Category Archives: Managing Growth & Change

Joint Ventures: The Key Role of the Project Director During the First 90 Days

A few years ago I wrote an extensive article for Business Law Currents, a Thompson Reuters publication, that laid out the “Top Dozen” list of issues that parties to a prospective joint venture (“JV”) needed to consider before investing the extensive amount of time and resources necessary to achieve the expected benefits of collaboration associated with a JV.[1]  The discussions surrounding each of those issues are important in establishing the overall goals and objectives of the JV and the framework for implementation.  However, while well-drafted legal documents are useful, they obviously are not enough to assure the success of a JV.

This article is adapted from material in Managing Growth and Change: A Handbook for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

While a JV and a merger are distinctly different strategies, with their own unique consequences to both sides of the deal, they share one thing in common: the need for a clear planning and building agenda for the first 90 days following the announcement of the combination.  In the merger context this is often referred to as an “integration plan”.  When a new JV is on the horizon the idea is to bring the JV alive and move it along from being just an announcement from the management of both parties to an accepted part of the day-to-day experience of personnel from both parties.

As it becomes clear that the parties will soon reach agreement on the outline for a new JV action should be taken to initiate quick and aggressive, yet carefully orchestrated, planning overseen by an experienced JV project director who can provide strong leadership from the very beginning.  The project director, ideally supported by a staff of specialists in particular areas (e.g., human resources), should be prepared to engage in a number of different activities and deploy a wide array of tools and strategies.  While each of the parties to the JV will have one or more persons with primary responsibility for implementation of the JV from the perspective of that party the JV project director should be selected by both parties and empowered to engage with both parties to facilitate the JV formation and organization process.

The experience that the JV project director brings to his or her role should include a project procedure manual that lays out the key steps that will need to be taken and provides the tools necessary to complete each of those steps.  While the launch activities for a complex JV are quite extensive experience shows that the following “Key Dozen” should be on every project director’s list:

  • Embark on detailed planning of the structure of the JV as well as the provisions that are to be included in the charter documents (i.e., shareholders’ agreement) and operational plans and policies
  • Conduct a full audit and assessment of the resources (i.e., technological, informational, strategic, physical and human) that are owned or controlled by both of the parties and determine their suitability and availability for the JV
  • Interview key players from each of the parties to identify their concerns about the proposed JV and any challenges they believe will need to be overcome and establish processes for developing strategies to address and overcome potential problems
  • Establish an ongoing program to secure the commitment and ongoing engagement of key players from both of the parties from the very beginning of the JV review and formation process
  • Identify the business and financial goals and objectives of each of the parties with respect to the JV and incorporate alignment of those goals and objectives into the planning process
  • Develop a systematic and continuous program for educating each of the parties about the strengths and resources that are available from the other party and the reasons that the other party was identified as a suitable partner for the JV
  • Carefully determine the requisite level of experience and skills needed to fill key positions within the proposed JV organizational structure
  • Establish a clear and mutually agreed process for selection and assignment of key personnel within the proposed JV organizational structure
  • Develop and implement a clear and comprehensive set of personnel policies and procedures supported by training and other methods for establishing cultural norms and expected behaviors from the very beginning of JV operations
  • Design and launch a program for educating all JV personnel, up and down the entire organizational structure, about the conditions, norms and expectations in the markets in which the JV will be operating including local regulations, culture and customs
  • Establish a clear and mutually agreed strategy for engagement of the JV with key stakeholders in its marketplace (e.g., pricing and marketing strategies for products to be manufactured and sold by the JV)
  • Establish procedures for cooperation and coordination between the parties with respect to initiation and negotiation of strategic alliances between the JV and other parties

In order for the project director to achieve success with respect to each of the initiatives listed above he or she needs to be prepared to engage in extensive face-to-face dialogue with executives, managers and other personnel from both parties.  Once agreement or consensus is achieved, the results should be immediately documented, and commitments from the parties should be confirmed, so that there is no confusion at a later date.  For example, if it becomes apparent that one of the parties has a large pool of engineers or other technically-trained personnel with skills and experience that are ideally suited for the JV it is important to obtain a commitment from that party to provide staffing support to the JV including agreement on who will be made available to the JV and when, the terms of the assignment and plans for allowing personnel to return to their parent company upon completion of certain activities.

