of every negotiation, and to deny that is simply to close your eyes to what “fuels this engine”. The key is in surfacing, understanding and managing your own and your counterpart’s emotions. Something that the Japanese negotiation team clearly missed.
2. Since You Can’t Control Everything, Focus On What You Can And What Is Most Important.
To build on point #1, we must have the courage to talk about the impact of what you can’t control. This is, no doubt, one of the most frightening parts of negotiation. However, if something is outside your “circle of influence”, as Stephen Covey would say, but can have a dramatic impact on your negotiation outcome, wouldn’t you want to understand “the likely damage”? As scary as it may seem, you’re better off understanding the consequences and their cost, rather than putting your head in the sand.
Just a few short years ago, I led the DCNS international negotiations for submarines and naval programs in the South American region. This experience is a frequent reminder to me of the vital role of interpersonal relationships, as well as the deeply interconnected play between negotiator’s skillset and mindset at the negotiation table. However, I have also learned the hard way that we never control all the stars that need to align in order to get to the deal. For any negotiator, this is both a sobering and humbling learning.