Should I Start a Strategic Alliance or Joint Venture?

You are looking to gain that competitive edge over your competition. Many smart business leaders look to collaboration for expedient advantages. Might a mutually-beneficial relationship with another organization be in your future? If you answered in the affirmative, your next question will be, “Should I start a strategic alliance or a joint venture? This is a question that I’m frequently asked and the answer could be complicated?

More than Just Words

Actually, there is a huge difference between a strategic alliances and joint ventures; culturally, operationally, strategically, and legally. A little bit of strategy and pre-planning can, and will, make a dramatic difference for your organization as your new collaboration is developed and implemented. Let’s get it right from the beginning.

Strategic Alliance

Your reason for developing a strategic alliance relationship with one or more other companies is to take strategic advantage of their core strengths; proprietary processes, intellectual capital, research, market penetration, manufacturing and/or distribution capabilities, and a number of other reasons. You will share your core strengths with them too. You will have an open door relationship with another entity. You will mostly retain control. The length of agreement could have a sunset date or could be open-ended with regular performance reviews. However, you simply want to work with the other organizations on a contractual basis, and not as a legal partnership.

Joint Venture

Your reason for creating a joint venture is to take advantage of a fitting or convenient connection or overlap. A joint venture is a legal partnership between two or more entities. With a joint venture you will have something more than simple governance; you’ll have a completely new entity with a board, officers, and an executive team. Effectively a joint venture is a completely new organization, but owned by the founding participants. The board of directors generally is constructed with representatives of the founding organizations. This new company will “do business” with the founding entities—usually as suppliers.

Important Differences

1. Your strategic alliance is a contractual or handshake agreement while the joint venture is a legal partnership, LLC, or corporation.

2. Your strategic alliance summons the core strengths and differences of another organization to deliver value to your organization while the joint venture becomes a blending of cultures and creates a new organizational culture and path.

3. Your strategic alliance requires continued relationship maintenance while the joint venture has its own leadership team.

4. Your strategic alliance allows you to remain in control of your own company but the joint venture chooses its own direction; with the guidance of its board.

5. You can retain control of your proprietary creations while involved in a strategic alliance but in a joint venture, these creations are the property of the joint venture. If the joint venture fails, dividing the spoils can be a challenge.

Which Is Right for You?

There are numerous reasons, benefits, and pitfalls available to you whichever path you select. The key is to have an understanding of both your and your partner’s long-term desires. You can jump into and out of a strategic alliance quickly but the joint venture takes much more time to start and could be difficult to end. The joint venture takes less necessary attention form stakeholders once launched because of its own leadership team. If you are not willing to devote your time and resources to the health and maintenance of your strategic alliance, perhaps the joint venture is the better path for you? If control is important to you, the strategic alliance would be the better course of action.

Conflict Management in Alliance Development

There will always be conflict in strategic alliance development--it is inevitable. During this time of conflict you can take one of two positions. The first and frequently employed position is that of having your heels dug in. You believe you are right and that's it! The second position, and more difficult to employ, is where you care enough about your partner and the success of the alliance to understand what is motivating their behavior. Needless to say, my recommendation is the second.

Think Back

Just to make a point, I’d like you to think back to the last argument you had with your spouse, parent, child, a friend or in a business situation. Do you see yourself in the argument? Now, I ask you which position did you take?“ The first,” you say? I thought so. If you had taken the position of trying to understand the other’s position, there most likely would not have been an argument. We humans are not perfect. As such, we sometimes we fall into our stuff. At these times we are not the best people we could be. But, it is the person who recognizes that they are in their stuff and makes a new behavior decision that makes a good partner.

You might be thinking, “Thanks for the info, Ed, but why do I have to always be the person who makes the change, the person who makes it works? Why can’t it be the other guy once in a while?” My answer to you is simply that you are the one who figured it out first. Get out of your stuff and, as Nike says, JUST DO IT^®.Listed below are some additional tactics to help you resolve conflict.

• Evaluate your, and your partner’s, conflict management styles. Understanding each other is a great start.

• Identify and plan strategies to deal with non-productive behaviors before they crop up.

• Give positive feedback as often as possible so the relationship does not take on a negative tone through only fire fighting interactions.

• Confront problem situations at once rather than waiting for the situation to escalate.

• Invite comments from all stakeholders early in every project, especially your alliance partners.

• Consider using humor and maybe even humility in certain situations.

• Encourage dissent at a time and place that serves all involved.

• Review the value of the alliance relationship. Determine how much your circles of interest overlap. Ask if winning this battle will get you closer to an OSR, or further away from it.

• When you hear something you don’t like, repeat it back in an informational way. See if the message you received was the same as it was intended. Misunderstanding is the root of much conflict.

• Know your buttons and don’t allow them to be pushed. You have control in this area.

• Completely listen to what the other guy has to say before you open your mouth. Remember the adage, Listen twice before speaking once. That’s why God gave you two ears and only one mouth.

• Remember the principle of saving face. In some societies, it is a matter of life or death. Fortunately, or unfortunately, depending on how you look at it, this is not usually the situation in North America.

• Keep your ego in check. Be clear on the difference between high self-esteem and high ego. One serves and one does not. Need I say more?

• Appoint a devil’s advocate and allow them to be involved in projects from the start, all the way through completion. Their job is to be a pain in the neck. It’s not that they are just picking on a certain person or position. This keeps people from taking a dissenting opinion personally.

• Keep the consequences of your decisions in mind.

• Value the opinion of others. Focus on the clarity of the water, not the spring from which it flows.

I understand that building Outrageously Successful Relationships can be difficult at times. My best advise for you: Know the value of your relationships. Know where you want the relationships to go and stay on course. Accept that quality Partnering just takes time and effort. Accept that there isn’t any magic--just dedicated implementation.