The project director needs full and visible support from the executives of each of the parties and executive support can be particularly useful to the efforts of the project director to pursue and achieve alignment of interests between the parties in general as well as among the functional and support units within each of the parties and the JV.  For example, if a JV is formed to conduct research and product development activities relating to a specific technological opportunity a concerted effort must be made to inform and engage relevant research specialists from both parties, even if they are not being assigned to the JV, and establish communications between them and the researchers who will be working on the problem within the JV.

Finally, the project director needs to be provided with sufficient financial and other resources to be successful and complete all of the activities suggested above in a very tight time frame.  Support from specialists has already been mentioned; however, the project director should be able to access meeting rooms to conduct planning and training activities, engage outside consultants to facilitate brainstorming and problem-solving sessions and obtain assistance to create documents, budgets and schedules.  The project director should also be in a position to facilitate the extensive flow of information and communication that will be required during the first 90 days.  In particular, the project director and the executives from both parties need to take advantage of multiple communications channels (i.e., print, meetings, video and e-mail) to disseminate a full and clear vision of the hopes for the new JV and impact it will have on everyone on all sides of the deal.

A JV project director occupies an important role; however, the director must be mindful that the mission he or she is pursuing is often seen as threatening by people from both parties and that planning for the JV will begin in an atmosphere filled with rumors, misinformation and worries.  In the ideal world, for example, the project director would obtain full commitment and support from all quarters and gather information on “best practices” that can be transferred to the JV to reduce the learning curve for the new business and accelerate progress and success.  The reality is that people will be reluctant to share their knowledge with the project director and the JV until they fully understand what the JV means to them and their careers.  The JV project director may also be stymied by personality issues and the personal ambitions of executives and managers on both sides who either see the JV as a threat or a path to advancement.  In order to reduce the potential damage to the JV launch from these issues the project director must have the support of top executives from both parties and their commitment to invest time and effort in personally addressing the “me” issues that persons from each party can be expected to have regarding the JV (e.g., “will I have a job, will I be assigned to the JV, who will I report to and will my duties change?”).  The executives also need to set the stage for success in the way that they act during the negotiation process, which means avoiding unnecessary hostility and establishing a foundation for ongoing communication and cooperation which naturally flows down to everyone else involved in the JV.

While all the advice above is valuable, the task is clearly daunting and there is much to be done in a very short period of time.  While each of the issues are important the JV project director, acting in concert with the senior executives of both parties, such identify and pursue a small set of key, and measurable, goals and objectives during the first 90 days in order to get off to a good start in the JV launch process.  These goals and objectives, which should keep everyone tightly focused and engaged, should be announced and widely communicated and accompanied by guidance to everyone as to what their role will be in achieving those goals and objectives.

This article is adapted from material in Managing Growth and Change: A Handbook for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

 

Google to Alphabet: An Ambitious New Conglomerate Experiment

In August 2015 Google Inc. announced a dramatic and sweeping change in its organizational structure: Google would become one of several autonomous subsidiaries of a newly-formed holding company named “Alphabet”.  The restructuring would separate, at least on paper, the company’s wildly successful search business, which was quite profitable and generated significant amounts of cash, from a handful of other initiatives focusing on ambitious and difficult problems such as developing a driverless car and life-extension technology.  While the company’s efforts outside of the search business had attracted a good deal of publicity and scrutiny, they were far from profitable and quite risky.  The company’s founders, Larry Page and Sergey Brin, argued that by putting Google and the other businesses into separate subsidiaries, and forming new subsidiaries for other businesses the company launched or acquired in the future, the operations of the entire company could be made cleaner and more accountable and they could avoid getting too “comfortable”, relying on incremental changes, and continue to pursue the revolutionary ideas that would drive the new growth areas that Alphabet needed to stay relevant.  According to Page, “Alphabet is about business prospering through strong leaders and independence”, and Page explained that each subsidiary would have a strong CEO and that the role of the founders would be to “rigorously handle capital allocation and work to make sure each business is executing well”.

