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Four steps to joint venture success

Four steps to joint venture success

More organisations are forming alliances with others from completely different sectors due to increasing project complexity and customer demands. Some universal principles will apply to all however.


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Four steps to joint venture success

The growing intricacy of projects and increasing demands from customers means joint ventures can be a vital tool for business. But the ventures themselves can also be complex arrangements to pull off.

For businesses seeking to drive growth and meet the demands of complex projects, joint ventures are a logical pooling of resources. But, they can also be a minefield. 

In this article, Kelvin Hingley, Chairman, KPMG-HPR, writes about the repeated flaws that businesses fall victim to in aiming to establish a successful joint venture. He also offers a four-step guide to avoiding these pitfalls and making the arrangement work – across the supply chain.

There is no one right way to construct a joint venture, but there are a number of lessons to be learned from previous experiences.

Repeated flaws

  • A case study of a conflict in the construction of a new power station provides key examples of how joint ventures can go wrong if not properly planned. 
  • Despite the experience and expertise of the people involved, the companies (and crucially the leaders) had no experience in working together on a project of this size. 

Structure and leadership

  • Designing and setting down the internal structure of the joint venture is vital. Each party needs to know the risk it is carrying and the responsibilities each team has.
  • Capable leadership is crucial, along with smart recruitment of talent and a wholehearted commitment to the joint venture from all involved.

Mutual success

  • Although a heavy focus on internal structure is necessary, it shouldn’t be forgotten that the joint venture must be geared towards the client.
  • From the partners, right the way down the supply chain, each person and team must understand where the liability and responsibility lies. Establishing these details creates the solid foundation that the venture relies on.
  • On your reading list: Collaborate to Survive – KPMG’s report on construction, consortia and the ‘Red Queen hypothesis’.
  • On your board agenda: How do we access the experience and expertise needed to tie down the detail in joint venture (JV) structures and contracts?
  • Anticipate tomorrow…: International consortia and JVs are becoming the norm, with more overseas contractors taking leading roles in UK projects. This trend is set to continue. So how well prepared is your business to address differences around jurisdiction,methodology and culture at every level?
  • …deliver today: Success or failure of large JVs and consortiums often comes down to the expertise and experience of both leaders and frontline managers. This is as much a talent issue as it is one for engineering solutions or tightly drawn contracts – and means we need to prioritise these skills and experience now.
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© 2020 KPMG Central Services, a Belgian Economic Interest Grouping ("ESV/GIE") and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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