 Zone of Possible Agreement (ZOPA) In life and Sales, there exists the Zone of Possible Agreement. The Zone of Possible Agreement is considered an area where negotiating parties may find common ground - where parties will often compromise and strike a deal. In a traditional sales negotiation, it is defined by the highest possible price that the buyer is willing to offer, and the lowest possible price that the seller is willing to accept. (Remember that ZOPA is not necessarily just about price in terms of money. It can include other terms and conditions.) Suppose that you want to sell a product that costs you $18,000. You calculate that you can reluctantly let it go at the break-even sell price of $20,000 but would like to sell it for $30,000 to meet target margins. A buyer wants to buy it for $15,000 but is willing to pay up to a maximum of $25,000. The ZOPA where both buyer and seller can negotiate within would be between $20,000 to $25,000. You (the Seller) would not entertain a bid at $15,000 because you would lose money and the Buyer would not consider your asking price of $30,000. Beware the dangers of not understanding the ZOPA. If you, the seller, start your offer at $40,000, so far outside the buyer’s ZOPA, the buyer will walk away since he or she may think that any discounting will never reach their buying range. The Seller had demanded too much and shut down negotiations. Likewise, the Buyer may make such a starting bid so low that the Seller might not think that he/she is serious and decides to walk away.  Negative ZOPA - Example with N. Korea Standoff Negative ZOPA
In Sales, a negative ZOPA exists when the walkway points of both parties are too far apart with no common area of overlap – a negative ZOPA. With a negative bargaining zone both parties may (and should) walk away. If we study the current North Korea standoff, we see this negative bargaining zone. North Korea’s current walkaway point is that the US and world must drop sanctions before talks. The US walkaway point is that N. Korea must abandon pursuit of nuclear weapons. Moving a ZOPA Can you move the ZOPA? Yes, but it requires combining common interests to create a “win/win” for all. I, as the Seller, might be able to offer a demo or refurbished version of my product at a slightly reduced price which reduces my break-even sell price. The Buyer may be willing to offer me a testimonial for my promotional material or offer to buy in volume to reduce the Seller’s transportation and installation costs. Likewise, a Seller or Buyer can shrink a ZOPA by adding terms and conditions during negotiations. True Story: A couple was getting very serious about marriage. The woman kept mentioning “little” things which got the man’s spiderman senses tingling (their ZOPA was shrinking). Finally, she mentioned that she would be in charge of their future finances and ration him $50 per week – their ZOPA went completely negative and he ran for the hills...and is still running.
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 Circle of Influence vs. Circle of Concern  Gac Filipaj (Courtesy Columbia University) The Story of Gac Filpaj
Gac Filipaj left a war-torn Yugoslavia as a refugee for the United States in 1992. He fled after almost finishing law school in Belgrade, where he commuted for years by train from Montenegro. He started working as a restaurant busboy while living with his Uncle in the Bronx. In his words: “I asked people, which are the best schools in New York?" Since Columbia topped his list, "I went there to see if I could get a job." Gac worked full time as a custodian at Columbia University. He spent several years taking English proficiency classes (his mother tongue was Albanian), then enrolled in the School of General Studies in 2000. Mr. Filipaj took advantage of the University's policy that allows employees to enroll in college courses for free, provided that they are able to hold their own academically. For Mr. Filipaj, he would open his books after returning late at night to his Bronx apartment after working a 2:30 to 11:00 PM shift, cleaning the school's bathrooms and emptying the trash. He would pull “all-nighters” before exam time or to finish a paper, then go to class in the morning and then to work. In May 2012, after 12 years of dedicated study, Gac Filipaj at the age of 52, donned a cap and gown to graduate with a bachelor's degree in classics - with honors, from what is arguably the fourth best university in the country - shortly after Harvard, Princeton and Yale. The Model of Circle of Influence versus the Circle of Concern Gac Filpaj is a wonderful example of Stephen Covey’s “Circle