Posted by: rongeri | October 14, 2009

Joint Venturing: A Business Tool For The Small Business Enterprise

Strategic Alliance Joint Venturing: A Business Tool For The Small Business Enterprise (“SBE”)

by

Geraldine Reed Brown[i], Esq., M.B.A.; Ronald W. Brown[ii], Esq., M.B.A.; and Michael Brown[iii], B.A. A

A Yoruba proverb observes: “When the door closes, you must learn to slide across the crack of the sill.” The comedienne Jackie ‘Moms” Mabley observed: “If you always do what you always did, you will always get what you always got.” Demosthenes once observed that “small opportunities are often the beginning of great enterprises.”

Think about these three observations. Each one contains some wisdom that applies to life and business, and particularly to how we can approach change, challenge, and opportunity. Though the observations were not referring to SBE strategic alliance joint ventures, the quoted words are applicable to them today. Why should an SBE consider entering into a strategic alliance joint venture? What are the possible problems, pitfalls, as well as opportunities and profit potentials? Is this business tool for you?

On balance, when properly structured, and in the right situations, a strategic alliance joint venture can be a very useful business tool that works well, and launches the beginning of a great enterprise. The joint venture is a powerful tool that can open new doors/avenues, maximize profits, and increase business networks for future partnerships, not only in times of economic downturn, but in a flourishing economy by utilizing multiple skill sets for a common goal.                               

Consider an example. “Do-You[iv] Enterprises” (“DYE”), a SBE entrepreneurial firm consisting of four Principal members, received a copy of an RFP from The Major Utility. Each Principal thought the firm should respond to the RFP but each also had reservations. One Principal thought DYE had some of the skills required to meet the deliverable required by the RFP but she was concerned that the firm did not have all of the skills covered in the RFP. Another Principal felt that the contract might be beyond the firm’s financial capability. The third Principal was concerned that though the firm had been in business for several years and was growing, it lacked the track record he assumed The Major Utility would require in order for the firm to win the business. The fourth Principal thought where there is a will, there is a way. The challenge was to find that way. The entrepreneurs in DYE had a choice: pass up the RFP or figure out a way to pursue it. 

What did DYE do? DYE went after the RFP and won it, reflecting an understanding of the Yoruba proverb, the insight from “Moms” Mabley, and Demosthenes words. How did DYE do it? Through a strategic alliance joint venture arrangement, DYE’s entrepreneurs went outside to get the skill sets it lacked but needed in order to get the project.  DYE partnered with another firm in order to capture the business opportunity presented in the RFP. Though several forms of alliance were available for DYE to consider, after careful review DYE selected a Collaboration Agreement for its alliance.

In selecting a Collaboration Agreement, DYE was very concerned that the project that was the subject of the RFP be successfully completed. DYE was not looking to be merged into or acquired by its collaborative partner, simply to work out a relationship by which both parties could benefit from working together on one project.    

Other examples of a strategic alliance can be found in almost every team sport. Take basketball team as one example of a strategic alliance. The coach, a trusted and well-experienced leader, makes decisions on who is best qualified to play each role on the team. A strong offensive team consists of members who shoot the ball and score points, members who get rebounds, and members who create plays through passing. Each member of the team has different strengths. Whether it’s their height, their speed, their ability to handle the basketball exceptionally well, or their previous experience, the team members bring multiple skills and resources together for a winning formula. Unless every member is doing his or her job and the team is playing in unison, everything falls apart. The same principles that guide a successful basketball team hold true for strategic alliance joint ventures in business. Determination, open communication, a clear plan, a strong leader, the ability to be flexible, and a positive attitude come together to form a winning team. Though other examples can be drawn from sports, let’s return to DYE and its strategic alliance.

