Strategy Under Scrutiny

By James Bamford | Tuesday, April 30, 2019

IN MANY JOINT VENTURES – including those in semiconductors, financial services, media, healthcare, and natural resources – the owners are also the JV’s customers, channel, suppliers, users, or otherwise actively participate in the same markets as the venture (Exhibit 1).

Intel, Samsung, and AMD all own shares in semiconductor manufacturing joint ventures where, as owners, they are the JV’s major and sometimes only customers. Banks like JP Morgan Chase, HSBC, and Credit Suisse have all been part of joint ventures to develop and operate advanced technology and transaction processing platforms where success hinges upon owner adoption of the JV’s products or services. Mining companies like Rio Tinto and Anglo American routinely find themselves in JVs that are geographically proximate to their owners' wholly-owned infrastructure or operating assets, creating the potential synergies and conflicts. And oil companies like BP, Chevron, and ExxonMobil are all in JVs that are so financially material that they as shareholders have a fiduciary duty to deeply understand the venture’s strategy, market assumptions, performance, and financial controls.

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Report from the JV CEO Roundtable: The Questions CEOs Ask Their Peers

By Peter Daniel | Tuesday, August 14, 2018

WATER STREET PARTNERS recently hosted our 8th annual JV CEO Roundtable at our offices in Washington, DC. We are privileged to regularly convene the world’s only network of JV leaders and felt especially so this year because we are celebrating our ten-year anniversary. We count a few of the participating CEOs among our earliest clients and are humbled by both their ongoing support and willingness to share their deep experience with others in the network.

Fifteen executives from 14 JV companies attended the Roundtable. Collectively, these JV companies employ over 10,000 people and generate billions of dollars in annual revenues. Their shareholders, including Boeing, Humana, IQVIA, Chevron, Royal Bank of Canada, Bank of America, Shell Oil Company, Walgreens, Pitney Bowes, Continental AG, are some of the largest and best-known companies in the world. An important part of the job for the 15 executives in the room is figuring out how to leverage the strengths of their companies’ shareholders while managing the “tax” imposed when shareholders are not perfectly aligned on their vision for the JV.

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The Joint Venture Operating Model Blueprint

By James Bamford | Tuesday, July 31, 2018
PERHAPS NO OTHER aspect of joint ventures has caused so much trouble as an ill-defined, outdated, or inappropriate
operating model.

In a general sense, an operating model is a high-level architecture of the organization – how the various structures, systems, processes, and people within the enterprise relate to each other to deliver the strategy. In JVs, the operating model is defined by the venture’s overall level of independence from – or dependence on – its shareholders ( Exhibit 1). Some joint ventures, like Dow Corning, Aera Energy, and Sony Ericsson, are highly independent. Others, including most upstream oil, gas and mining JVs, are operated by one partner.
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Lighting the Way with Guiding Principles for Your Joint Venture

By James Bamford | Tuesday, July 24, 2018
IN A PREVIOUS INSIGHT we discussed the challenges of maintaining alignment in joint ventures across multiple levels and topics. In this article we will outline the how and the what. Over the last few years, we have worked with a number of JV Boards and management teams to help develop or revise Guiding Principles. We’ve learned a lot about what “good” looks like, what it takes to run a process that leads to real agreement, and the value that, when done well, such Guiding Principles create.
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Maintaining Alignment in Your Joint Venture: A Full Contact Sport

By James Bamford | Tuesday, July 17, 2018
WHEN A JOINT VENTURE is formed, the strategy, scope, governance, and underlying deal logic can feel overwhelmingly clear. But fast forward a few months or years, and partner differences are likely to emerge. Not necessarily irreconcilable differences about deal rationale, venture economics, or competitive positioning, but subtle, natural differences in interpretation about how to build, manage, and evolve the venture – e.g., how involved parent staff should be in prioritizing the JV product development slate, whether contracts should be sole or competitively sourced, or how information sharing protocols should work when the venture sells into a parent company customer.
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Getting a Grip on Your Joint Venture Committees

By James Bamford | Sunday, July 15, 2018
IN A PREVIOUS INSIGHT we outlined where Joint Venture Committees go bad. Here we will show how Joint Venture Boards and CEOs must actively manage such groups to ensure they contribute to – rather than undermine – venture performance.

JV Boards have a lot to do – and actively managing non-Board committees should not be one of them. But JV Boards do have a responsibility for ensuring the integrity of the overall governance system, which includes having an up-to-date understanding of committees and working groups.

How do Boards keep tabs on – and when needed restructure – committees? It starts
with some probing questions and, depending on the answers, may flip into a more
formal review.
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