“Joint undertakings stand a better chance when they benefit both sides.” — Euripides
A couple of weeks ago I asked the question, “Are all business partnerships made the same?”
In this blog, I’d like to discuss joint ventures and strategic alliances, two commonly used business partnership structures. First a reminder of how I’m defining the two:
Strategic Alliance – a formalized relationship between two parties to pursue a specific endeavor or set of objectives while remaining separate entities.
Joint Venture – a strategic alliance where the two businesses create a separate legal entity for this endeavor.
Strategic alliances are quite simply business collaborations and can be formed for a variety of reasons, including joint sales or marketing, R&D, and other resource or intellectual property sharing. Strategic alliances take place between sole proprietors, small and large companies alike. For example, in my consulting business I have strategic alliances with other consultants who specialize in areas I do not, such as human resources or social media. These alliances benefit my business because they allow me to create added value for my clients. They benefit my client because I have saved them the time of finding and prequalifying additional service providers. And they benefit my alliance partners because they reduce their cost of sale and bringing them business they otherwise may never have received.
Strategic Alliances are not a “legal structure” per se, but for purpose of clarity, I do recommend a written agreement between the parties outlining how the alliance will work, who has what responsibility, and any financial consideration.
Joint ventures on the other hand, are those strategic alliances that have been formalized to the point of the creation of a separate legal entity in which the two parties each own a stake. This is method is more commonly used by large corporations, sometimes even competitors (e.g. automobile, entertainment and energy industries,), often in real estate for large development projects, or by companies for the purpose of entering foreign markets.
What these two types of partnerships have in common is the need to carefully select your alliance or joint venture partner and to ensure there is alignment on all of the important issues, including those considered “soft”, such as vision, culture and values.
For more information on strategic alliances and joint ventures check out:
- July 2010 issue of INC magazine article: http://www.inc.com/magazine/20100601/how-to-build-business-alliances.html
- “What’s the Difference Between a Joint Venture and a General Partnership? By Kimber Leo: http://www.brighthub.com/office/entrepreneurs/articles/86301.aspx#ixzz0zARVF2pj
- “Joint Venturing 101” by Scott Allen: http://entrepreneurs.about.com/od/beyondstartup/a/jointventures.htm
My recently published workbook, “Creating Great Business Partnerships. A Workbook For Success” contains all of the tools you will need to move through the due diligence of picking the right alliance or joint venture partner and making sure you are on the same page to ensure success.