You probably have seen a few instances of Joint Ventures being announced between a big Chinese tech firm and a strong local partner in Southeast Asia.
The Chinese firm would provide the technology, experience and expertise; whilst the local partner will give access to customers, partners, as well as local understanding and resources. Millions, if not tens of millions, of dollars were often committed.
You probably have seen a few of these prominent JVs going quiet after the fanfare announcement. And if you ask the people involved in the projects, they would tell you “well nothing is moving”.
Reasons for failure
Typically there are a few reasons, from the cases we have seen:
- Misalignment of objectives: vision-wise, the partners are usually aligned, at least initially, otherwise they would not go into a joint venture. However, the short term and medium term objectives often differ. For example, if the JV is in ecommerce while the local partner is a retail giant. Would the local partner rush the JV with the peril of disrupting its existing business, or would it be more defensive to not miss out in any disruption?
- Shareholding structure and decision making mechanism: again, even if the short and medium term objectives are aligned, you still need to make decisions on how to achieve these objectives. Just like any co-founder relationships in startups, here much more is at stake and much more people are involved, sometimes disputes do take a lot of time to be resolved.
- Collaboration between teams: we have seen a number of cases where the core teams of such JVs are contributed by both partners, with additional people hired to fill in the gaps. Quite often, when at the higher level there is a lot of consensus, at the working level different cultures, styles and understanding make it a bit difficult to translate. Working styles, perception to time, planning etc. can all be different – and someone would need to actively be in charge to bridge the gaps.
The few relatively successful cases we have seen have the following in common:
- A dominant party in the relationship with strong incentive to make it work;
- The other JV partner knows their position and supports the dominant party (just like investors supporting their portfolio startups) with their proportionate contribution;
- The team coherence problems are addressed at the onset – and the JV is very quickly put into the growth mode (so the team would focus on the tasks of delivering growth rather than philosophical debates on what is right).
We tried not to name the ones mentioned above. However, if you want to discuss about specific cases, welcome to write to use at [email protected].