Initially the portfolio of Alphabet subsidiaries would include Nest (smart homes), Fiber (affordable and super-fast Internet and cable television for consumers), Calico (life-extension technology), Google X (drones and self-driving cars), Sidewalk Labs (new technologies to improve urban life) and Google Ventures and Google Capital (early and late-stage investments) apart from the Google subsidiary itself, which would still have a sprawling mandate covering search, apps, Android, You Tube, ads, maps and technical infrastructure.  The company enjoyed a modest bump up in its market capitalization after the restructuring was announced and, not surprisingly, the move was subjected to a high level of scrutiny and analysis.  An article in The New York Times written just after the announcement of the restructuring noted that many pundits had been struck by the decision of the company’s founders to create what amounted to a “conglomerate” and set out to explore what the experiences of three well known 20th century conglomerates—Berkshire Hathaway, General Electric (“GE”) and AT&T/Bell Labs—might tell us about what could be in store for Alphabet and some of the issues that Page and Brin will likely need to address. 

Berkshire Hathaway has been guided for decades by Warren Buffett, who has made himself one of the wealthiest people in the world and turned his company into one of the most valuable in the world through a continuous stream of acquisitions of businesses in a wide array of industries and markets. While insurance is the largest sector in the Berkshire Hathaway portfolio, Buffett has also been willing to place bets on mobile homes, private jets, Heinz ketchup, Duracell batteries and aerospace parts.  One of the apparent similarities between Berkshire Hathaway and the proposed Alphabet structure is the practice, rigorously followed by Buffett, of providing management of the various businesses with broad discretion to manage day-to-day operations.  In fact, Buffett keeps only 24 employees in Berkshire Hathaway’s corporate office in Omaha to watch over businesses that employ 340,000 people worldwide.  A key difference, however, is that Berkshire Hathaway’s portfolio of businesses was carefully culled to emphasize companies that were “well established, with proven models for profitability, at favorable prices” and which were based on proven and/or reasonably projectable business models.  In fact, Buffett rarely invested in businesses that represented large bets on a particular technology.  While Page and Brin promise Buffett-like autonomy for the Alphabet subsidiaries, for now at least they will all be seeking to create products and services that do not exist and for which the markets are far from certain.  As such, Alphabet shareholders cannot expect the same sort of smooth ride that Buffett has provided to his investors, especially since nobody can credibly predict the outcome of the innovative activities the subsidiaries will be undertaking.  There is the possibility that Page and Brin will fold established businesses into future subsidiaries, as Buffett has done, but this would clearly be a radical see change from where they were at the time they announced the restructuring. 

The initial similarities between GE and Alphabet follow from the diverse range of technologies and businesses that GE has been involved with since the company was launched with the help of Thomas Edison.  GE researchers, designers, manufacturers and marketers have played an innovative and pivotal role in the development, improvement and commercialization of light bulbs, locomotives, X-ray machines, electrical appliances, radios and televisions, fiber optic cables and M.R.I. body scanners, to name just a handful of the technologies that bear the imprint of GE.  The businesses of the initial Alphabet subsidiaries—for example, search and driverless cars—are certainly as different as light bulbs and locomotives; however, for Alphabet to be able to tap into GE’s secret formula it will need to find a way to make its various business lines stronger under the Alphabet umbrella than they would be standing on their own.  GE did this by maintaining a strong organizational culture among independently operated businesses by creating and vigorously guardian linkages between the businesses and the people that worked in them that benefitted everyone.  GE was also adroit at leveraging a centralized research and development capacity to create and disseminate technologies that could be applied across a range of businesses (e.g., laser technology developed by GE researchers was used by business units active in medical devices and telecommunications).  The question for Alphabet, as posed in the article: “… is whether it becomes a centralized innovation machine or a bunch of separate projects that happen to have the same corporate parent but not much else in common. Can it make its various initiatives more than the sum of their parts?” 

