Any family business leader will confirm that ventures and alliances with multinationals are a complex matter. In addition and all likelihood, each and every one of them will systematically stress the importance of finding the right partners for growth. Family businesses, maybe especially in the Arab world, are in a unique position of being able to provide high quality access to markets for multinational corporations (MNCs), and yet, recognising each other as potentially beneficial partners to future expansion is not enough to ensure that a venture will be successful. Rami Alturki, President of Khalid Ali Alturki & Sons (Alturki), KSA, gives a first-person narrative of his experience in forging strategic alliances and joint ventures with multinationals and defines the most important dos and don’ts.
In the Beginning or ‘How I started’
I joined our family business in 1999 after having completed my studies and first years of work experience in the US. When I started, my first assignment was part of a new venture: We had created a new company that was to act as a master licensee for satellite communication in the Middle East and Central Asia. At the time the industry was booming and our partner was an American company. When I began my work our family business had just started negotiating the master franchise with the Americans. I became the Director of Territory Development, which meant that I was responsible for the appointment of sub-licensees. It was the first venture that I witnessed first hand and I worked on it for about two years. Unfortunately, our partners ended up going under as the industry took a severe hit around that time. We had to wrap the whole thing up. That is how quickly these things can go wrong. Fortunately for us, we had not yet reached the point where we had made any sizeable investments. In terms of loss, I guess, it could ohave been much worse.
Our family has always operated under a vision that drives us towards building differentiated businesses. The idea is to partner with MNCs and build extraordinary opportunities that would not be possible would either party act on its own. We have over the years added many of these types of ventures to our portfolio (see Figure 1 below). In my own career I actively participated and led the development of our joint-ventures with WR Grace, Exova, and Velosi. I learnt many important lessons from each and every venture and will certainly continue to learn with every new partner we acquire. Essentially, however, I think that partnering with MNCs holds a few specific challenges for family businesses. That is why I have come up with a list that encompasses the crucial dos and don’ts, according to me, for achieving successful alliances and ventures between these two entities.
Partnerships or ‘Why We Need Others’
Before you start looking or talking to potential partners, it is important to understand why you want or even need to team up with another organisation. Can you succinctly state what and how a partner will contribute to your business? Is it a new technology, market access, distribution channels, production facilities, or all of the above and more? When the answer to these questions is clear then finding the right organisation and collaborating with it will become easier. Moreover, once the right partner comes on board the weight you are pulling should become lighter not heavier and you should be able to achieve more than if you had acted on your own. If a partner adds to your burdens then you might want to reconsider.
DNA or ‘What defines us’
No matter how many ventures and alliances a family business enters, it should know its core values and strive to remain true to them. You can change the appearance of it all and modernise branding and marketing, but you should remember who you are at all times. So before a family business enters a partnership with a MNC, family members might want to sit down and define what it is that defines their business; discover their family business DNA. This will also help you in differentiating yourself from others a business that has a clear vision of its capabilities and values will stand out. Automatically, an external partner will be able to recognise in what ways it can contribute to and benefit from you as a family business.
Principles or ‘Cannot compromise on values or principles’
You should understand and know your own principles and make sure that you never compromise on them. No matter how badly you want to partner with a certain organisation, if you pretend to be something you are not, somewhere down the line it will catch up with you. Pretending that you can adhere to visions that do not fit with your principles is of no use and makes both parties loose a lot of time and energy.
Culture or ‘Try to understand it’
If as a family business you want to work with a MNC you have to get a firm understanding of its corporate culture. Culture is probably the most important fit element for a positive collaboration prospect. Not understanding a company‘s culture ultimately means not understanding how it takes decisions and that is undoubtedly a bad premise from which to start a business venture. The decision-making process as well as the day-to-day activities are key information components that you may want to find out about. Next to understanding corporate culture it is, of course, key to understand national culture as well. You are always dealing with people and they are influenced by their backgrounds.
Key Contacts or ‘Who you should have on speed dial’
MNCs often have a fast rotation system when it comes to their employees and it is by no means sure that you will be dealing with the same person throughout the process of your intended venture. Most MNCs rotate their people quite frequently so you need to expand those relationships across levels of the organisation: you need to be sure of a personal relationship with the chairman, board members, and the CEO. However, mostly the people you will interact with in a first instance are regional or country managers. Relationships with these people are key and can define the success or failure of the venture, which is why having access to several levels of the organisation hedges your risk.
Communication or ‘Talk it out and write it down’
I cannot emphasise this enough: 99.99% of the problems that I come across on a daily basis can be explained by a lack of or poor communication be it verbal or written. In my experience there is often not enough written communication, which should be used to clearly define what the positions of the respective parties are. This also links into providing the proper legal documentations; it is paramount that you spend enough time with your lawyers to draw up communications and contracts properly. If you have to lead a venture or partnership and are a poor communicator then chances of success become slimmer with every misunderstanding.
Negotiation or ‘Always negotiate from a position of strength’
In seeking partnerships with MNCs you have to try and negotiate from a position of strength. It is paramount that you try and avoid the feeling that you have to save the deal at any cost. The danger is that once you start feeling that this is the most important deal you have ever undertaken you will start compromising on your principles just for the sake of it. Most underestimate that getting the deal done is just one stepping stone; do never forget that you have to live with it afterwards for a long time? Of course, it is not always equally achievable to come from a position of strength. There is no universal recipe to achieve it and sometimes it will not be possible at all. In any partnership there is always a real possibility that you will be struggling and that you will loose money. However, you should always try and keep the upper hand in negotiations. My father always asks me this one question in order to test my motives in pursuing a deal: “Are you going to go hungry tomorrow if you do not make this deal happen?”. Asking myself that question has often proved useful and necessary to me; sometimes we get so caught up in the deal that we forget to think of what happens if it should fall through or what other options there are.
Emotions or ‘It’s not personal, it’s business‘
When forming ventures it is important to keep your emotions in check. When you deal with the business, it has to be about the business and nothing else. If you let your emotions run the show you automatically loose your partner’s respect. In a family business this may be a particular challenge and, therefore, a particular topic that needs to be discussed before negotiations with outside partners start. Most people ask me ‘how can you not become emotional? This is your business!’. I agree with them, however emotions drive you towards making decisions that you will not be able to relate to at a later date when you are in a different frame of mind.
Business Model or ‘The reality of your bottom line’
Another recommendation: Do not get into a venture or partnership without really understanding your partner’s business model. How do they run their business? Do your due diligence on financials: When discussing the bottom line make sure that you are aware of all the royalties and the extra corporate charges that often are not mentioned in first negotiations. If you are not careful you end up working at cost and with no profit at all. Your partner will end up making all the money from the top line and when it comes down to profits you will have spent half of it already on fees. It is nearly impossible to get yourself out of that type of position.
Leadership or ‘It’s lonely at the top’
Even in a family business it can be lonely at the top: You have to take responsibility and look out for yourself and the people depending on you. As leaders it is great to have advisors but ultimately you have to take responsibility and understand every last detail. You should never stop investing the effort and can never just rely on what other people are telling you. Of course, it is crucial that you make sure to have a great team around you whether it consists of family members or not.
These are the main lessons I have learned, and I have learned them the hard way. Sometimes my father was able to spare me disappointment by sharing his wisdom with me. Much like in human relationships, no venture or partnership is perfect, but maybe the above pointers can increase the chances of success.