Creating Value and Expanding the Pie

The Orange Story

Two sisters fight over the last orange. They compromise—each gets half. But one sister wanted the juice to drink, and the other wanted the peel for baking. If they’d talked about interests instead of positions, both could have had 100% of what they needed.

By the end of this lesson, you’ll find the “orange peel solutions” hidden in every negotiation—creative options that give both parties more than compromise ever could.

🔄 Quick Recall: In the previous lesson, we practiced active listening and strategic questions. Remember the calibrated question technique? The information those questions reveal is exactly what powers today’s lesson. You can’t create value without understanding both parties’ interests.

Why Compromise Is Often the Worst Outcome

Compromise sounds fair. “Meet in the middle.” Split the difference. But compromise means both parties get less than they wanted. It’s the lazy solution—the default when neither party explores alternatives.

The hallmark of a skilled negotiator isn’t getting the biggest slice. It’s finding ways to make the pie bigger so both sides walk away with more.

The Three Value-Creation Strategies

Strategy 1: Logrolling (Trading Differences)

When each party values different things, trade them. This is the most common value-creation technique.

Example: Freelance contract negotiation

The trade: “I can deliver two weeks faster than my standard timeline if we adjust the payment to 50% upfront instead of net-30. I’ll also cap revisions at three rounds, which keeps the project focused.”

Both parties get what matters most to them. The client gets speed. You get cash flow certainty and scope control. Neither gave up something they valued highly.

My negotiation involves these variables:
[list all negotiable elements]

My priority ranking (1 = most important):
[your ranking]

Their likely priority ranking:
[your estimate]

Identify the best logrolling trades—where I give
up something I value less for something I value more,
and vice versa. Propose 3 specific package deals.

✅ Quick Check: Why is logrolling only possible when you understand the other party’s interests? What happens if you guess wrong about their priorities?

Strategy 2: Adding New Variables

When the existing variables don’t allow good trades, introduce new ones that create additional value.

Stuck negotiation: “We can’t agree on price.” New variable: “What if I include a training session for your team? The value to you is significant, and my marginal cost is low.”

Common variables to add:

• Future business guarantees or volume commitments
• Referrals or testimonials
• Extended warranties or support
• Exclusivity periods
• Performance bonuses tied to outcomes
• Joint marketing or co-branding

We're stuck on [the sticking point].
Our negotiation currently involves these variables:
[list them]

Suggest 5 new variables we could add to create
additional value. For each:
1. What it is
2. Why it's valuable to them
3. Why it's low-cost to me
4. How to propose it naturally

Strategy 3: Contingent Agreements

When parties disagree about the future, create agreements that depend on what actually happens.

Disagreement: “This property will be worth $500,000 in two years.” “No, it’ll be worth $400,000.”

Contingent solution: Set a base price now with a bonus tied to the actual value in two years. If the optimistic party is right, they pay more. If the pessimistic party is right, they pay less. Both parties are protected against the scenario they fear.

Common contingent structures:

• Performance bonuses (if revenue exceeds X, you earn Y)
• Earnouts in acquisitions
• Ratchet clauses in leases
• Satisfaction guarantees with refund options

✅ Quick Check: When is a contingent agreement better than a fixed deal? What risk does it address?

The Brainstorming Session

Before proposing solutions, generate as many options as possible. Quantity leads to quality.

Rules for brainstorming options:

1. Generate at least 10 options before evaluating any
2. No idea is too creative during brainstorming
3. Combine and build on ideas
4. Separate generation from evaluation

Here are both parties' interests:
MY INTERESTS: [list]
THEIR INTERESTS: [list]

Available variables: [list all negotiable elements]

Generate 10 creative options that could satisfy
both parties' top interests. Include:
- Standard logrolling trades
- Creative new variables to add
- Contingent agreements
- Unconventional solutions

Don't filter for realism yet—just generate options.
Then rank the top 3 by mutual benefit.

Packaging Proposals

Never present a single option. Present three packages that create a choice:

Package A: Your preferred deal with the most value for you Package B: A balanced deal that emphasizes different trades Package C: The deal that maximizes what they care about most

Multiple options demonstrate flexibility and give the other party a feeling of control. People are more likely to choose from a set than to accept or reject a single proposal.

Try It Yourself

Think of a negotiation where you’re stuck on a single variable (like price). Use AI to expand the possibilities:

We're stuck on price. I want [X], they want [Y].

Context:
- My situation: [relevant details]
- Their situation: [what you know]

Help me move beyond price by:
1. Identifying 5 other variables we could trade
2. Suggesting 3 package deals with different mixes
3. Proposing one contingent agreement structure
4. Recommending the single best creative option

Key Takeaways

• Compromise (splitting the difference) is usually the worst outcome—it means both parties lose
• Logrolling trades exploit different priorities: give low-cost, get high-value
• Adding new variables creates value when existing variables are exhausted
• Contingent agreements resolve disagreements about the future by letting reality decide
• Always brainstorm at least 10 options before evaluating any
• Present three packages instead of one proposal to increase flexibility and acceptance

Up Next

In Lesson 6: Salary and Compensation Negotiation, we’ll apply all these techniques to the negotiation that matters most to your income—getting paid what you’re worth.