How do I make a joint venture work?
Leadership & Strategy mentor Keith Lamb responds:
We at the Lamb Group have had both good and bad experiences with joint ventures. Here are a few lessons we've learned along the way.
Shopping for a Partner
We look for joint venture partners that have complementary products and services and share our business goals and motivations. Even if some of our products and services overlap with those of our partners, we don' t consider them competitors. Such thinking kills partnerships. We want to collaborate with people who promise to work hard to build a relationship that will increase value for our customers.
To reach that goal, we find it helps to partner with people whose leadership philosophy is similar to ours, whose approach to customer delivery is similar to ours. The best partnerships have that buy-in -- the notion that both sides fully support predetermined common goals and that the leaders of both companies champion the action plans. You need to plan and execute as one. That's very important.
It's important to address cultural issues, too. For us, a good partner is one who vows to make employees in both companies feel like part of this new family. When we've ignored this guiding principle, we' ve run into trouble.
One of our partners, for example, was a much larger company led by a successful visionary. Problems arose when this CEO dropped his involvement in our alliance and made someone else his point person, someone who was less concerned with cross-cultural issues. Naturally, our people felt like outsiders. No matter how hard we tried to make that alliance work, we couldn' t, without their help.
Funny thing about that messy partnership: We learned -- after the fact, of course -- that the other company had already been through several fruitless joint ventures. We should have dug more deeply. So I urge you to research your potential partners thoroughly. Ask for names of other companies they've partnered with and be sure to follow up.
In time, you'll develop your own set of partner must-haves and red flags. For us, for example, a joint venture candidate that offers only leads and no start-up cash raises a red flag right away.
Making the Partnership Hum
When we find the right partner, we sit down to agree on the start-up strategy, investments, goals, plans, and execution. We'll also come to agreement on joint marketing and sales efforts. This proactive approach to joint venturing makes your alliance far more than a handshake deal. Being proactive instead of reticent can mean the difference between delivering world-class customer service and run-of-the-mill customer service.
During these planning and strategy sessions (and later during joint sales visits), you'll find out right away the strengths and weaknesses of your partner. Learn to value, respect, and play to your partner's strengths, making the fullest use of them. Learn to understand the extent of your partner's shortcomings and be prepared to fill any gaps. You can't allow big egos to get in the way. Share ideas and determine what role each of you will play in making the venture a success. Markets are changing far too quickly to think there' s only one right approach.
With every joint venture -- as with a new business -- there's always a start-up phase that often takes more time and money than you expect. Promise to dedicate time and resources to the new venture. In our case, a few people from either side spend a certain percentage of their time both working on the new business and doing their regular jobs. Also, you should determine your up-front investment before jumping in. We call that putting skin in the game, and the partnerships that have worked best for us are those in which both partners have kicked in some money.
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