How the Best Get Better at Negotiation: A Talk with TJ Rodgers, Cypress Semiconductor founder and Sun Power former Chairman
I am celebrating the release of the unabridged audio version of my partner Jim Camp’s book, Start With No. Penguin Random House published the Audible version a couple weeks ago and I had the good fortune to narrate Jim’s best-selling book and add a couple personal reflections on Jim and his timeless coaching.
This was also a good excuse to catch up with TJ Rodgers in this recorded interview, founder of Cypress Semiconductor and the former Chairman of Sun Power. The world didn’t know that while TJ was growing Cypress Semiconductor into a phenomenally successful public company, he had Jim Camp in his corner, a secret weapon as it were, coaching the Cypress team on how to negotiate more successfully with customers and suppliers.
Hailed by Upside Magazine as one of the hundred people who changed the world, TJ received his first patent in 1975 and his most recent in 2017. That’s 42 years of inventiveness. Among his 22 patents, in 2008 he pulled a doubleheader — yet another for semiconductor design with “programmable floating gate reference” and then later that year a patent for winemaking. Who does that?
But before wine making came the brutal battles of designing, marketing and selling microchips to global customers who just adored beating up their vendors, squeezing every last penny out of supplier margins.
TJ wasn’t inclined towards negotiation when he was a young engineer. Like other technical geniuses, he just wanted to invent. With a desire to solve real-world problems with superior solutions, to him negotiation was something delegated to others.
But as Chairman of a growing company, excellence in negotiation has to be part of your toolkit whether you like it or not. From multimillion-dollar contract talks down to the minutiae of managing thousands of employees, being good at negotiation is a necessity.
The proving point for better negotiation for TJ and company came in the form of a crisis. A real whopper — an existential crisis testing whether Cypress would live or die, all based on one negotiation with one customer.
Cypress Semi had a market leading position in static random access memory (SRAM) chip manufacturing. TJ recalls the fateful moment. His biggest customer “announced one day that there are now three vendors for static RAMs. They were going to treat it like a commodity product, and there would be a negotiation.”
A third player had entered the picture, emboldening the customer — one of the largest buyers of SRAM in the world — to announce that henceforth they would conduct quarterly auctions pitting the three manufacturers against each other, instead of automatically giving their business to Cypress.
The customer told them that the winner of the auction would get 80% of the customer’s total buying needs, while the second best bid would get 20%, and the third bidder would get squat. Zero. Zilch. This was a pretty strong hint that to win this supplier auction, they would have to cut their prices, which would be a catastrophic loss of margin for the company.
Enter Jim Camp.
TJ sought Jim’s advice. What should he do? It was a no-win situation. If Cypress bid, he’d lose margin, and if he didn’t bid, he’d lose the customer. Jim said: “tell them no.” He told TJ not to play along, not to participate in the auction.
Easier said than done, thought TJ. He recalls how Jim put it: “they’re treating your company like a commodity. But is it a commodity? Could you buy it in 10 places and sell it? And could you pass through somebody else’s product? Well, of course not. There are only a few companies in the world that can make this stuff.”
TJ knew the wrong decision could cut his share price in half. Jim pressed on, reminding TJ that Cypress Semi wasn’t a commodity supplier, and its SRAM was highly engineered and of superior quality — in no way widely available or easily replaced.
Jim was the shot of courage TJ needed, helping him see that the customer had much more to lose than they were letting on, if they couldn’t keep their steady supply of high-quality SRAMs.
TJ and Jim then hit on an idea that to outsiders might have seemed suicidal. TJ went to his board, calling for a corporate resolution banning participation in supplier auctions. Come the day of the auction, Cypress didn’t bid, explaining that the company could not and would not participate. The board had forbad it.
The result? The giant customer quietly killed the auction, and the orders continued to flow to Cypress.
While this one negotiation completely changed the trajectory of the company, TJ and Cypress learned may more vital lessons from Jim Camp. Here are TJ’s top three:
System Based Negotiation Beats Chaos
Over the course of his career, Jim’s big discovery was that a system was needed to become a disciplined negotiator. In his case, he used his experience as a US Air Force-trained fighter pilot to create his negotiation system. Flying a jet and persuading other people may sound unrelated, but he morphed vital aspects of training from one to the other.
Before takeoff, for example, the pilot always has a stated mission for the flight. She always works against a checklist before takeoff, and always debriefs after the flight. Jim set that same kind of disciplined system for executives he coached, employing a comprehensive set of rules, behaviors and activities. In my first two years of Jim Camp coaching, I completed over 900 checklists and logs (checklists are upfront plans, and logs are written debriefs following the negotiation).
Your Mission and Purpose Are Your Guide
When someone threatens the very existence of your company, what do you do? Reacting to Cypress’s customer — what was TJ supposed to do in the moment of crisis? Think of all the companies you’ve ever heard of that were destroyed thanks to blowing it in a crisis. Regardless of the specific reason for the crisis, in many cases companies compound their problem by reacting emotionally in the moment, having no sense of their highest and best value.
Cypress could have fallen into this trap by participating in an auction and implicitly agreeing with their customer that they were no better than a commodity supplier , not worth more than an auction process and certainly not worth the price they’d been charging. Had Cypress given in to that mentality — easily done for the sake of trying to win at least 80% of the customer’s order — they would have lost on their just due, their vital profit. And that loss wouldn’t be just that one time, but would have led to more losing, more concessions, lower profits, no doubt to a bitter end.
Instead, they created and kept their mission and purpose front and center: to supply the best semiconductor products in the world, and to be paid fair value for their work.
When you know your M&P is valid, you can sleep at night, and everyone around you comes to know what you stand for.
Say No
Jim loved to tell the story of one of his kids nagging him to go to the park. He was busy. He said no. Did his son give up? Of course not. He kept asking until he got his way. But somehow as we mature into adulthood, we can’t stand hearing no. We never want to hear it when we’re earnestly selling our services and products. Its rejection! And we avoid saying it when we are the customer. Much easier to just say maybe, even though it doesn’t get us anywhere.
And yet no is the beginning of getting to the truth in a negotiation.
Jim’s advice to say no resonated with TJ. He doesn’t go for platitudes. He liked being definite, and could take hearing no as a way to get at the root of a problem or roadblock.
From there, companies can get at the truth, and figure out what to do next. Companies can ask themselves why their proposal was rejected, what needs to be modified, or whether the negotiation is even worth pursuing.
Things got better and better for Cypress from then on. Initially only supplying SRAM, Cypress Semi knew they couldn’t sustain growth with a single product. SRAM was highly specialized, and if they wanted to grow, they knew they needed to diversify. It was either going to be growth from more R&D and innovation leading to new products, or acquisitions.
They doubled down on acquisitions, buying at least one company a year for a long time. They bought to bring in new ideas and new talent into their fold, and it worked. From SRAM dominance, it became a small piece of a smaller worldwide market, while new chips became the lion’s share of revenue and profits.
TJ Rodgers credits a lifelong love of learning for his success, noting that at the age of 72 he’s learning more now than when he was a young graduate student. Working to learn from everyone he meets, he credits negotiation coach Jim Camp with instilling his enthusiasm for the value of excellence in negotiations.
This is just scratching the surface into the lessons learned from Jim. One thing for sure: he helped many people around the world for the better. To continue the celebration of the Start With No audio program, check out this interview with Lanham Napier and Todd Camp. Lanham was president of Rackspace and Jim Camp-trained negotiator, who credits Jim’s coaching helping Rackspace explode from $2M revenue to $2B. Todd Camp shares some of his dad’s best advice and secrets he shares with his clients as head of Camp Negotiation Systems.