The Challenge of Change for SBEs

DYE, like any entrepreneur in this situation, had to deal with the potential double paralysis of a negative attitude and the inability to take positive action. DYE’s entrepreneurs, like many others, had never done a strategic alliance joint venture arrangement before. It was a new way of doing business on a project. In order to move ahead, DYE had to confront the challenge of change. As Peter Drucker has observed “systematic innovation requires a willingness to look on change as an opportunity.” Changing the way you have done business — perhaps from acting alone and in isolation to acting together with someone else in collaboration — is a challenge. Not everyone is up to it. Are you? Asking that question of yourself and answering it honestly is tough. The words “To thine own self be true….” may find no higher testing than when required for an SBE entrepreneur thinking about a strategic alliance joint venture.

Overcoming Fear of Success or Failure                                                              

DYE’s SBE entrepreneurs could also have passed on the RFP because they feared success —winning the RFP meant growing, perhaps challenging the capacity of the SBE’s human, financial, and other resources— or they feared failure. But Thea Alexander put fear into a perspective which we think can usefully be applied by an entrepreneur:

“Fear only sticks around if you hang on to it…. I realized that two things can’t occupy the same space at the same time, and if I take the space that fear previously occupied and fill it with positive intention and specific goal-oriented action, the fear can no longer occupy that space. I realized that there are two paths you can take in life.  One is seeing life as a series of problems, fears, and failures. The other is seeing life as experiences, opportunities, and adventures. It is exactly the same life. It’s just that the perspective is different. You can either walk path A or path B. The choice is always yours.”

A strategic alliance joint venture can be a vehicle for maximizing success and minimizing failure. In that sense, a strategic alliance joint venture is a simply a business tool for MBEs. Increasing your understanding of how and when the use of a strategic alliance joint venture as a tool can assist you in progressing on your path to business success. In this example, AY Enterprises had the two components necessary to go after the project: a necessary attitude (open to the idea of collaboration to achieve a goal that could not be achieved by itself) and activity (focused attention to identifying, and involving strategic alliance joint venture participants with the appropriate skill set to go after a contract). DYE’s combining attitude and action reflected a basic realization: a percentage of something is better than a monopoly of nothing.

In deciding to pursue an opportunity through a strategic alliance joint venture rather than miss that opportunity because of false perceptions of limitation, DYE was putting into practice an observation embraced by the late Duke Ellington: “Life has two rules. 1. Never quit! 2. Always, remember rule #1.”                                                

When is it Right?

For a strategic alliance joint venture to “fit”, it must be right for you. Though that may seem circular, it isn’t. For the first place to determine if it is right, is with your attitude. You must be open to the idea of collaboration and it cannot be in conflict with your personality, your perception of yourself as an entrepreneur, and in practice, a strategic alliance joint venture must fit in with the way you operate and run your business.

How Do You Make a Strategic alliance joint venture “Fit”

In creating a strategic alliance joint venture, there are a number of practical steps that have to be considered. It is important to create a framework in which to operate. Joint planning between partners of the strategic alliance is crucial for both beginners and seasoned business veterans. You need to determine what you want to do (purpose of the venture) and how long you want to do it together (the duration). Thorough planning will provide expectations for each member of the alliance in order to release tension by ensuring that all members clearly know their responsibilities. Determining a plan and a business strategy will allow the goals of the joint venture to be clear and ensure that all members remain focused on their responsibilities.

The thoughts that the strategic alliance joint venture partners have about their venture should also be expressed in writing and address traditional business points (finance; management, etc.).

 Money                                                                 

Strategic alliance joint venturers should determine basic money issues early on, such as how strategic alliance joint venturers will be compensated. If a strategic alliance joint venture arrangement requires some financing, how that financing will be provided and its terms, how funds earned from the activities of the strategic alliance joint venture will be handled, including expenses as well as terms of compensation to the strategic alliance joint venturers should be addressed. One strategic alliance joint venturer might be looking at cash while another strategic alliance joint venturer might be looking at cash flow. These are not the same, and the difference can be a source of substantial friction when it comes to determining what is available to be paid out to the strategic alliance joint venturer.

