Chapter Seven

Twelve Smart Practices for Maximizing Collaborative Value Creation

The purpose of this chapter is to distill from the preceding chapters, and from the underlying literature review, a consolidated set of guidelines for nonprofit and business practitioners involved in designing and managing strategic cross-sector partnerships aimed at generating ever-higher levels of planned and emergent collaborative value.

Twelve Themes

From our analyses, there have emerged twelve interrelated themes of smart collaboration practice:

The first five themes relate directly to the components of the Collaborative Value Creation Framework. The other seven merit spotlighting because they have been repeatedly identified by the practitioners and researchers cited in the previous chapters as especially important to successful collaboration. In this, the final chapter of the book, we will elaborate the salient aspects of each of these twelve smart collaboration practices.

1. Understanding Value Creation

The conceptual cornerstone of constructing a powerful collaboration is to understand where value comes from and what kind of value is created. Therefore, the building blocks in the analytics of collaborative value creation are the four sources and the four types of value.

Identifying Sources of Value

Practitioners can make value analysis more systematic by examining the four core sources of collaborative value. Each source contributes to value creation in distinctive ways. First, resource directionality addresses the question of who provides value-generating resources, and how. The value potential of the resources is greater as their mobilization moves from sole creation to dual creation to co-creation. Second, resource complementarity addresses the question of how productive the fit is between the collaborators’ respective resources. Differences are a source of value, and so the key is to preserve those value-creating differences while avoiding incompatibilities. Third, resource nature focuses on the kinds of resources deployed. Practitioners can generate greater value by moving from generic resources to differentiated, organization-specific resources to key success-related resources. Fourth, linked interests have to do with the value-creating linkages that tie the partners together. The broader and deeper the partners’ shared interests, the greater the value potential.

For each source, practitioners should ask, “Are we tapping to the fullest the value potential embedded in the source in our particular context?” Because value sources are complementary and interrelated, partners should also identify the possibilities of combining the different sources. The question here is “Have we created the optimum value-source mix to move the collaboration toward the highest level on the Collaborative Value Creation Spectrum?” In a high-performance collaboration the resources would flow from both partners, move beyond a bilateral exchange, and achieve a conjoined fusion of resources. The combination of complementary resources would add new capabilities to the integrated effort. Key success-related resources would be deployed, and the distinctive competencies of each partner would thus be leveraged. The collaboration would be propelled and sustained by broad and deep linkages between each partner’s self-interest and the creation of value for the other partner and for the larger society.

Assessing Value Types

Ultimately, these sources give rise to economic, social, and environmental value, but the analytics of value creation enable a more refined analysis of the four underlying types of value and their respective constituent value subsets created by the collaboration. Associational value emerges from the perceived worthiness of the relationship in the eyes of the partners’ stakeholders, both internal and external. Its value subsets include enhanced reputation and credibility of the partnering organizations as well as internal benefits, such as employee recruitment, retention, and motivation, and such external benefits as clients’ patronage and loyalty, support from the surrounding community and from governmental sources, and attractiveness to investors and donors. The subsets of transferred-asset value are depreciable assets (such as cash, and goods and services that get used up), durable assets (which can be used for a longer time), and renewable assets (which bring new value to the collaboration). Interaction value arises from the processes of the partners working together, with resultant value subsets that include relationship capital, trust building, diversity management, joint problem solving, conflict resolution, communication, coordination, empathy, solidarity, and collaborative leadership. All of these are value outputs from the collaboration but also inputs to the collaboration that strengthen its value-generating capacity. Synergistic value is the virtuous circle of reciprocal generation of economic, social, and environmental value, whereby complementary resource combinations lead to high-value innovations and ongoing synergism-process pathways.

Practitioners should first reflect on which types of value and value subsets are most important to them. Then they should look at the entire constellation of value as a collaborative value portfolio and assess whether the mix is optimum. The Collaborative Value Creation Spectrum provides a conceptual mapping tool for identifying where a partnership’s value creation resides on the spectrum, from a low-performing to a high-performing collaboration, in terms of sources and types of value. The core question is how to produce more collaborative value for individuals, organizations, and society.

2. Achieving a Collaborative Value Mindset

Partners’ mental frameworks regarding value and collaboration fundamentally shape collaborative value creation. Partners will have higher potential for the co-generation of value with mindsets that include the following elements:

3. Advancing through Stages of Collaboration

The dynamics of value creation vary as partner relationships evolve through the philanthropic, transactional, integrative, and transformational collaborative stages. In different ways and to different degrees. each stage taps into the four sources of value (resource direction, complementarity, resource nature, and linked interests) and generates the four types of value (associational value, transferred-asset value, interaction value, and synergistic value), creating economic, social, and environmental value for partners, individuals, and society.

The three interrelated value drivers—alignment, engagement, and leverage—propel the collaboration to increasingly higher value co-creation across the Collaboration Continuum. Each value driver encompasses a constellation of value contributors, which change in their nature and significance from one relationship stage to another and are useful descriptors of the different stages. More important for practitioners, they are variables for analysis and management action, as revealed by the following summarizations of how these drivers and their respective value contributors evolve across the stages, from philanthropic to transformational.

