Small Business
Business INSIGHTS e-News for Manufacturers
Follow @PNCNews for breaking news and information from PNC. more >
A Cash Flow conversation that can help your business achieve more. Start your conversation today. more >
It All Starts with the CFO Conversation
Success Factors for Collaborating on a New Venture

How to share resources and foster innovation among different parties.

In manufacturing, collaborations between companies may come in a handful of different forms, according to PricewaterhouseCoopers in Navigating Joint Ventures and Business Alliances. Some of the forms that may be employed include:

  • A joint venture is a structural alliance where the parties form a new company.
  • Virtual joint ventures are collaborative arrangements based on contracts that include defined risks and reward.
  • A joint development arrangement is a long-term contract for a specific task such as purchasing or developing a part or module of a new product.

Sometimes a venture includes more than two parties. To foster collaborative ventures and innovation, cities and regions are establishing networks--business ecosystems--of educational institutions, government agencies, research organizations, entrepreneurs, mentors and sources of capital. In the Grand Rapids, MI, region, for example, a tech-driven initiative of several partner organizations led by GR Current is supporting startup medical device manufacturers. This collaborative also includes customers--area hospitals--in the mix.

If you enter a joint venture, you will be committing to sharing certain resources, knowledge and activities with your partner. The intention to collaborate can break down unless both parties have a full understanding of exactly how resources, risks and rewards will be shared. Each partner must be ready to make the degree of commitment the new business will require. And new ventures are complex. Shared assets and structures from one partner may be very unlike those of the other, making integration difficult.

Any successful collaboration requires firm, mutual trust. To support trust, create transparency. Your plan should define the key business and performance indicators to be measured, as well as the monitoring mechanisms to be used--and how they will be reported. While the venture is being structured and negotiated, the parties must thoroughly and explicitly share and understand a vision and purpose for it. Key stakeholders and their objectives need to be identified, and the objectives of the new venture aligned with them. There should be a clearly documented strategy for how to achieve the objectives.

The companies should make a firm commitment of the resources and leadership needed to start up and manage the new venture. Expectations and accountability should be part of the plan. The agreement also should establish policies and procedures within a solid operating and governance framework. However strong your trust and plans are, things can change. Be sure that your understanding and contracts are clear on exit mechanisms you may need if things are not going the right way.

Another company and yours may have the right ingredients to do more together than you could do separately. With all details clarified beforehand, your joint venture will be able to hit the ground running.

 



The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.