Winning Can Equal Settling For Less

An accommodative approach can provide greater gains.

Shyam Ponappa   |   February 3, 2022

My previous article “Moving Beyond A Zero-Sum Approach”¹ dealt with how in most interactions, focusing on one’s own gains narrowly can lead to ignoring coordination, which then results in inferior gains. Coordinated solutions can be in the form of cooperation, collaboration, or accommodation. The reason is that while a situation may not have a win-lose (zero-sum) structure, if one party in seeking gains takes an approach as if it were win-lose, the areas for beneficial joint gains through collaboration or settlement are often ignored. This is likely to result in worse outcomes for all (a Nash Equilibrium in game theory). Conversely, if participants consider the interests of all parties and are willing to accommodate, the outcomes are likely to be better for all.

This can apply to battles of attrition as well. In resisting arbitral awards, it is a question of settling for a better outcome instead of being compelled to accept less/lose by seeking to enforce entitlements. It may be less damaging in our overall interests to seek a settlement, even if we believe we are right.

A review by the government of its committed direction is warranted in some areas, taking stock of the facts afresh to decide what is best for us. One of these is resisting the arbitral awards to Devas, because this is a battle of attrition, and the risk of attachment and seizure of government-owned assets abroad will continue. The requirement is not on principles, of not relinquishing a position once taken, or of establishing whether or not there was fraud. It is the issue of continuing national waste of attention and time on resisting international awards, diverting these away from actual governance needs. The awards are there, and enforcement will be pursued. The reputational damage to India from attachments and seizures will continue, as will the waste of time and money on resistance, until there are diminishing returns for the claimants.

In such situations, alternative strategies to be considered include possible accommodative responses. Should India resist claims indefinitely in these circumstances, considering the likely outcomes and the negative repercussions, especially to developing its manufacturing capabilities? Or should it consider possible ways to settle this matter for less than foreseeable costs, and shift its attention and energies to constructive activities in other areas?

The diagrams explain this graphically. Chart 1 (from my previous article (1)) is the example of Company A acquiring a stake in Seller S for an alliance. Chart 2 highlights the potential for gain from a collaborative or accommodative/coordinated outcome, as explained below.

The potential for gain is in the shaded area between the “bliss points” and the lowest achievable benefits, comprising: (a) S1, the Seller’s desired highest price for selling a lower stake;( b) A1, the Acquirer’s desired lowest price for the highest stake; and (c) N, the lowest achievable outcome.

The minimum-gains for both are at the origin at N, the Nash Equilibrium, which is the likely result if both sides pursue their respective interests to the exclusion of the other’s. However, if both consider mutual benefits through collective gains, both will gain as they move away from N towards the contract curve S1 to A1. The gains are maximised at any point on the contract curve.

For the arbitral awards, the ideal requirement is for an accommodative agreement on an amount or arrangement that leaves both sides better off, rather than litigating indefinitely, having already been contending for the last 10 years.

Telecom As Infrastructure

A second area that deserves recall is the The National Telecom Policy-1999 (NTP-99). Briefly, in 1994, regulations required telcos to bid for licences. Most won with high bids, some had to forego their licences, and all were stuck with no cash flows to pay licence fees. Cash flow constraints limited their networks and the ability to lower tariffs to attract customers. Based on an accommodative consultation between the government, the telcos, banks, and other experts, and thereafter the public, a revenue-sharing arrangement was introduced for licence fees. It was faulted for being prepared without Parliamentary debate, and for its lack of transparency, with some people charging that it was a sell-out to telcos. Initially, the revenue share was set too high until 2003, when a lower percentage share and reduced charges stimulated enormous growth and proliferation in mobile services, until 2011. At that point, the 2G scam broke the trend, followed by retrospective adjusted gross revenue demands, and it hasn’t recovered since.

In terms of process, the government initiated a coordinated arrangement in consultation with the telcos and other industry representatives and experts, and then with the public. The outcome after some years, after initial missteps because of overcharging by the government, was a remarkable success.

This is the process that deserves consideration, with improvements such as for Parliamentary consultation followed by public consultation at the appropriate time, and legal and regulatory inputs. It is in lieu of the committed course of extracting cash from telcos through auctions, while expecting them to make massive investments to provide state-of-the-art services.

An objective consultation and design process by a multi-disciplinary group led by the Ministry of Communications and Information Technology is required, with coordination through the Prime Minister’s Office as for NTP-99 drawing on other government departments, industry and experts, with assistance from behavioural science facilitators for work-outs. The scope to be covered is everything from network infrastructure, spectrum, and new technologies, with a systems approach using objectives-oriented process design.

Ideally, apart from techno-economic, civil administration and managerial aspects, behavioural science inputs to assist groups in addressing inter-departmental resolution for overall gains needs to be made a part of the consultation process.

Adopting an approach geared towards the benefit of society shifts the focus away from the adversarial, competitive perspective of fixating on defensive strategies that result in least gains, and opens up to greater benefits through group effort. This is what we should be aiming for to improve communications infrastructure.

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shyamponappa@gmail.com

1: https://organizing-india.blogspot.com/2022/01/moving-beyond-zero-sum-approach.html

2: GE's Work-Out Process

Unlike conventional methods of teaming, whereby problem-solving or “task” teams meet for short periods over several weeks or even months, the heart of General Electric Work-Out is its efficient, focused, multiple-day work sessions.  These are carefully designed and closely facilitated by one or more of our GE Work-Out-experienced Senior Associates.

https://thinkgagnonassociates.com/core-capabilities/ge-work-out

Gagnon Associates did the first workouts for/with Jack Welch at GE.