of Influence versus Circle of Concern”. All of us have a wide range of concerns in our lives – the economy, friends and family, the environment, the Kardashians, etc. Within this whole universe of our concerns, there are some things we can influence and some things we can only stay concerned about. We have a choice about where we focus our attention and energy. We can choose to focus all our attention on: 1) what we can change ("Circle of Influence") or 2) the area that is outside our influence ("Circle of Concern"). Don't we all know whiners? They get annoyed about other people’s shortcomings, blame the government, global capitalism, the weather, a rotten childhood, bad luck, etc. Everything becomes ‘poor me’. Such people are living almost exclusively in the Circle of Concern. They become reactive and stuck. Gac Fipaj chose to focus on things that he could change - his Circle of Influence. Influence does not mean just the more immediate or ‘trivial’ concerns. It also means focusing on aspects of larger problems that we can exert some influence over. Influence does not necessarily mean direct ‘control’; we can influence things in an indirect way, for example in our own personal, daily behavior. So don’t play the “Blame Game”. Gac Fipaj didn't whine about having to move to a foreign country and not knowing the language. He recognized his Circle of Influence: he learned English, got a job at a good university which would pay for his studies, and took courses until he graduated with honors. (Fipaj continues to take courses to this day.) By focusing attention and energy on our circle of influence, we become increasingly proactive. The energy we expend is enlarging; each little victory motivates us to find new ways of exerting influence. We don’t waste energy on things we can do nothing about, but direct it towards what we can change. With each step we feel stronger and more creative. And so our circle of influence expands. Here’s another very common example: How many people feel limited by or hate their jobs? A whiner would complain and blame his or her manager, the economy, colleagues, etc. However, you cannot change your manager, the economy, your colleagues, or the past. This negative way of thinking, playing the “blame game” accompanied by inaction to change things, results in shrinking your circle of influence. So what can you change? You can change your attitude, seek your manager’s honest advice and help, expand your horizons and skills from external learning, do a reassessment of your values & behaviors, participate in projects beyond your role, observe how successful people thrive, get a mentor/life coach, etc. These are things within your circle of influence – worthy things that you can focus attention and energy on. You become increasingly proactive and start to expand your circle of influence. You build up your credentials; people start recognizing your contributions, your teamwork, reach out for your thoughts, and you can move up or out. What’s the lesson here? 1. Identify what is within your Circle of Influence and your Circle of Concern. 2. Continuously work and focus your energy on what you can change to expand your Circle of Influence, e.g. your relationships, your mission statement, purpose. 3. Slowly but surely, your Circle of Influence starts expanding to take up more of your Circle of Concern. This is because you can start making changes as your life role and capabilities expand. 4. Your Circle of Concern should always be larger than your Circle of Influence – otherwise you become self-centered. 5. Your Circle of Concern also grows as you widen your Circle of Influence - we care more and more about some of the very challenging things in our world as we learn we can influence them. Spending your energy daily on things that you cannot influence is a waste of time with a negative compounding effect. You end up feeling like you are stuck with no control of anything (which leads to stress). Focus your efforts on what you can control. You will create a positive compounding effect that brings the reality that you want.  One of the top buzzwords today is “innovation”. Many equate innovating to pioneering – being the first to market, creating and dominating a new product segment or business model. It’s true that some real innovators, e.g. FedEx, SouthWest Airlines, Amazon, have created some truly successful businesses but these are exceptions rather than the rule. Just like pioneers in real life history, most get shot down by arrows in unexplored territory. The truth is that timely and effective execution of an adequate imitation is more important than innovation.