AT&T/Bell Labs aligns well with Alphabet’s aspirations for successfully solving difficult and life-changing technological problems.  Just as Alphabet can reasonably expect to generate significant revenues from the Google search business, AT&T could rely on a continuous stream of cash from its position as the monopoly provider of telephone services in the US.  In 1925 AT&T set up Bell Labs as a free-standing research unit and over the next 70 years Bell Labs, using money provided by AT&T, was a preeminent center of basic research that developed technologies that were central to a wide range of inventions including the transistor, the laser, communications satellites and solar cells.  It was not always clear that AT&T shareholders benefitted significantly from the work done at Bell Labs, particularly when the work was basic research that was accessible to other companies; however, the parent company’s support of Bell Labs was not overly concerning to its shareholders as long as the profits coming from the monopoly continued to pour in.  In other words, there was plenty to go around.  The profits from Google might serve a similar purpose within Alphabet: a lot of the research in the relatively new and unknown fields occupied by the other subsidiaries is essentially “basic”.  The  founders will need to strike the appropriate balance in allocating Google-generated profits and will need to be mindful that while Google is strong in search right now there are no shortage of competitors and regulators around the world clearly have reigning in Google’s actual or perceived monopoly on their agendas. 

Google and its founders are not strangers to being compared to iconic businesses frm the past.  For example, in a December 2014 article in The New Yorker, Lemann described some parallels between the “pre-Alphabet” Google and General Motors (“GM”) in its early days.  First, both Google and GM accelerated their growth paths through aggressive acquisition of small companies that provided technology and, in the case of Google, large crowds of users that could be usefully integrated into their larger businesses.  Second, Alfred P. Stone, GM’s iconic leader from the early 1920s, foreshadowed Google’s fixation on “the user” by offering a range of styles and prices for consumers that allowed GM to tap into the subtleties of demand rather than relying on the on-color, one-style and one-price approach used by competitors such as Ford.  Third, Sloan, Page and Brin were all in agreement that they oversaw “engineering” companies.  Finally, the three men also shared a hunger for pursuing high-risk, high-reward projects that flew in the face on the demands for short-term earnings and profits that came from the investment community.  Lemann noted that Sloan actually launched a technical center that looked a lot like something one would see in Silicon Valley decades later, complete with what Sloan called “fine cafeterias”, and implemented programs that tied managerial compensation to the performance of GM stock. 

The Google to Alphabet restructuring was welcomed in many parts of the investment community as a means for achieving more transparency about the financial situation of the company’s “Hail Mary” businesses.  Presumably reporting profits and losses for each of the subsidiaries, as well as the transfers of capital between subsidiaries, will make it easier for investors to understand how the Alphabet portfolio approach is working.  Interestingly, this is another area where Page and Brin are making moves similar to those made by Sloan after he had completed his own “organization study” of GM to find ways to address financial and administrative chaos left by his predecessor.  Sloan was one of the pioneers of new organizational design techniques and decided that the best approach was to establish autonomous divisions based on “product lines” (e.g., Chevrolet, Buick, Cadillac etc.), each of which would have its own president and operating budget.  As autonomy was being disbursed among these new business units the headquarters office would, much like the parent company in the Alphabet structure, monitor performance of the divisions and take the lead in providing specialized services that all of the divisions might need at some point such as finance and research.  While the reorganization at GM did distribute large numbers of employees into different groups, Sloan remained mindful of the advantages of commonality and implemented uniform training and supervisorial programs overseen by professional managers to improve and maintain productivity and instill in all of the employees a sense that they were valued contributors to a larger endeavor that bound all of the divisions together. 

