The wounds of Honour are self inflicted

Path dependence

Path dependence is the idea that decisions we are faced with depend on past knowledge trajectory and decisions made, and are thus limited by the current competence base.

In other words, history matters for current decision-making situations and has a strong influence on strategic planning. Competences that have been built in the past define the option range for today’s moves. New business opportunities, in particular those based on technological progress, emerge gradually as a consequence of competencies acquired prior to new discoveries and over time.

Example

A well-known example is the QWERTY layout for typewriters. Despite the fact that different keyboard layouts in modern computer keyboards would allow faster typing, the QWERTY layout prevails. Due to the network effect (network externalities) the layout seems immutable.[1]

network effect

A network effect (also known as a network externality) exists when a product’s value to the user increases as the number of users of the product grows. The classic example is the telephone. The more people own telephones, the more valuable the telephone network is to each owner. If there are N owners, each one of them can call the other N - 1 owners: a total of N(N-1) communications can be made. Thus the network’s value grows with the number of possible connections, in the order of N squared. This insight is the basis of Metcalfe’s law that states that the value of a network is proportional to the square of the number of members within the network.

When you buy a DVD player and some DVDs, you encourage an industry, and thus more DVDs are put on the market. In fact, the concept can easily extend: perhaps the most dominant network effect is language. If you write a web page in Inuktitut, not many people can read it. If your only audience is that community, that is fine. But if you want to get attention, you will probably write it in English: scientific journals, for example, are now overwhelmingly in English, especially because the internet amplifies network effects.

Network effects have fundamental importance for business strategy, intellectual property, and technical change in a wide range of industries. For instance, it becomes very important to establish early on in a market. [1]

Example

Amazon lost money for years establishing itself as the main source for online books, in direct competition to Barnes & Noble and eventually driving Borders out of the market.

Over time, positive network effects made the network more valuable and the business more succesful.

Haptic communication

Haptics where you touch a person to add to the emotion of whatever you are saying. A hand over a shoulder, a handshake etc.

Haptic communication refers to the ways in which people and other animals communicate and interact via the sense of touch. As well as providing information about surfaces and textures, touch, or the haptic sense, is a component of communication in interpersonal relationships that is nonverbal and nonvisual. Touch is extremely important for humans and is vital in conveying physical intimacy. Haptics is a branch of nonverbal communication.

Proxemics

Proxemics which is personal space that people have and which varies by culture. See the queue at the bustops in Britain and you will know what I mean. They are all at least a metre from each other while waiting in a queue.  Some  cultures for example have a much smaller personal space.

Boiling the Frog

As the story goes, researchers found that when they put a frog in a pan of boiling water, the frog just quickly jumped out.  On the other hand, when they put a frog in cold water and put the water to boil over time, the frog just boiled to death.  The hypothesis is that the change in temperature is so gradual, the frog does not realize it’s boiling to death. While the results of the experiment are in question it is a good metaphor for organization cultures.

Negotiating 101 - Know Your 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 ZOPAIn 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 ZOPACan 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.