Novi was asked to advise his boss, the CEO of the five-year-old medical device start-up in the Boston area, regarding the oncoming negotiations with one of the possible investors. This Asian medical device company has an established distribution base in the Asian market. The company is conservative, and its boss is a proud older man, being pushed for the meeting by his son, an eye doctor. The meeting will be held in Tokyo, and it aims to establish long-standing relationships or attract an Asian partner as an investor. The expected result is to ensure the Asian company that the new device for cataract surgery is a great invention that will meet demand in the Asian market.
Firstly, the main strengths of both companies should be discussed. The start-up’s main strength is innovation, and the Asian company’s main strength is its distribution network. Therefore, it makes sense to suggest launching the joint venture to establish long-standing relationships. This joint venture’s headquarters will be highly likely based in Asia since the start-up wants to sell its devices on the Asian market. There are also plenty of details to be discussed if the Asian potential partner will agree to this idea. Unlike in the MedLee scenario, Novi’s boss and Asian CEO have never met each other. Therefore, time should be spent presenting the general idea and aim of the joint business. Supposedly, the start-up company could send some e-mails to Asian partners to present themselves. Besides, the meeting atmosphere is likely to be more restrained than in the case of MedLee.
To fix this ‘cold discussion zone,’ some preparations should be made to plan the first impression. For instance, Novi’s boss may study Asian customs and etiquette and bring some presents and a printed prospectus of the start-up. After two CEOs get to know each other, Novi’s boss should discuss the start-up proposition. He should suggest establishing a joint venture and present his opinion on four main topics: decision-making mechanism, staffing, profit distribution, and conflict resolution mechanism. During the negotiations, the start-up CEO should remember that his primary purpose is to build relationships based on trust, and he should be open to cultural differences. Another objective is to establish ongoing communication with Asian partners in whatever partnership structure is under discussion.
When discussing the decision-making processes of the future joint venture – or the other form of collaboration – Novi’s boss should show respect for concerns about being treated fairly and equally in the allocation of power and responsibility. It means that, in the case of a joint venture, the forces in the board of directors should be distributed equally, and the staff of the new venture should have a sufficient ratio of start-up and Asian company employees. Moreover, when designing the rules for the new organization’s functioning, Novi’s boss should consider cultural differences and long-standing customs of the Asian company and its organizational dynamics. Ideally, Novi’s boss and Asian CEO should base their relationships on the shared responsibility regarding their joint business and jointly advocate for this business’s interests.
Another critical question to discuss is a conflict resolution mechanism. Both sides should present their vision regarding the dispute resolution mechanisms for resolving disagreements. Novi’s boss and Asian CEO probably could follow the example of the MedLee case and hire an independent lawyer who would be genuinely interested in the joint business’s success. To ensure this interest, the lawyer could get the salary as an employee of the new joint venture. In any case, both sides should feel safe and not suspect the other side to sue them.
Finally, the profit distribution should be discussed, even though this issue could be postponed to further meetings. Both sides should have the guarantees for the worst-case scenario, but, given the MedLee negotiators’ experience, it should not be discussed during the first meeting. The profit distribution should be based on the input of each side. Given the need for investment on the start-up’s side, the initial input from the Asian company can be as high as 90%, with the opportunity to move to 40%-60% and eventually 50%-50% situations.
In general, future negotiations should pursue the idea of collaboration in any form, and the start-up’s CEO should convey to the Asian partner the potential value of such a relationship. He should give a detailed description of the new technology for eye surgery and remind us that this technology has already received good reviews from one of the Boston hospitals. The parties should also discuss what other medical devices are in demand in the Asian market. For example, the start-up company could use its main strength of innovation and introduce some patented analogs of medical devices with scarce supply or unreasonably high prices.
Thus, the advice was given to Novi’s boss on how to involve the potential Asian partner in the long-standing relationships. A huge emphasis should be put on mutual respect and shared vision and the shared responsibility, and mutual benefits. Therefore, the negotiations will feature three aspects: the prospects of the future business, related responsibilities, and benefits for both sides. Understanding cultural differences will be of particular importance during the negotiations.