It is fair to suggest parallels and similarities between the initial visions and promises for Alphabet sketched out by Page and Brin and the positive experiences of Berkshire Hathaway, GE and AT&T/Bell Labs; however, Page and Brin will continue to face the classic tradeoffs between doing what is best in the short-term for shareholder value and making long-term bets on extremely risky innovation.  Doubling down on big ideas is not new for the company—it’s already made big investments in the businesses that will be operated in the new subsidiaries and the company’s organizational culture has always included explicit permission for employees to set aside time to work on personal projects.  But, the restructuring invariably changes the entire picture and some of the things that will be watched closely as the Alphabet experiment begins are the following: 

  • Loose supervision, lack of formality and “ship and iterate” have been mainstays of Google’s organizational culture and managerial practices since the very beginning.  All of this obviously worked very well as the core business grew and prospered; however, maintaining some semblance of order has become a higher priority and the restructuring likely represents an effort to clarify who does what and how decisions will be made.  It is imperative that the found clearly and cleanly demarcate the boundaries of the businesses and construct the links between them that will facilitate communication and tap into the value of having small groups collaborate to solve mutual problems.
  • While Alphabet enjoys substantial cash reserves built up from Google’s past successes, Google’s path remains crucial to the progress of all of the businesses until they reach a point where they can sustain themselves on their own and attract investor capital independently without the search business being offered as collateral.  Google is under a lot of pressure to keep users engaged, which means finding ways to continuously add new users, more information, new reasons to engage with Google, and new search features.  To be determined is whether or not Google will need to continue its strategy of acquiring small companies, most of which have been unprofitable or barely profitable, at obscene valuations in order to maintain the growth path of audience share and/or applications that will help keep existing users from straying.
  • While the ambitions of the founders are clearly sprawling, doubts have been raised about the company’s ability to internally develop groundbreaking new products and critics have often pointed out that the products that have been most successful for the company—Page Rank and AdWords, YouTube, Google Maps and the Android operating system—came into the fold through acquisitions.  All of this raises questions about the value that the “parent” can provide to its subsidiaries apart from cash and close attention will be paid to how delegation and autonomy is handled.  Early indications were that the founders were indeed committed to selecting strong CEOs for the subsidiaries and following the approach they took after acquiring NEST of leaving them alone to carry on with what had worked well in the past.
  • All of the letters in Alphabet, perhaps none more so than Google, will operate in a turbulent external environment that is rapidly changing and populated by competitors and stakeholders from all over the world.  Google must fend off threats to its market dominance, which is solidly but tenuously based on its intellectual property, and appears to be destined to decades of arm-wrestling with regulators.  Google cannot reasonably expect to fend off the rise of large competitors in the search area in enormous markets such as China.  One must wonder how much time the founders will have to divert their attention from the Google business.
  • While an “alphabet” implies order, the letters can be moved around to form new words and letters can be added and subtracted.  Will the founders add new areas and challenges to their list and, if so, how will those be supported and how will that impact other pieces of the structure.  Will the founders follow the path of Bell Labs and throw money at basic research to generate ideas to refresh the structure?  What will be the growth and exit strategies for each of the subsidiaries: spinoff, public offering, alliances or what?
  • A uniform culture is difficult to maintain even when employees remain in close proximity but in different buildings spread out among several locations.  While the founders see Alphabet as a noble pursuit to better many parts of our world, it will be difficult to create and maintain an Alphabet organizational culture that will provide the foundation for collaboration and communication. The burden falls heavily on the founders to make this happen.  Will that culture track the early days of Google?  Difficult to see that given that company is now much larger and those who have stayed on and become managers have graduated to middle age.  Moreover, identifiable sub-cultures will like emerge in each of the businesses in the subsidiaries.
  • Google, like many other modern companies in the technology space, lacks the social vision that bound employees to their companies for decades and organizational culture must be built in an environment in which both the company and its employees do not expect that employees will remain with the company for long and both side will do what is best for them in terms of economic efficiency.  As such, work-life balance has seemingly not been a priority at Google and the line from the Google evangelists has been that employees get to focus on things that are so interesting and meaningful that they rarely see any of it as being “work”.  Smart people come there to work with other smart people, experience what they need for themselves, and then move forward on their own.

