Companies that successfully manage their joint venture (JV) and alliance portfolios recognise the need to adapt to a business model that understands the unique challenges of shared control - a Federated Enterprise.
In the 2016 KPMG CEO Outlook study, 5 in 10 CEOs planned to create significant partnerships, JVs, or collaborative arrangements with other firms, making it the most popular form of M&A-type deals. Interestingly, less than 2 in 10 ranked managing the ecosystem of partners/alliances as a top strategic priority. Instead, CEOs are more focused on traditional business activities, such as developing stronger client focus and new products. Given that more than half of all JVs fail to deliver value, this lack of attention is somewhat worrying. The hierarchal management model that many corporations have adopted over time, needs serious reconsideration.
A Federated Enterprise, which sees a corporation embrace partnerships as part of its structure, has an advantage over standard structures that endure high overheads, a bias towards the culture of the headquarters and low flexibility. However, a Federated Enterprise still needs a central nervous system to translate its approach into a competitive advantage.