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Chapter One
Collaboration: It’s All about Creating Value
Businesses and nonprofits collaborate mainly to create new value for themselves or others. Collaboration between these two sectors is now widespread and growing. The strategic question no longer is whether to collaborate but rather how to co-create more value for organizations, individuals, and society. Yet we still lack understanding of where value comes from, how it is generated, what forms it takes, and who benefits. To deepen our comprehension and management of these critical issues for practitioners and academics, this book elaborates the Collaborative Value Creation (CVC) Framework. The framework provides a theoretically informed and practice-based approach to analyzing and creating greater collaborative value.
The Rising Importance of Collaboration
Over the past three decades, the perceived value of collaboration has vastly increased partnering between businesses and nonprofits. As of 2011, 96 percent of the world’s 257 largest nonfinancial enterprises were engaged, on average, in eighteen cross-sector partnerships.1 In 2010, 78 percent of 766 surveyed CEOs in 100 countries confirmed that collaborations “are now a critical element of their approach to sustainability issues” and that they “believe that companies should engage in industry collaborations and multi-stakeholder partnerships to address development goals.”2 The perceived importance is mutual, and the partnering widespread: another 2010 survey revealed that 87 percent of nongovernmental organizations (NGOs) and 96 percent of businesses consider partnerships with each other important, and that most are engaged in eleven to fifty or more partnerships.3 A supporting 2012 survey in California of small and midsized organizations found that 74 percent of the nonprofits and 88 percent of the companies were partnering, with over 50 percent of both having more than five partnerships.4 In Brazil, a study of major businesses revealed that 95 percent partnered with NGOs and made social investments of about $850 million.5 In Mexico, 61 percent of the nonprofits surveyed collaborated with businesses.6 A survey of the top 500 firms in Holland showed that 70.1 percent have active relationships with nonprofits.7 Academic research has amply confirmed that cross-sector partnering is considered essential to implementing strategies for corporate social responsibility (CSR) and to achieving nonprofits’ social missions.8 Furthermore, it is important to note that collaboration is not size-dependent. It occurs with organizations big and small, and the principles of value creation set forth in this book are applicable to all. In the twenty-first century, cross-sector collaboration constitutes a major leadership challenge across organizations and around the globe.
The growing complexities and magnitude of the economic, social, and environmental problems faced by societies across the planet exceed the capacities of individual organizations. A McKinsey & Company survey of 391 CEOs revealed 95 percent as reporting that, over the previous five years, society had increasingly been expecting businesses to assume greater public responsibilities, and the study’s authors point to “the dawn of a new era in corporate innovation and experimentation, when new partnerships and standards will emerge, when new, more transparent measures will better reflect the full costs of doing business, and when greater private participation in the delivery of public goods and services will change companies’ roles in society.”9 In addition, the number of nonprofit organizations has grown explosively, and the United Nations has estimated that one of every five people in the world has participated in some sort of civil society organization.10
At the same time, we are witnessing fundamental shifts in ways society and business and nonprofit managers are thinking about value. The concept of economic value creation has never been more hotly debated. From viewing value as hierarchical, with economic value at the top, we are moving toward equal priority for social and environmental value. From a single value associated with a particular sector, that is, economic value from businesses and social value from nonprofits, we are moving toward the concept of multiple value production from each sector. From the dominant logic of value coming through transactional exchanges, we are moving toward recognizing the greater value that can emanate from fused partnering relationships. The spotlight that used to shine on sole creation of value now shines on co-creation of value. The most productive pathway to progress is through strategic alliances across sectors. If your organization is collaborating only marginally, then you are being left behind. If your organization sees collaborations as strategically important, then there is still more value to be created. Throughout this century, practitioners will increasingly turn to cross-sector collaborations as powerful vehicles for organizational success and societal betterment, and so it is critically important for all of us to deepen our understanding of value co-creation.
Current Limitations in Understanding Value Creation
There is no doubt that collective knowledge about cross-sector partnering has advanced significantly over the past three decades. Nevertheless, our exhaustive examination of the literature on collaboration and corporate social responsibility11 has revealed several important weaknesses in how value creation has been treated in this literature:
1. Definitions. Starting with the basic concept of what value is, we lack specific definitions.
2. Language. We do not have a common language and set of value reference terms.
3. Sources. There is no systematic categorization of sources of value.
4. Relationships. We do not fully distinguish among differences in the potential for value creation across different types of collaborative relationships.
5. Dynamics. We do not understand well enough the value-creating pathways of different collaboration processes.
6. Location. Only unevenly and narrowly do we specify and assess who is benefited. We have not yet uncloaked the full value of collaboration.
These weaknesses impede collective understanding and ability to realize the full potential of value creation as an outcome of collaboration.
The Collaborative Value Creation Framework
To address these limitations and enable a more specific, systematic, and comprehensive approach, we offer the CVC Framework, a new way of viewing and analyzing value and its co-creation. This is a revised, more developed, and illustrated version of a conception we proposed in 2012.12 We will briefly introduce the framework here and then, in subsequent chapters, elaborate each of its components.
We define collaborative value as “the transitory and enduring multidimensional benefits relative to the costs that are generated due to the interaction of the collaborators and that accrue to organizations, individuals, and society.”13 With this definition in mind, we look at collaboration activities not as expenses but as investments generating returns. The CVC Framework consists of five complementary and interrelated components, each offering a distinct window through which to view, understand, and manage value creation. Each of the components is elaborated in a chapter of its own. From those chapters and the underlying literature, the final chapter distills a set of smart practices for co-creating value.
Component I: The Collaborative Value Creation Spectrum
Who creates the value? Where does the value come from? What kinds of value get created? This component provides the cornerstone of the CVC Framework by introducing the concept of a Collaborative Value Creation Spectrum that specifies four sources of value and four types of value, which provide a new set of reference terms, with each source and type of value being a unit of analysis for understanding value creation more precisely and more systematically. It serves as a mapping mechanism that enables partners to locate where their collaborative efforts fall on the value spectrum.
Component II: Collaborative Value Mindset
What is the mental framework partners should have about value creation and collaboration? How partners think about creating value collaboratively conditions, in fundamental ways, the productive potential of partnerships. This component identifies multiple dimensions of the mindset that reveal how strong the mental framework is for collaborative value creation. This element of the framework enables one, first, to identify specific attitudes and perceptions partners hold toward creating value collectively, and, second, to understand how those can be adjusted to achieve more robust co-creation of value.
Component III: Collaboration Stages
How does the type of collaborative relationship affect value creation? This component presents the Collaboration Continuum, to analyze how key value drivers change as partnering rel...
