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Joint ventures are likened to honeymooners, destined to forever after a fairy tale wedding. But is it so?
According to a Mckinsey report an “estimated 40-60 percent of joint ventures,” on a macro level of business entities, “underperformed or failed outright.” The report says that what makes JVs click would be a clear understanding of existing business mechanics and aligned expectations, selection of partners is objective, a working structure that is fair and balanced, clear sense of exit options, and a check and balance of decision processes.
Sounds like a marriage after all? Good combination of great expectations with a clause on good separation strategy. Prenuptial agreement for 2 businesses.
True enough most failures come in when skipping steps – in a rush of the joining together — takes place. Most perhaps are thinking that should there be issues, a step back is possible later on in the game. This creates blind spots. As risks come in, struggles with response are not agile enough to prevent losses.
At times, business owners encounter situations primed for growth yet they feel that given the speed to market and vastness of the opportunity, they don’t have the necessary moving pieces coming together yet to grab it all at once.
That’s where joint ventures come in. It comes to mind when start ups, and even established ones, sense the cramps in terms of internally available skills or resources to tread on a specific marketing channel.
Still many are left skeptical of this setup thinking that by staying internal will ensure 100% profits intact. That joint venture split revenues.
Far from it, if execution is done properly, JV’s don’t deduct, it adds up. Be it for product offer, a promotional initiative or slice of the target market.
In marketing speak, JV is likened to co marketing or an alliance in strategy. Two companies combining separate efforts into one to pump revenues and brand equity.
Don’t mistaken JV with partnership. With the latter, the combination seeks to combine altogether creating a unified presence. It is now a big ship.
With joint venture marketing, given the agreed upon marketing and bottom line goals, the marketing and promotions plan is designed to take in both companies in unity to achieve its purpose. It is now an aircraft carrier.
There is conjugal, if we may say, decision making existent with joint ventures. However we would want to do it, we decide on it together first. Mutually beneficial for both. Whereas with partnership, there is a dissolution of separation.
JV, what is yours is mine. Partnership, we are created as one.
As the world is getting flatter by the nanoseconds, collaboration is all the more becoming pivotal a certain advantage and competency over competitors. So who said 2 heads are better than one? And this is true with joint ventures. Both become complementary and edge rounding the other.
Yet, given that almost 50% of these engagements fail, we look back to worthiness of efforts.
Two companies looking at each other as an ideal match is a good way of getting faster and bigger when the time comes they become a joint venture couple. Skills and assets combined plus a great marketing plan to service delivery, life’s a punch.
But when revenues dry up, disputes become heated, as in most never to forever after invoke — irreconcilable difference hound the union.
It’s time to take stock and ponder. To save what is left or to call it quits.