Joint ventures are a form of strategic alliance where a temporary partnership is formed between two or more parties, seeking to leverage shared markets, IP, knowledge and, of course, expenses and revenue. The degree of ownership is dependent on the agreement. Partnerships and joint ventures are quite similar; however the underlying difference is that partnerships may involve continuing a long-term business relationship, whereas a joint venture may be based on a single business or project. Beginning a joint venture with a business that has complementary abilities and resources can make a lot of sense and assist in the commercialisation pathway, but the pros and cons need to be considered before embarking on this strategy:
- Joint ventures agree to share profits and losses in a particular ratio. This also implies that risk and costs are spread amongst the parties
- Diversification of businesses allows companies to enter related businesses by producing new products
- Opportunity to gain access to new markets. This is of particular relevance if it is a foreign collaborator.
- Opportunity to learn new expertise and gain commercialisation and research and development capacity
- Greater access to resources including specialised staff and technology. Partners may complement one another in that one may have access to new and improved technology but lacks capital, whereas the other may have capital but does not have the technology.
- Use of existing marketing arrangements, distribution networks or advisors (ie. Patent attorneys, business consultants or grant writing specialists) is possible to save on time and resources. Increased flexibility as joint ventures have a limited life span and only serve a proportion of each partner’s business.
- Slower decision making as the objectives and management style of each partner/ inventor may differ, leading to the need to compromise
- Time and effort to find a new partner that is an organisational and cultural fit. A lot of time is needed to establish a positive relationship.
- Imbalance in the share of capital, resources, investment, etc. may create tension points in the relationship.
- Poor integration and poor co-operation may lead to the collapse of a business. Up to 60% of joint ventures end up failing.
Inner Maven can assist in defining and managing a clear path to market and in establishing the correct structures and relationships along the way.