The questions and challenges above are specific to Alphabet and its founders; however, all growth-oriented entrepreneurs should recognize a universal set of imperatives that apply regardless of the size and scope of the enterprise: striking the proper balance between autonomy and collaboration across businesses, managing formality and establishing and maintaining the “parenting value” to be provided by headquarters and the founders, maintaining a lazar focus on the core business and competitive advantage, guarding tested values and norms of the organizational culture while skillfully executing appropriate acquisitions of technologies and human resources and allowing sub-cultures to emerge and flourish, continuously scanning the external environment, making sure that the customer’s expressed needs rather than founders’ notions of how their lives should be remain the focus of product development, tracking and appreciating legitimate concerns about the social impact of the products being incubated, and forging a social contract with knowledge workers which respects and meets the needs of both sides.  

Sources for this article included J. Yarow, “Google just announced a massive overhaul of its business structure”, Business Insider (August 10, 2015); N. Irwin, “Alphabet, Viewed Through the Lens of 3 Companies”, The New York Times (August 12, 2015), B3; L. Page “G is for Google” (blog post to employees and investors at https://abc.xyz/); and N. Lemann, “When G.M. was Google”, The New Yorker (December 1, 2014), 76.

Documentary Requirements for Dissolving & Liquidating a Corporation

It is not often that business counselors are called upon to dissolve and liquidate a corporation; however, when it does happen it is important to be aware of all the documents that will be needed to complete the process.  Among the most common are:

• Notice of intent to dissolve;

• Notices, proxies, ballots, and resolutions for board and shareholder actions;

• Articles of dissolution;

• A plan of liquidation and distribution;

• A notice of liquidation for publication;

• Notices to creditors, employees, government agencies, and taxing authorities;

• If responsibility for the liquidation is being given to an independent trustee, a liquidating trust that appoints the trustees and lays out the rules they are to follow with respect to orderly payment of the obligations of the corporation and distribution of the remaining assets to the shareholders;

• Transfer documents relating to sale of assets by the corporation and “in-kind” distributions of assets to the shareholders;

• Settlement agreements with creditors; and

• Final tax returns.

While the winding up and dissolution of a corporation can be done pursuant to the default rules established by applicable statutes, shareholders often prefer to modify and/or supplement the statutory rules with a comprehensive and customized dissolution agreement that cover a wide range of legal and operational issues such as preparation of a final accounting, management of “work in progress”, satisfaction of liabilities of the corporation, ongoing liability insurance, distributions of corporate assets and amounts received from collection of accounts receivable, management of books and records, dispute resolution, rights and restrictions with regard to soliciting and servicing customers of the corporation after dissolution and responsibility for termination of registration with applicable boards and/or licensing authorities.   An agreement of this type should be used in conjunction with the required actions by directors and shareholders.  In order to provide greater certainty to the process, the parties should consider supplementing the agreement with exhibits to identify and describe pending projects, outstanding liability, tangible and intangible assets and outstanding accounts receivable.

For further discussion and examples of the forms and other documents referenced above, see Dissolution and Liquidation of Corporations (§§ 305:1 et seq.) in Business Transactions Solutions, which is available by accessing Westlaw Next.

