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Updated: 29 Jan 2019

BATNA Explained

best-alternative

Summary

Having good options available before you start negotiating is a best practice. You'll feel empowered and confident to reach a mutually satisfactory agreement, or walk away to your better alternative.

“Don’t put all your eggs in one basket,” is an old saying which has stood the test of time. To a negotiator, this wise old proverb illustrates that if you only negotiate with one counterparty, you may end up with a rotten deal, or with no deal at all. You need to have a strong alternative waiting in the wings to have the power to say ‘no’.

Netscape’s BATNA Blunder

This site’s case studies are rife with real life examples of BATNA being the single biggest success factor or blind-spot in both business and politics. The Netscape Navigator negotiation case provides a now infamous example of how the browser war was won by an inferior product provided by Microsoft to AOL, then the dominant internet provider in the United States. Netscape overestimated the strength of their BATNA, and underestimated the strength of AOL’s BATNA.

BATNA Defined

This is where BATNA comes to the rescue for those of us sensible enough to have heeded the sage advice of that old farmer who coined the proverb above many ages ago.

BATNA means “Best Alternative to a Negotiated Agreement.” This is your alternate plan when the talks start to wobble out of control. It can also be your trump card to make the deal happen to your advantage or enable you to walk away from it altogether.

negotiation trainingImagine you’ve taken a negotiation training course, and you know the value of going into your negotiation meeting fully prepared. Before arranging the meeting, you set up talks with two alternative suppliers who are ready and able to handle all your needs. When you meet with your preferred supplier, you calmly sit back in your chair and allow the supplier to finish their spiel. Now, you watch the gleam fade from their eyes when you make mention of some aspect of his or her competitor’s offering. You have a BATNA!

BATNA or No BATNA? That is the Question

The power of your BATNA affords you the leverage to ask for more. If you don’t get what you’re looking for, then you can turn to your best alternative. A strong BATNA is like a warm, fuzzy insurance policy. A strong alternative provides you with two possibilities. Either you reach an agreement with more favorable terms, or you simply say “No deal,” because you have a good alternative plan.

Walmart LogoSarah Talley shared this sage advice after creating more prosperity for her family business through her skillful negotiations with Walmart: “Try not to let Walmart become more than 20% of your company’s business.” In our Walmart case study, one of the gems to emerge is not to become too dependent on any one supplier or customer. Dependency reduces your leverage and erodes your BATNA.

A BATNA doesn’t come prepackaged. A BATNA is the result of a two-step planning and preparation process. First, you have to determine all your available alternatives, and choose your most attractive and actionable alternative. Next, you must also realistically assess your negotiation counterpart’s alternatives. Both steps are equally important. You need to figure out whose best alternative is stronger and more actionable.

You should seek to increase your flexibility. It is important to keep in mind that both your approach and your alternatives should be able to bend in the wind, and weather an unexpected storm. A negotiator may enter the talks with a preconceived idea of the best alternatives available to both parties, but must not be bound by these preconceptions.

Circumstances can change rapidly. Unexpected changes can be anything from new information, a sudden rise in costs, or new legislation. A sudden shift in conditions can immediately affect the strength of either party’s BATNA during the negotiation process.

How To Determine Your BATNA

How do you determine your best alternatives to a negotiated agreement? First, you have to dissect both your position and your negotiation interests. Then, look at the sum of these parts relative to all the alternative options available. Pick the best option. Finally, do the reverse from your counterpart’s perspective. A well-prepared negotiator views the whole picture in this way.

Some of the most crucial factors which should be considered include:

  • Cost: Ask yourself how much it will cost to do this deal relative to the cost of your best alternative. Cost estimation may include both short-term and long-term considerations. Figure out which of your options is the most affordable.
  • Feasibility: Which option is the most feasible? Which one can you realistically put into action in time?
  • Impact: Which of your options will have the most immediate positive influence?
  • Consequences: Determine the outcome of each option which could be a possible solution?
  • Stakeholders: Do you need to win over any stakeholders before being able to move to your BATNA?

Egos and Orchestration

Keep your ego in check. After all the work you put into building up your BATNA, you might be feeling pretty smug. Studies have clearly shown that it is an all-too-human tendency to overestimate the strength of one’s own BATNA while underestimating the strength of your counterpart’s.

This scenario plays out when one party reveals an over-valued BATNA too early in the talks. Having put all his cards on the table too soon, he “calls” the other side. Suddenly, he finds that his big hand really equates to a pair of deuces facing a full house in a poker game. He can kiss that pot goodbye!

Let’s examine the scenario in which you have the stronger BATNA. Suppose that you know the other party needs to make a deal, but they have no good, actionable alternatives available. You may decide to allude to your own powerful BATNA in this circumstance. We advise clients in our sales negotiation training courses to avoid rubbing a buyer’s nose in his unfortunate negotiation position, lest the buyer becomes offended, and starts to work on a medium-to-long-term alternative to move away from doing business with our client. The BATNA you employ can act as powerful leverage while you decide whether or not to agree to the deal. As always, gauge the situation accordingly. Timing can mean everything in determining when to put your BATNA on the table.

Boosting Your BATNA

In the reverse situation, what can you do with a weak BATNA? Can you turn the tables? Yes, there are two ways this might be accomplished. The first possibility is to strengthen your own BATNA. The second way is to weaken the BATNA of your counterpart, or at least affect your counterpart’s perception of his BATNA.

  • Be Creative: Simply ask yourself what other options you might employ which could improve your bargaining position. Brainstorm the situation with all the key players in your organization. Your planning must also factor in your counterpart’s priorities, interests, and options.
  • Improve Your BATNA: Endeavour to expand your options. One possibility is to consider bringing more vendors or buyers into the mix. A new party’s interests may coincide with key components of your interests or those of your counterpart’s. For example, this might mean creative financing which presents a more attractive option to your counterpart. If you weaken the other side’s best alternative by adding this valuable new term to your offer, the game takes on a whole new slant.
  • Use Experts: Neutral parties with their own relevant expertise might be able to analyze your problem and resolve it through a newly-designed, highly-valued package of contract terms. If your side lacks some area of expertise, get the experts to lend a hand.

Conclusion

Failing to have actionable alternatives when heading into a negotiation is simply not a best practice. Having an attractive, actionable, alternative option empowers you to confidently reach a mutually-beneficial agreement or walk away with a satisfactory alternative.

 

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4 comments
  • 3
    1
    Atulmaharaj on

    It’s very important to first identify your BATNA before actually getting into anything. With that identified, it will surely make one’s negotiation simpler. I loved the line where you mentioned “BATNA doesn’t come in packages” would totally agree to it.

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    Trina on

    I bought a used car this past summer and made a bad decision and negotiations. I'm taking a class on negotiations this fall semester and was introduced to BATNA. I sure could of used this important information earlier this year. It would have helped me be a better negotiator and settle with a better car deal. I have learned much from this valuable article. Thank you

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    A. A. Fergusson on

    I was introduced to BATNA at a workshop at Harvard in the 1990s. Having retired some 18 years ago, I had forgotten all but the acronym. However, I am involved in an important negotiation with a debtor and welcomed the revision. It has helped enormously. Thanks.

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    Dr Piotr Jednaszewski on

    Presented illustration of BATNA shows clearly as the proverb says: “Don’t put all your eggs in one basket.” Nowadays many managers overuse BATNA in negotiations instead of having it as the last resource. Presented examples are down to earth and sufficiently illustrate how to work out the problems using BATNA.

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