Alignment

The collaboration’s relevance to the partners’ missions moves from being peripheral to central, and its strategic importance rises from weak to vital. The connection between the partners’ values shifts from shallow to profound. The partners’ respective knowledge of the social or environmental problem, which is often initially unbalanced, becomes synchronous as their joint efforts delve deeper into it. Disparate value-creation frames become fused; partners’ ways of thinking about co-generation of value become synchronized. The benefits focus in the beginning is on the partners but shifts toward the larger betterment of society.

Engagement

An initially modest shared emotional connection with the cause and with each other becomes deep. The focus of the interaction in the beginning is on procedures but becomes substantive. Involvement broadens from a few individuals to encompass personnel throughout the organizations and their external stakeholders. The interaction frequency shifts from occasional to intensive. Trust deepens as the engagement intensifies and results are produced. The partnership’s scope of activities broadens as they discover new value-creating opportunities. The dual partnership structure may expand to encompass the multiple parties needed to address more complicated and larger undertakings. Correspondingly, managerial complexity magnifies.

Leverage

The magnitude of resources required by the collaboration increases; larger investments are required to produce greater returns. The resource nature is generic at the philanthropic stage, but the more advanced stages mobilize the partners’ more powerful specialized organizational resources andkey success-related resources. At each successive stage, the leverage of these assets is magnified as they become more closely linked. As the linkages grow, synergism multiplies. Mutual learning is limited in traditional philanthropic relationships but becomes an increasingly powerful value contributor, especially fueling innovation, which becomes predominant and systemic at the transformational stage. Whereas very little internal organizational change is required initially, it later becomes critical to the support of high value transformation focused on external system change.

4. Managing Value-Creation Processes

Partnering processes are the underlying value-creating mechanisms. Each of the four phases of building and operating a cross-sector partnership—formation, selection, implementation, and institutionalization—has a distinct value-creation pathway that needs to be carefully managed. The components of each value-creation pathway are managed through vital subprocesses that tap into and convert the sources of value into actual value. Part of this process management is planned, and part is emergent in response to unforeseen events that require adaptive flexibility.

Formation

The process components of the value-creation pathway in this phase aim to assess the potential for collaborative value creation. They consist of articulating the social problem, mapping the potential collaboration in terms of the collaborative value portfolio, determining organizational intentions, charting the value-creation experience, assessing compatibility with respect to visibility, and detecting prepartnership champions.

Selection

This process pathway includes identifying linked interests, determining the value of resources, recognizing organizational capabilities, developing partnership criteria, and assessing risks.

Implementation

The pathway subprocesses focused on design and operation include experimenting, adapting, operationalizing, and evaluating.

Institutionalization

The process elements here include embedding the collaboration, wherein relationships deepen and enable information to become knowledge and then develop into new capabilities. The partners’ value frames merge and they govern the partnership in a fully shared manner.

5. Assessing Outcomes

Evaluation is essential to ensuring accountability, measuring progress toward goal attainment, and improving collaborative value generation. Assessing the outcomes of partnering is challenging because of the inherent complexity of measuring the economic, social, and environmental value generated by collaboration. These challenges can be addressed in five ways—through multilevel mapping, an evaluation mindset, clear objectives, a theory of value creation and change, and investments in assessment.

Undertaking Multilevel Mapping

To avoid underestimating the true value of collaboration, the partnership should comprehensively identify who is benefiting, and how. This means examining three levels—organizational, individual, and societal—that are internal and external to the partnership. At each level, one can specify which of the four types of value (with their corresponding subsets) are being generated.

Having an Evaluation Mindset

The partners need to be jointly and similarly oriented toward assessing outcomes. It really matters that measurement matters to the collaborators. There needs to be a strong shared commitment to and investment in evaluation.

Clarifying Objectives

The partners need to be very clear on the outcomes they are seeking, what they should be measuring, and the uses to which the evaluation results will be put. Ambiguity and vagueness are to be avoided.

Formulating a Theory of Value Creation and Change

By laying out the value-creation and change processes, the partners will be able to specify the operating mechanisms that will tap into sources of value and convert them to positive change. This activity provides a guiding structure for examining the co-creation process, from inputs to outputs to outcomes to impact.

Investing in Assessment

You get what you pay for. A weak investment will lead to weak returns. One should be pragmatic, of course, about the level of evaluation that is financially feasible, but managerially meaningful results require a meaningful investment of resources. The natural and important inclination is to measure the benefits to the partnering organizations, but the most fundamental and neglected question that partners should attempt to answer is “Are we co-creating meaningful value for society?”

6. Seeking Partners Who Fit

A foundational block for a strong partnership is achieving a solid fit between the partners along multiple dimensions. Four dimensions of fit are particularly critical: (1) between resource complementarity and linked interests; (2) between purpose and goals; (3) between strategy and structure; and (4) between values and culture.

