Joint ventures are like a marriage
‘Never go into a business partnership 50:50′. My father didn’t often give me advice, but that one stands out in my memory. A couple of decades earlier, he went into a partnership with a business associate. For many years the business did well. Their roles were well defined because my father did the books, mostly at home in the evening, while, during the day, his partner was on the road selling. They hired a manager to look after the warehouse in their absence. As an undergraduate, I helped out in the warehouse over my summers. By that time the business was much diminished from it’s heyday in the 1970’s. Sales were declining. The business manager and staff were stealing stock and competition was leaching customers away. My father and his partner had grown apart and were no longer friends. The colleague had become an alcoholic, while my father’s health was failing. Both men were stuck with each other. Neither could force their will over the other. It was a 50:50 partnership.
Fast forward another couple of decades and I found myself working for a large, multi-national business in joint venture with another large multinational. Each had pooled their brand and supply chain expertise to expand their drinks business beyond what each could achieve on their own. Included in the terms of the joint venture was requirement that any new drinks innovation from either partner should be brought within the terms of the agreement. I had an exciting new drinks innovation. Discussing with a senior colleague whether we should offer this to the joint venture, he laughed. ‘That’s the last thing we should do’ was his answer. That joint venture was notorious within our business for being troublesome. If we were dating, we would have called the other partner ‘high maintenance’.
Joint ventures are just like a marriage: living in close quarters, day in, day out, having to take someone else into account rather than just please yourself, the falling outs and arguments. You have to work to make it succeed. You have to want it to succeed.
In their way, joint ventures are more difficult than mergers and takeovers. In a merger or a takeover the parties are never equal. Although the level of change is significant, one party is dominant and their culture, ways of doing things and staff will prevail at the expense of the minority partner. After the minority partner has been absorbed, things go back to normal. With a JV, no party will ever prevail. Although the level of change is not so significant as with a merger, it is nevertheless permanent as long as the venture survives.
In joint ventures you have to work together. If you don’t the JV will certainly fail. But working together means voluntarily constraining yourself, finding ways to stitch different cultures together, asking people who might not like each other to find ways of working together, and putting up with longer decision-making times. None of these things you would tolerate in your own business where you have complete control.
Why put yourself through all this? Survival. Successful JVs need each other and, ultimately, this need outweighs all the hassles; each partner can’t do it on their own. It’s modern life really. Each of the stories I told at the beginning had an unhappy ending. My dad died. My mother sold the business to his business partner who, although he had complete control, went out of business shortly afterwards. And in the case of my drinks innovation, my ‘home’ company wasted years fiddling around with the product and never managed to bring anything to market. Both examples make me wonder whether, if the partners had been more motivated to find a way of overcoming their difficulties, whether the ending of each might not have been happier.
If you are considering a joint venture my advice is, ‘Don’t do it, you’re still young!’ My slightly more useful advice is to set things up from the beginning so that, years from now, when you can’t stand the sight of each other, the business is still able to function, or you are able to do something about it.