A remarkably high number of companies report being dissatisfied with their joint ventures. Here’s what to know before getting into one—and the pitfalls to avoid.
Meet the Speaker
Transcript
So for me, really, it's two things.
It's the collaboration: working with partners to unlock value. Fundamentally a joint venture is about creating more value than the sum of the parts. The second piece is variety: there have been seven-and-a-half thousand different joint ventures started up in the last decade and every single one of them is different.
It’s interesting. BCG research has shown that about 90% of joint ventures do not deliver as much value as was anticipated. And about 80% of companies report that they feel like they get less value back than they put into joint ventures.
So clearly there are a lot of challenges but when done right, there's a lot of value they can unlock. A couple of the common pitfalls we see are a lack of alignment around strategic goals. It's about poor working cultural chemistry between two different partners. It's about poorly defined business plans, and its inflexibility to change to a changing external environment.
The first is where you see that both partners taking an investment mindset. They both think about it as they're buying into a joint venture, they're contributing something but they're also getting something back. And that's really important, because it provides the joint venture with the investment and support that is required for it to flourish.
The second is around a functioning and effective partner governance. That means that you avoid micromanagement, but you also avoid a lack of interest and disengagement from the joint venture to really, again, make sure you're providing the support that is required for the joint venture to be effective.
And finally, the early successes are critical. Over-investing upfront to get the early successes there to build the foundations, whether that's around the first board meeting or the first sales or the first product launch. Get those early successes on the board and that will allow the foundations to be set.
It's the collaboration: working with partners to unlock value. Fundamentally a joint venture is about creating more value than the sum of the parts. The second piece is variety: there have been seven-and-a-half thousand different joint ventures started up in the last decade and every single one of them is different.
It’s interesting. BCG research has shown that about 90% of joint ventures do not deliver as much value as was anticipated. And about 80% of companies report that they feel like they get less value back than they put into joint ventures.
So clearly there are a lot of challenges but when done right, there's a lot of value they can unlock. A couple of the common pitfalls we see are a lack of alignment around strategic goals. It's about poor working cultural chemistry between two different partners. It's about poorly defined business plans, and its inflexibility to change to a changing external environment.
The first is where you see that both partners taking an investment mindset. They both think about it as they're buying into a joint venture, they're contributing something but they're also getting something back. And that's really important, because it provides the joint venture with the investment and support that is required for it to flourish.
The second is around a functioning and effective partner governance. That means that you avoid micromanagement, but you also avoid a lack of interest and disengagement from the joint venture to really, again, make sure you're providing the support that is required for the joint venture to be effective.
And finally, the early successes are critical. Over-investing upfront to get the early successes there to build the foundations, whether that's around the first board meeting or the first sales or the first product launch. Get those early successes on the board and that will allow the foundations to be set.