Pioneers do have a market advantage if they can lock in key customers, suppliers, or intellectual property (e.g. patents). The key is to build up market share, brand awareness, and an ecosystem that hinders upcoming competition. YouTube and LinkedIn have done this and have become dominant exchanges. In other instances, it pays to wait and learn lessons from earlier players. The pioneering Osborne was the first successful personal computer - widely imitated and then overtaken by several other computer companies who improved on deficiencies. The paper “Entrepreneurs' Decisions on Timing of Entry: Learning from Participation and from the Experiences of Others” written by Moren Lévesque, Maria Minniti, and Dean Shepherd in Entrepreneurship Theory and Practice, Vol. 33, Issue 2, March 2009 states that the decision to be the pioneer depends on how “hostile” the learning environment is - how much entrepreneurs can learn by observing other players before they launch compared to what they learn from participating after they enter. Patrick Barwise, Emeritus Professor at the London Business School, wrote in The Myth of Pioneer Advantage, that in new markets, it is not the pioneer but what he coins as the “fast follower” who reaps the rewards, specifically the fast follower with “a mass-market perspective, willingness and ability to invest in scale and marketing, a focus on customer understanding and continuous improvement, and an existing customer base. The follower learns from the initial market response to the pioneer’s offer, improves that offer, scales up production and distribution, reduces cost, and builds a dominant market share during the new category’s critical early growth phase--which it also helps to drive by investing in marketing as well as in distribution and production. Once the successful follower has established market leadership, it can (and should) aim to be the “first mover,” with relentless incremental and adjacent innovations, to sustain its lead. At that point, there is an advantage in being the first to innovate.” A perfect example is the famous story of how Bill Gates got rich. Gates started by licensing the DOS operating system software to IBM - software originally named QDOS that Bill Gates actually bought for $50,000. IBM engineers then debugged it further for market release and IBM/Microsoft did all the steps outlined by Professor Barwise to mass market DOS as the dominant PC operating system. Microsoft arguably took steps to also become the “first mover” by incremental updates and to DOS, then moving to Windows 3.1*, etc. Innovation is critical but effective imitation and timing should never be overlooked. The early bird can catch the worm but the second mouse gets the cheese. It is a matter of situation and timing. *One may argue that Microsoft stole the Windows GUI from Apple. This still supports the “fast follower” concept (and it could be further argued that Apple was a fast follower who imitated Xerox PARC for the mouse and GUI).  User Innovation - Feather Duster as Disciplinary Tool Here is a fine example of user innovation which brings back painful memories. We talked about “User Innovation” – innovation by intermediate or end-users, rather than by the producer or original designer.
Recall Prof. Eric von Hippel's research: many products and services are modified by users to meet their particular needs. Modern manufacturing is based on economy of scale so products are developed to meet the widest possible need. When individual users face their own “unique” problems, they develop their own modifications to existing products (or new products) to solve their issues. Users readily share that with the producer or other users in hopes that their changes and ideas will be incorporated into the product. Case Study: The Feather Duster The unassuming feather duster is used by most of Western society for dusting. Ah, but the Chinese mother has literally “turned it around” - into the child disciplinary tool of choice. The parent comfortably grips the feathers while whacking the child with the bamboo or stick end. I have never seen my mother use the feather duster for dusting…but I was very well acquainted with the stick end. Many Chinese parents have used the feather duster to the point of bending or breaking the stick while permanently compressing the feathers with their tight grips. My mother must have replaced at least 5 feather dusters because of me. (One replacement was due to my attempt to surgically saw a duster stick just enough so that it would break the next time it was used. Unfortunately, I sawed it all the way through which really upset my mom - leading to a serious beat down after she bought 2 new feather dusters, always keeping one in reserve for the future). I never liked or understood this user innovation. Nor did I understand the warning that followed to “Stop crying or I will give you something to cry about” (I’m crying because you just beat me with that stick so you’re going to beat me some more because I’m crying? Talk about a “vicious circle”.) Now, of course, my mother as the grandmother of my children admonishes me to never physically punish her grandchildren: “You should always reason with them. They’re young. It can hurt them physically and mentally.” To which I reply: “Hello? Have we met? Who are you?! Don’t you remember beating me with that feather duster?” And my mother’s final reply would be “Well, you were a different case.” Note: There is an actual Facebook group named 'My Chinese Parents Used to Beat Me with a Feather Duster'. |
AuthorFrank Lio is a Product Manager, Strategist, and Change Agent in the Hi-Tech industry. His growing track record of successes include creating 3 winning software products, leading nationwide seminars, and turning around a failing business unit. He is currently serving a dual role as Product Manager and Business Team Support Manager at Instron ITW. Happy to Share!Want to use my content & images on your website?
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