Joint venturing as a business development tool

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 (quot;AYEquot;), 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 quot;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 quot;To thine own self be true....quot; 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, financial, and other
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3. resources--- or they feared failure. But Thea Alexander put fear into a perspective which we think can
usefully be applied by an entrepreneur:
quot;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.quot;
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 quot;fitquot;, 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 quot;Fitquot;
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).
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.).
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4. 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
and profit greater than those who do not know how to use the joint venture business tool. A strategic
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5. 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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