Building joint ventures to
capitalize on megatrends

By Patrick Heinemann and Jörg Delhaes

Joint ventures (JVs) mitigate risks and create competitive advantage by pooling the resources, capabilities and expertise of their founding companies. They offer flexibility when transforming operations, at the same time enabling businesses to capitalize on key megatrends such as sustainability and digitalization. We present three strategic approaches for addressing these megatrends through JVs: Test & Nudge, Learn & Absorb and Innovate & Attack. We also show how we can support you in implementing these approaches and adjusting your JVs in line with your risk-return preference.

JVs are increasingly recognized for their advantages in consolidating expertise, facilitating market entry and enhancing operational flexibility. Their ability to help incumbent companies overcome internal barriers to growth has led to a surge in their formation in recent years, especially cross-industry and international collaborations.

JVs offer four distinct advantages:

1. Consolidated competence: JVs exploit the complementary resources and capabilities of their founding companies, helping businesses effectively achieve their objectives
2. Flexibility: JVs can be structured flexibly to allow for preemptive exits, preserving brand identity
3. Entry to international markets: JVs enable companies to access local markets, as well as drawing on local networks and expertise
4. Limited financial risk: JVs can be set up as separate legal entities from their founding companies, protecting those companies in case of exit or failure

To realize the full potential of JVs, their stakeholders need to align their objectives. Achieving harmony between the two or more founding firms, supported by information-sharing and systematic alignment of the target operating model, ensures the success of the undertaking.

Different types of JVs

Various types of JVs exist, differing along four key dimensions. On the legal front, JVs vary in terms of the equity share and control that each partner enjoys; some are 50/50 partnerships, while in others, one of the parties involved has majority or minority ownership. In terms of geographical scope, JVs may be local, regional or operate on a global scale. Regarding industry focus, they can be industry-specific or cross-industry, depending on the partners' expertise and strategic goals; this then influences the nature of the JV's operations and its competitive approach. JVs can also differ along the time dimension – that is, with regards to their duration: Some are created as long-term strategic partnerships, while others are temporary arrangements designed to address specific projects or market opportunities.

JVs applied in cross-industry megatrends: sustainability and digitalization

A number of megatrends are currently reshaping customer expectations and transforming business models across industries and geographies. In this article, we focus on two specific trends that have a profound impact on society, the economy and business globally: sustainability and digitalization . It is our belief that JVs can help businesses not only adapt to these trends but also capitalize on the opportunities they create.

Sustainability is a matter of global urgency and is very much front-of-mind for executives, policymakers and the public. It increasingly drives corporate decision-making, prompting businesses to integrate environmental, social and governance (ESG) factors into their operations.

Why do we consider the sustainability megatrend so important for today's businesses? For five main reasons. First, awareness of climate change and environmental degradation is growing, leading to a global push for sustainable practices; organizations are being challenged to reduce their carbon footprint and address resource scarcity accordingly. Second, governments and international bodies are implementing stricter environmental regulations and guidelines, encouraging industries to adopt sustainable practices. Third, we see growing consumer demand for sustainable products and practices – meaning that businesses that align with these values can gain a competitive edge. Fourth, sustainability often leads to operational efficiencies and cost savings over the long term, as companies reduce waste and optimize their resource usage. And fifth, companies are more and more being held accountable for their impact on communities and on the planet, raising the profile of sustainability in corporate strategies.

A robust digitalization strategy is likewise essential for enhancing companies' connectivity and operating efficiency, making digital expertise crucial for competitive advantage. Digitalization is particularly critical for industries such as automotive and industrial products , where companies need to lead on innovation.

Again, we identify at least five reasons why digitalization is such a key megatrend. First, the rapid development of technologies such as artificial intelligence (AI), Big Data, the Internet of Things (IoT) and cloud computing is transforming industries and creating new business models. Second, digital tools and processes enable organizations to streamline operations, enhance productivity and reduce costs. Third, digitalization allows for the collection and analysis of vast amounts of data, enabling better and more informed decision-making. Fourth, digitalization enhances customer engagement and personalization through advanced analytics, leading to improved customer satisfaction and loyalty. And fifth, digital technologies provide the flexibility for businesses to innovate rapidly, adapt to market changes and respond to customer needs with greater agility.

