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Making Joint Ventures a Strategic Success
Creating a successful joint venture (JV) entails taking seven major steps. Step one is to identify the purpose and drivers for the JV. Two, evaluate each side's product architecture. If each organization in a JV delineates its individual services and offerings to members and clients, some of the component parts could potentially be repackaged into a new and very attractive offering. Three, take great care in constructing an effective operating structure. Each organization in a JV separates and aggregates its operating activities in unique ways, and for a number of reasons. In addition, each organization has different ways of prioritizing and measuring effectiveness.

The fourth step is to define the business model for the JV. Each side must define the nature of the new venture, including the proposition to members, structure and roles, costs and payments, success factors and the timetable for delivery. Five, create an economic system that will work for all. The key players in any such venture must build a congruent economic system that includes a risk-adjusted cash flow model, along with break-even analysis and economic value-added rationale for the newly merged entity. Six, ensure that all negotiations are win-win. To this end, it is a good rule of thumb to negotiate according to each partner’s priorities and operating latitudes. Finally, "shake hands and lock arms."
Forbes (11/26/13)
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APRIL 2014 EDITION
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