Innovation in Joint Ventures: Do or Die?

By Peter Daniel | Tuesday, April 21, 2020

IN INDUSTRIES LIKE HIGH-TECH, telecommunications, and healthcare, innovation is critical to sustained competitiveness and performance. Joint ventures operating in these fast-moving markets often must compete with innovation machines like IBM, and with PE-backed startups. In our experience, the ownership structure and contractual agreements of JVs may disadvantage them in this competition.

Specifically, pursuing innovation often requires a JV to make investments, potentially including acquisitions and minority investments, in domains that are not explicitly defined within the company’s authorized scope, and to secure funding from owners, which may have other capital needs, low risk tolerance, or insufficient understanding of the market to make such investments. What are JVs to do? We talked to 16 JV CEOs to find out whether, like Ms. Rometty, they see innovation as fundamental to survival – and, if so, how they define their innovation ambition, allocate budgets toward different innovation initiatives, and establish the tools and capabilities – talent, review processes, funding mechanisms, scouting/business development – necessary for sustained success.1

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