ChristianA joint product development business partnership is a strategic alliance between two companies that need to leverage the assets of each other to create a new product or service offering for the market that would be difficult to do alone. This type of business partnership will require a special set of agreements between the two companies and it is absolutely critical to have a close and well established business relationship with the company or the executive prior to engaging in this special business relationship. It is unwise to forge ahead with a joint product development business deal if you have no prior relationship before discussing the opportunity. However; as a small business owner you may not have that luxury. Be aware of the risks when developing a new product or service with a new partner without establishing a history of trust between the companies. Both parties will be spending significant capital and an investment in staff in order to see a new product developed and brought to market. Failing to get a return of investment is likely to cause irreparable damage to a small business.
Vet the Product
When evaluating whether to develop a joint product development business partnership with another company it is critical to vet the company that you are thinking of partnering with and evaluate that they have the resources and talent to complete their parts of the deal. At the same time make sure that enough market research has been conducted that you feel confident in the success of the product once it is ready for the public. As the partner initiating the discussions about a joint product development deal, this data should already be collected and available to the potential partner, but do independent research to validate the potential partners claims. This will help you size up the partner quickly and understand the seriousness of the opportunity.
Identify Responsibilities
As in any type of business partnership it is crucial to identify everyone’s roles and responsibilities in the relationship and who will be paying for what. While it seems like common sense during a joint product development relationship the chance for unforeseen costs is very high as it is with any new product development. If there are problems in the product development it needs to be clearly defined who will be paying for the overages, what repercussions if any if the product fails, who will be paying for customer support, and all the other variables with building a new product, marketing it, and servicing customers.
A joint development partnership is a unique type of business partnership that can let two companies that are servicing a similar client base to create a product that they see a real need in the market for and have the existing client base to quickly test the market and make quick sales. While the opportunities for rapid growth exist in these types of relationships they are often full of little problems and delays that require a close business relationship that is capable of overcoming the challenges as it is a loss for everyone to get half way through a product development cycle and the partnership disintegrates causing even more problems concerning who owns what, etc.
Christian Fea is CEO of Synertegic, Inc. A Joint Venture Marketing firm. He exemplifies how to profit from Joint Venture relationships by creating profit centers with minimal risk and maximum profitability.
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