How to Make a Joint Venture Succeed: Conducting a JV Pre-Mortem


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How to Make a Joint Venture Succeed: Conducting a JV Pre-MortemJOINT VENTURES have a bad reputation. While we believe that the drawbacks of joint ventures are sometimes over-stated, especially among companies that have limited experience with them, JVs remain a transaction structure that too often leads to underperformance, inefficiency, and failure. As one public company CEO once told me: “I’m certain that JVs were created by the Marquis de Sade as a special type of torture reserved for corporate executives.”

The list of failed, underachieving, or just good-old-fashioned painful JVs could fill a phonebook (Exhibit 1).   

Examples of Joint Venture Failures 

How do companies avoid this fate? We have built a career advising companies how to design, structure, govern, and manage joint ventures and other alliances. And we have come to believe that many considerations – from strategy, partner selection, contractual terms, venture governance, organizational design, and management – coalesce to determine whether a JV meets or exceeds its shareholders’ expectations, or whether it limps toward the horizon or collapses under its own weight. 

That said, one tool merits more attention: The JV Pre-Mortem. Many companies conduct post-mortems on failed projects. And many companies conduct some form of “look-back” or post-investment appraisal on acquisitions, joint ventures, and other investments. But how many companies think seriously upfront about the prospect of joint venture failure – and then try to do something about it before it is too late? Not many.


The idea of a JV Pre-Mortem is simple: While negotiating with the counterparty, carve out a bit of concentrated time with your team to consider failure. The idea is to imagine a future where the JV fails – and to think about what might have caused it. It’s like the old adage to “imagine your own funeral” applied to a joint venture. Unlike a post-mortem – which may help science and future generations but doesn’t do much good for the patient – the pre-mortem helps avoid failure on what the team cares most about: the current JV. The JV Pre-Mortem is a JV-specific application of a concept developed by Gary Klein, a pioneer in decision science. Klein has argued that a pre-mortem temporarily reverses the culture of the team – where everyone is pegged on success and creative solutions, and skeptics are viewed with some disdain. In a pre-mortem, this culture is flipped on its head, and the smartest guy in the room is suddenly the one who has the sharpest view on what could cause failure.

Conducting a JV Pre-Mortem is not complicated (Exhibit 2). It works like this: Assemble everyone in your company who is meaningfully involved in the JV – the executive sponsor, members of the deal team, key functional executives, lawyers and finance staff, future board members, and those who might be tagged to run the JV post-close. Carve out two hours from 12:00 noon to 2:00 pm, and buy them lunch. (Food will get them to relax and think creatively.)

Exhibit 2: Sample Agenda Workshop

Once everyone has arrived (no dial-ins or video conference participants please), set the scene. Explain that we are now living in the future and the JV has failed. That the JV has failed is beyond question. Now ask everyone to spend 5 to 10 minutes writing down a list of reasons for why the JV failed. Ask people to be thoughtful and imaginative. Next, go around the room and ask each person to provide one reason for the failure. Write the reasons on a board. Keep going around the room until all ideas are out. Have someone do nothing other than take notes. Ask the room whether the list of ideas has sparked other thoughts that should be captured. Stop generating ideas after 60 minutes.

Now spend 15 minutes categorizing the reasons for failure. Does the group believe that certain failure stories are more realistic, while others are highly unlikely? Focus the discussion on the more likely reasons for failure. Of these, are certain failure scenarios purely externally-driven (e.g., entry of a new competitor, change in regulations) or things that the team can do nothing about (e.g., failure of the technology)? Are others things at least partially-within the team’s control (e.g., partner choice, failure of the partners’ to fund the JV’s growth into new markets)? Focus on those within the team’s control. 

From this list, generate the 10 most likely reasons for failure. Finally, spend the last 45 minutes generating ideas for how to address these failures. The solutions might be found in overall deal design (e.g., authorized scope, operating model, ownership split) or specific contractual terms (e.g., IP rights, exclusivity, financial incentives for one shareholder sales organization to support the JV). Or solutions might relate to choice of partner. Or they might relate to risk management and assurance policies (i.e., extent to which the venture meets the company’s HSE or financial control standards). Or they might relate to governance or organizational practices (e.g., board composition, caliber of senior management seconded into the venture, use of lead directors, how the JV connects with each shareholder’s corporate strategy and review processes). 

If the creative juices dry up, the facilitator might expand the frame by introducing structure for different types of solutions. When we do this, we will simply write on a white board seven seven categories of solutions: business strategy, partner choice, deal concept, contractual terms, risk management and assurance policies, and governance and organizational model.

Once done, send everyone on their way. But have one person (e.g., a core member of the deal team) soak on and synthesize the ideas, and propose how to translate the best of them into practical changes to deal terms or other elements of the venture. Depending the size and risks of the venture, that person might supplement this workshop input with additional analytics. This might include refining the failure scenarios by reviewing similar ventures that the company, counterparty, or industry peers have done, and looking for patterns of problems. Or it might include conducting what we call “misalignment scenario planning” – an analysis that looks closely at a major category of JV failure (misalignment), disaggregates it, and seeks solutions. In some cases, the company might consider conducting a JV Pre-Mortem with the potential partner. This exercise might be done in lieu of – or in addition to – a Pre-Mortem just with the internal team.

Gandhi told us to “live like you are going to die tomorrow, and learn as if you are going to live forever.” That’s the JV Pre-Mortem in a nutshell.