Working in tandem, the sustainability and digitalization megatrends transform how businesses operate, innovate and create value. They operate synergistically, digital solutions providing the tools needed to achieve sustainability goals, while sustainable practices drive technological innovation. By adjusting their strategies in line with these two megatrends, companies can put themselves in a position to thrive in a rapidly evolving global landscape.

Three strategies

Companies require effective strategies for addressing the megatrends of sustainability and digitalization. Experience shows that JVs can be a powerful solution here. We present three distinct strategies: Which one fits the company best will depend on its risk profile and experience with megatrends.

Test & Nudge

A Test & Nudge strategy is ideal for companies that have limited experience with megatrends and a low willingness to invest. The JV runs pilot projects to test out new sustainable solutions or digital innovations. This approach limits initial investment and risk, while allowing partners to assess the feasibility and potential benefits. As pilot projects progress, the JV gathers feedback and data to refine its strategies – an iterative process that allows for adjustments to be made in response to market reactions, technological changes or regulatory landscapes. Once the "test" phase identifies successful initiatives, the JV "nudges" these solutions into broader applications or markets. This gradual scaling-up process allows the partners to capitalize on proven successes without overextending resources or acting prematurely.

Examples of this approach include automotive manufacturers forming JVs with IT firms to develop their technical capabilities, or with companies offering ride-hailing services to promote autonomous driving vehicles. Recent JVs in the automotive and aerospace sectors highlight how companies are using this strategy to meet the skills needs of both partners without establishing separate divisions. By fostering agile leadership and a startup culture, they can develop solutions in areas such as IT security and cloud services, at the same time attracting talented individuals with a startup mindset.

The Test & Nudge strategy balances innovation with risk management, making it an effective approach for JVs wishing to capitalize on global megatrends.


Learn & Absorb

A Learn & Absorb strategy suits companies with a solid understanding of megatrends and moderate willingness to invest. It treats the JV as an external business unit, preserving independent innovation dynamics and focusing on profitability while allowing established business units to "watch and learn". By regularly monitoring market developments and technological advancements, the JV stays informed about changes related to megatrends, ensuring that it can quickly identify any emerging opportunities or threats. Engaging with industry experts, academic institutions and thinktanks provides it with additional insights into the latest sustainability practices and digital innovations. By running small-scale, low-risk pilot programs, the JV builds on its innovation culture to experiment with new ideas and gather valuable data, with regular feedback loops allowing for continuous learning from both successes and failures. This approach enables the founding companies to develop structured innovations that the existing units then have access to, and which they can absorb over time.

An example would be a JV between a technology company and a chemical firm focused on agricultural solutions, in which the partners exploit their complementary competencies to independently address digitalization and sustainability. Similarly, in the automotive supply industry, JVs can generate synergies in prototype development and testing facilities, while allowing for independent market operations.

The Learn & Absorb strategy gives companies a proactive framework to effectively respond to the fast-paced changes driven by global megatrends. This ensures that they not only adapt, but are also potentially become leaders in these evolving landscapes.

Innovate & Attack

An Innovate & Attack strategy is suitable for companies with a strong understanding of megatrends and a high willingness to invest. It emphasizes proactive innovation management, enabling organizations to shape industry trends through market leadership. By exploiting their complementary capabilities, the partners can focus on creating breakthrough products or services that capitalize on sustainability and digitalization – including new, disruptive business models that challenge industry norms. The JV can quickly enter new markets or segments with innovative offerings, exploiting first-mover advantages. At the same time, by creating or joining innovation ecosystems with other organizations, the JV can expand its reach and access novel ideas. Equally, forming strategic alliances with tech companies, sustainability leaders and other innovators can enhance its ability to "attack" market opportunities more effectively.

This strategy is beneficial for cross-company standardization, as in the case of JVs for electric vehicle charging infrastructure, where automotive OEMs partner with financial investors to create brand-neutral, high-power charging networks.

Companies can use this approach to become leaders in the development and deployment of solutions that address the major global shifts driven by sustainability and digitalization. At the same time, it enables them to build an agile workforce and so gain a competitive edge and drive industry change.

Roland Berger can support you through the entire JV lifecycle

Roland Berger supports companies at every stage of the JV lifecycle, from portfolio evaluation and strategy development to establishing the JV and validating its operational structure.

We help companies avoid common pitfalls by asking themselves the right questions upfront. In so doing, we draw on our full international expertise and our comprehensive range of proprietary products to help them select and implement a JV strategy that is tailored for their organization.

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