In December 2017 Metallica were invited to perform their track ‘Moth Into Flame’ at the Grammys. As a lifelong Metallica fan I couldn’t wait to see the guys on stage performing some of their new music live. This performance was different though. Lady Gaga was joining James Hetfield on stage to share the vocals. After the performance (which had a few technical difficulties) I found myself listening to Metallica albums on Spotify. No big surprise there. What was surprising is that a number of Lady Gaga songs made their way back into circulation. I hadn’t listened to those for years. The Joint Venture had worked. A Metallica fan was revisiting Gaga songs!
In between my head banging and air guitar the performance got me thinking. How can we use the same approach in our business to achieve this sort of result? How can we team up with another business and have that relationship increase interest in both of our products and services?
What is a Joint Venture?
A Joint Venture (JV) is a project or promotion involving two or more distinctly separate people or business. The aim is to combine forces in some way to produce a desired outcome for both parties. Joint ventures can be as simple as swapping website links to drive traffic from one site to another or they can be as complex as whole combined business operations.
How is this different from a partnership? In a JV each party maintains their own separate identity and goes into the JV with their own set of objectives to achieve. It’s not one business sharing its profits between two people but rather two businesses working on something together that helps to grow them both independently. Metallica and Lady Gaga didn’t form a new band for one performance, the existing artists just worked together on the project.
Why Joint Ventures Work
Why should you use joint ventures as part of your business development plan? The beauty of joint ventures is that they allow the parties to leverage their assets to build something neither could have built alone. Something that is (hopefully) far more value than the sum of its individual parts.
It may appear that joint ventures are about the benefits they deliver to the businesses. It’s true that the participants hope to benefit from the project. However, first and foremost the JV must deliver increased value to the customer. Buyers are well educated and have infinite research capabilities literally at their fingertips. If your JV is about you and not your customer they will see straight through it.
A successful joint venture can offer:
- access to new markets and distribution networks;
- increased capacity;
- sharing of risks and costs; and
- access to greater resources, including specialised staff, technology and funding.
A joint venture can also be very flexible. It can have a limited life span and/or only cover part of what you do. This limits the commitment for both parties and the business’ exposure to each other.
How to choose a JV Partner
To ensure the success of your JV its important to choose the right partner(s). When choosing an appropriate business to join forces with you’ll want to consider the following:
- Your partners should have a similar target market without being direct competitors;
- Ideally, you will share similar values and beliefs. This will help your joint venture in the long-term;
- Consider a blended skill set, so that roles and tasks can be shared among you;
- A shared commitment to the success of the project is essential… if one party has too may ‘irons in the fire’ and shows a lack of commitment to your project that can be disastrous.
What can go wrong
If you go into a JV for the wrong reasons or choose the wrong person it can go horribly wrong. We are seeing this a lot in the accounting industry with professional bookkeepers going into JV’s with Accounting firms. Initially the bookkeepers are unaware that the accounting firms they are partnering with also offers bookkeeping services. Despite entering the JV for the right reason, to ensure their clients get a better overall service, the bookkeepers gradually lose clients to the accounting firms.
If your JV is struggling you might want to consider the following:
- Have the objectives of the joint venture been clearly defined and communicated to all parties?
- Is there an imbalance in the levels of expertise, investment or assets brought into the venture by each party that needs to be addressed?
- Are different cultures and management styles from the separate businesses failing to integrate with each other in the JV and stopping collaberation?
- Have the partners failed to provide sufficient leadership and support to their teams in the early stages of the venture?
Any one of the above can serious damage what could have otherwise been a great collaboration opportunity. Early detection and corrective action is absolutely essential.
Ready to start using JV’s to build your business? get out there, meet other business owners and look for interesting opportunities. The only limit is your imagination!