Launching a Strategic Alliance

While the parties to a strategic business relationship, or “SBR,” should not abandon the customary practice of preparing a business plan for the alliance and carefully negotiating and drafting contract provisions and other formal management procedures, they must also understand and appreciate that plans, contracts and rules are generally of limited or almost no value when the inevitable disagreements crop up once the SBR is under way.  At that point the problem almost certainly lies in a lack of trust between the participants and an inability to communicate.  As a result, the dispute resolution procedures in the SBR documentation are rendered essentially ineffective, the relationship stalls, and the parties begin to look for other options to achieve the goals that they were originally seeking when the choice was made to entering into the SBR in the first place.

 

Disagreements and unforeseen events and problems cannot be avoided; however, the parties can do a better job of preparing for choppy waters by taking the time to learn more about one another before the hard work of launching and operating the SBR begins.  A business plan and the contract documentation bring the participants together “on paper” but they do not provide the tools necessary for their managers and employees to immediately and continuously collaborate as if they were employed by the same company.   In order to realistically aspire to the level of collaboration that is required for a successful SBR everyone involved must have sufficient and truthful information about the following:

  1. What is the organizational structure of the alliance partner?
  2. How are decisions made within the alliance partner regarding the allocation of capital, personnel and other resources?
  3. How is information collected and disseminated within the alliance partner’s organization?
  4. Which business units within the alliance partner’s organization will be closely involved in the delivery of resources that will be needed for the alliance relationship to be successful?
  5. What are the regular reporting channels for the senior managers of the alliance partner who will be overseeing the partner’s activities in relation to the alliance?
  6. What are the dominant cultural values and norms within the alliance partner?

There are no “right” or “wrong” answers to the questions listed above and parties should not sit in judgment of the way the other partner operates or the values that influence the behaviors of individuals representing the other partner.  In fact, one of the main reasons for considering a SBR is to have access to and gain leverage from different ways that the partner conducts its business.  For example, a relatively conservative company may seek an alliance with a partner known for having an entrepreneurial culture in order to accelerate development of new technologies and products.  The primary objective is to lay a foundation for greater mutual understanding.

 

Obviously this type of information is typically not shared in detail during the time that the parties spend on negotiating and finalizing the documentation for the SBR and the business plan that is usually prepared for a SBR tends to focus on quantitative areas such as markets and technical specifications and tactical issues in sales and marketing.  In order for the parties to begin learning how they will actually work together, it is recommended that plans be made earlier on for a “launch period” that would begin soon after the formal documents are signed and before the parties get too heavily involved in specific projects and activities.  The focal point of the interaction during the launch period should be a series of meetings between the key representatives of the parties, which should be hosted by both parties, to explore in detail the challenges that are likely to occur during the SBR due to differences between the parties and to attempt to develop specific guidelines and procedures for managing the potentially harmful effects of those differences on the progress of the SBR.  The goal of these meetings, which typically occur over a period of four to six weeks, is for the parties to work together to define the type of relationship that they want and jointly create the tools that they need for the SBR to play out in the way they anticipate. 

 

These meetings are also a good time to review when and how important decisions regarding the conduct of the SBR will be made.  Identifying key decision points should be occurring hand-in-hand with the discussion and refinement of the business plan for the alliance and the formal process for making decisions should have already been outlined in general in the SBR documentation.  In some cases one of the parties will be given the contractual authority to make a specific decision; however, it is still important to have a dialogue on what criteria will be used to make the decision and how much input the other party will be allowed to have with respect to providing information and offering opinions.  If representatives of a party must obtain approval from others within their organization the parties need to understand how that approval process is likely to work in practice.  For example, if approval must be obtained from a formal review committee information must be provided regarding the timing of committee meetings and the composition of the committee.  Insight should also be obtained regarding the cultural norms that generally govern decision making within each party—are decisions made based on hierarchy or is it necessary to seek and obtain a consensus.  Knowing how each party makes decisions, and planning in advance for managing how key decisions will be made, should reduce uncertainty and frustration and increase the chances that decisions will be made on a timely basis and that the parties will receive sufficient information regarding those decisions to execute them effectively.