1. Joint Venturing: A Business Tool For W/MBE’s?
by
Geraldine Reed Brown
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 W/MBE joint ventures, the quoted words are applicable to them today. Why
should an W/MBE consider entering into a 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 joint venture can be a very useful
business tool that works well, and launches the beginning of a great enterprise.
.
Consider an example. AY Enterprises ("AYE"), a W/MBE entrepreneurial firm consisting of four
Principal members, received a copy of an RFP from NJ TRANSIT. Each Principal thought the firm
should respond to the RFP but each also had reservations. One Principal thought AYE 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 NJ TRANSIT 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 AYE had a choice: pass up the RFP or
figure out a way to pursue it.
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2. What did AYE do? AYE went after the RFP and won it, reflecting an understanding of the Yoruba
proverb, the insight from “Moms” Mabley, and Demosthenes words. How did AYE do it? Through a
strategic alliance joint venture arrangement, AYE’s entrepreneurs went outside to get the skill sets it
lacked but needed in order to get the project. AYE partnered with another firm in order to capture the
business opportunity presented in the RFP. Though several forms of alliance were available for AYE
to consider, after careful review AYE selected a Collaboration Agreement for its alliance.
In selecting a Collaboration Agreement, AYE was very concerned that the project that was the subject
of the RFP be successfully completed. AYE 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. For illustrative purposes, the checklist that AYE utilized in shaping
its Collaboration Agreement is presented at the end of this brochure. The checklist is offered to assist
business entrepreneurs to identify and clarify some of their own business preferences and priorities as
part of the process of considering if a strategic alliance joint venture might fit those preferences and
priorities.
The Challenge of Change for W/MBEs
AYE, 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. AYE's entrepreneurs, like many others, had
never done a joint venture arrangement before. It was a new way of doing business on a project. In
order to move ahead, AYE 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 W/MBE entrepreneur thinking about a joint venture.
Overcoming Fear of Success or Failure
AYE's W/MBE entrepreneurs could also have passed on the RFP because they feared success
---winning the RFP meant growing, perhaps challenging the capacity of the W/MBE’s human,
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3. 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 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 joint venture
participants with the appropriate skill set to go after a contract). AYE'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 joint venture rather than miss that opportunity because
of false perceptions of limitation, AYE 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 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 can not be in conflict with your personality, your perception of yourself as an entrepreneur, and in
practice, a joint venture must fit in with the way you operate and run your business.
How Do You Make a Joint Venture "Fit"
In creating a stratetic 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. You need to determine what you
want to do ( purpose of the venture) and how long you want to do it together (the duration).
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4. The thoughts that the 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 joint
venturers will be compensated. If a joint venture arrangement requires some financing, how that
financing will be provided and its terms, how funds earned from the activities of the joint venture will
be handled, including expenses as well as terms of compensation to the joint venturers should be
addressed. One joint venturer might be looking at cash while another 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 joint venturer.
Management
In order for the joint venture to be successful and to fulfill its stated purpose, it must be well managed.
Determining who will lead the joint venture, who will manage the day to day operations of the joint
venture will be critical. We all know that if everybody is responsible for all aspects of a project then
nobody is responsible. In setting up a 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. Apart from ego, the parties should determine who is best suited
to manage.
Increasing Opportunities Through Strategic Alliances
W/MBEs should consider strategic 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 joint venture context, the 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
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5. and profit greater than those who do not know how to use the 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 W/MBEs to do so.
MBEs should consider joint venture arrangements when it is in their economic self interest to do so. In
coming together in 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 joint venture
context, the 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 joint venture business tool. A joint venture may be a means
to an end: fulfilling part of the entrepreneurial vision for your business.
Geraldine Reed Brown is President of The Reed-Brown Consulting Group, a management consulting firm, and
an Attorney. She obtained her MBA from Harvard Business School and her Juris Doctor from Harvard Law
School. RBCG can be reached by e-mail at RBCG1@aol.com.
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