Management             

In order for the strategic alliance joint venture to be successful and to fulfill its stated purpose, it must be well managed. Determining who will lead the strategic alliance joint venture, who will manage the day to day operations of the strategic alliance joint venture will be critical. Leadership must be competent, clear, and credible for a joint venture to be sustainable and successful.  We all know that if everybody is responsible for all aspects of a project then nobody is responsible. In setting up a strategic alliance joint venture, the venturers will have to determine what roles each will play to produce the result or purpose that has been agreed upon. Some parties may have to play a subordinate role in the venture. Although not every member may be used to playing a subordinate role, it is necessary for the ventures to remain focused on the goal and trust in the competence of their leader. Apart from ego, the parties should determine who is best suited to manage.

Increasing Opportunities Through Strategic Alliances

SBEs should consider strategic alliance joint venture arrangements when it is in their economic self interest to do so. In coming together in strategic joint ventures, whether in and through virtual offices, or in and through older commercial settings, entrepreneurs need to insure they know the rules of the game. In the strategic alliance joint venture context, the strategic alliance joint venturers through an agreement write their own rules, set their own game plan and then can go out into any field of business opportunity–hopefully, to perform better and profit greater than those who do not know how to use the strategic alliance joint venture business tool. A strategic alliance joint venture may be a means to an end: fulfilling part of the entrepreneurial vision for your business.

The ABC’s Success: Conceive, Believe, and Achieve

If we conceive, then believe we can achieve and accomplish more together than any of us can accomplish separately. Someone once observed: “Belief is the knowledge that we can do something.  It’s the inner feeling that what we undertake, we can accomplish. For the most part, all of us have the ability to look at something and to know whether or not we can do it. So in belief, there is power: our eyes are opened; our opportunities become plain; our visions become realities.” Strategic alliance joint ventures can help SBEs to do so. A strategic alliance joint venture may help you launch a great enterprise.    


[i]      Geraldine Reed Brown earned her B.A. from Fisk University, her Juris Doctor from Harvard Law School, and her Masters in Business Administration from Harvard Graduate School of Business Administration.

[ii]      Ronald W. Brown earned his B.A. from Rutgers The State University of New Jersey, his Juris Doctor from Harvard Law School, and his Masters in Business Administration from Harvard Graduate School of Business Administration.

[iii]     Michael D. Brown participated in the L.E.A.D program in business. He earned his B.A. from Stanford University.

[iv]     “Do-You Enterprises” is a totally fictional name and any resemblance of that name to any actual company or enterprise or its trademark, service mark or any other protected intellectual property is purely coincidental. However, Do You! 12 Laws to Access the Power in You to Achieve Happiness and Success is the name of an extraordinarily well-written book by the entrepreneur Russell Simmons. The book is packed with wisdom and practical insights.

  


[i]  Geraldine Reed Brown earned her B.A. from Fisk University, her Juris Doctor from Harvard Law School, and her Masters in Business Administration from Harvard Graduate School of Business Administration.

[ii]  Ronald W. Brown earned her B.A. from Rutgers The State University of New Jersey, his Juris Doctor from Harvard Law School, and his Masters in Business Administration from Harvard Graduate School of Business Administration.

[iii] Michael D. Brown participated in the L.E.A.D program in business.  http://www.leadprogram.org/  He earned his B.A. from Stanford University.

[iv] “Do-You” Enterprises is a totally fictional name and any resemblance of that name to any actual company or enterprise is purely coincidental. However, Do You! 12 Laws to Access the Power in You to Achieve Happiness and Success is the name of an extraordinarily well-written book by the entrepreneur Russell Simmons. The book is packed with wisdom and practical insights.


Responses

  1. Very nice.

    I’d like to add that geographically diverse joint ventures allows partners to take advantage of the comparative advantage of nations to create value.


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