Measuring Joint Venture Success – A Different Perspective

A recent article published by the McKinsey & Company reminded me of a lesson learned from an Asian business friend.  Here is the link to the McKinsey & Company article:  Avoiding blind spots in your next joint venture provides a number of very practical thoughts on how to measure success. I have always been intrigued by how companies measure success in joint ventures.  From my experiences, there always seems to be a winner and a loser or the JV just didn’t work out well for either party.
A few years ago, I was enjoying a round of golf with my usual foursome of CEO friends at a golf course in Brazil.  We played every week and frequently shared stories regarding the challenges of managing a multinational company.  One of the fun parts of the business was getting the opportunity to test out joint ventures in a country like Brazil.  Companies can try to make a joint venture work without a serious financial risk to the bottom line if the same joint venture experiment was attempted in the United States or Europe.  If the joint venture succeeded, then the joint venture could be expanded regionally or globally.
As occurred many times, my CEO friends would at times invite other executives to join us.  One weekend, an executive with a major Asian corporation joined us for our day at the golf course.  He was the executive responsible for joint venture with one of the major US corporations to which one of my CEO friend managed.  87650603-1
As the day moved along, there was a greater openness to talk and share things about business.  I asked our Asian executive guest about how Asian companies measure the success of a joint venture.  He originally provided a rather simple reply that it is no different from any other business.  however, after a day of golf and then dinner that night, the two of us talked more over coffee about the differences between managing business in a U.S company versus an Asian company.   He then apologized for earlier not being completely honest with me earlier in the day.  He explained that in reality, Asian companies do measure a joint venture very differently than US companies.
The measuring stick for Asian companies takes a longer term view of success, whereas in US companies, the measure is always on short-term financial benefit.  As he elaborated, he smiled and said:

 ” the real JV success is measured by who sucks the brain of the other company faster.”

He explained that Asian companies are always focused more on process improvement and learning how to constantly improve things.  If an Asian company forms a joint venture, their primary goal is to learn as quickly as possible how to produce a product better or how to create a new product better…learn from the company that has already has the intellectual capital.  Then take that knowledge and dominate the market through better execution of processes with a longer term view of profitability.
Truly insightful and something that we should all adapt to in measuring Joint Venture success.Source document:  http://www.mckinsey.com/insights/corporate_finance/avoiding_blind_spots_in_your_next_joint_venture

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