I am currently in India celebrating a friend’s wedding (congratulations Nikhil and Ishani!).
Cultural impressions aside, some of the experiences on this trip have highlighted the difference between street-smart and book-smart business acumen.
An example. Having recently sat our final exam in negotiation, my friend Ben and I went to the local market to find gifts for our girlfriends and families. What a great opportunity to practice our new negotiation skills on an unassuming Indian shopkeeper.
We found a pashmina store, chose our items, refused to pay list price and then began to haggle. We used several classic negotiation devices. We re-anchored to a very low price, ignoring the shopkeeper’s price tags. We asked several questions with yes or no answers to elicit any clues from ‘grey’ responses as to whether there was any room for movement.
We combined our offers to make the outcome more binary to the shopkeeper: he would either sell us both everything, or nothing. In simple language we pointed out that this was the closest to a Pareto efficient outcome: he runs down his enormous pile of inventory and we get a discount. Finally, we signalled our ability to find easy alternatives by threatening to walk out if he didn’t match our price.
The result? We achieved a 30 per cent discount. A victory? Probably not. The shopkeeper recognised our alternatives were weak: he could see that our vacation time was valuable and that we wanted to close the deal then and there. Like all good retailers, he also exerted the ultimate ‘anchor’ over us: the list price. The final price was closer to his price tag than our opening offer where we had tried to ignore this. His demeanour throughout was one of nonchalance and indifference, even though we may have been his first sale of the day.
And so we were reminded that a successful business career needs to be built over years and years of experience. Our MBAs have taught us how to frame and understand the shopkeeper’s strategy and how to respond to it in theory, but we need more business interactions in the real world before we can start to compete outright in these battles, whether against a ‘powerful’ business person or a rural Indian shopkeeper. Upon graduation this May, there is still a lot to learn.