Fit between Resource Complementarity and Linked interests

An essential starting point for powerful co-creation of value is a solid fit between partners’ value sources, particularly the complementarity of the resources that each brings to the alliance and the strength of the linkages between their mutual interests.

Each partner needs to assess what necessary resources the other partner has, and the extent to which its own strengths and weaknesses are complemented by the other. Given these sets of resources, each partner should be asking, “How can I create value for my partner, and vice versa?” A more powerful question for the partners to ask is “How can we combine our core capabilities to co-generate value?” Integral to answering those questions is an understanding of how each organization’s interests (and those of its stakeholders) are linked. Structuring the collaboration to optimize mutual benefits will contribute to sustainability and longevity. Partners’ resources and interests change over time. Consequently, there is a need for periodic reassessment of the prevailing fit and of the underlying value-creation dynamics. The respective value propositions will need to be adjusted and renewed to ensure productive compatibility. To the extent that these shared interests also encompass producing societal benefits, the external impact of the partnership will be even greater. The challenge is not just how to be better off but also how to make the world a better place.

Fit between Purpose and Goals

There is wide recognition of the importance of having clarity of partnering purpose. Jointly establishing explicit goals for the alliance is essential for clarity, motivation, and evaluation. Ambiguity of purpose fosters confusion and misunderstanding. Having clear and strong shared goals provides resilience to deal with any subsequent and almost inevitable partner friction. These goals will be stronger and more durable to the extent that they emerge from and are compatible with each partner’s own mission. Partners must be able to explain readily to any stakeholder how the alliance contributes to the attainment of their respective missions. Without such mission fit, the alliance is unlikely to move beyond being of tactical importance and on to being of strategic importance. This argues for each partner’s having explicit objectives that it hopes to achieve through the partnership for its own organization; because these objectives will be different for each partner, they should be communicated to ensure clarity of expectations. To add value to a partner, one should know what the partner values. But there are also shared goals for the collaboration. These should include goals having to do with the hoped-for impact on the social problem being addressed. This requires shared understanding of and agreement on the nature of the problem and how the joint effort can contribute toward its solution. Businesses usually have less understanding of the complexities of social problems, and so a nonprofit partner’s experience and knowledge can serve as a compensating strength. But co-creation requires joint understanding. The deeper the mutual comprehension of the problem, the greater the possibility of a clearer vision and more imaginative approaches. The partners should assess the resource-problem fit, that is, the adequacy of their individual and combined resources to achieve a meaningful impact on the problem they wish to address. Being realistic about what is feasible helps avoid the frustration of false expectations.

Fit between Strategy and Structure

Strong alliances achieve strategic fit. Understanding your partner’s strategy is important in order to understand how the collaboration fits into it. If you do not take the time to study and comprehend your partner’s strategy, you will be unable to shape the strategy for the alliance so that it adds the greatest strategic value to each partner. This requires each partner to learn from the other about its strategy and operations, both at the early stage and continually at later stages. The alliance strategy emerges from this mutual understanding and provides guidance for the most powerful combination of resources so as to attain the shared goals and ensure fit between the partners’ respective organizational strategies.

As Chandler’s pioneering research reveals, structure follows strategy.1 Consequently, the collaboration strategy should guide the way the alliance is structured, but underlying this is the issue of the fit between the partners’ respective organizational structures. There is, of course, no one correct alliance structure or optimum fit. Rather, each partner’s different organizational characteristics, such as those involving hierarchical structures and centralization of decision making, will entail pros and cons for the other partner, depending on the goals of the collaboration and the nature of each partner’s organization. Experimentation and adaptation during implementation can achieve organizational fit.

Fit between Values and Culture

A strong partnership is characterized by congruence of values and compatibility of cultures. Such alignment is not readily available. The literature abounds with examples of how the many differences between businesses and nonprofits can constitute barriers to their entering into a partnership. Crossing from one sector into the other is akin to crossing the border of a foreign country and encountering a different language, strange customs, puzzling values, and distinct behavior. But such obstacles are surmountable. One imperative is studying, understanding, respecting, and appreciating the partner’s cultural values and comportment. Therefore, fit emerges as this process of comprehension unfolds through collaborative interaction. It is important to remember that differences may seem like impediments but are also a fundamental source of value. Partnering with an identical twin is just more of the same. Complementarity requires diversity. Therefore, we value differences. Screening aims to catch fundamental incompatibilities that are not amenable to adjustment.

7. Bonding

In strong and enduring alliances the partners develop deep bonds. There appear to be four stages in this bonding process: (1) understanding, (2) empathy, (3) emotional connection, and (4) commitment.

Understanding

As mentioned earlier, a prerequisite of achieving fit is understanding your partner. This is seldom instantaneous. Taking the time to get to know your partner well is a good investment. As in most other significant relationships, this entails an ongoing discovery process. The more you interact, the more you discover. It is important to go beyond the narrow boundaries of the specific collaboration activities to understand the partner’s other dimensions and practices. Part of this exploration involves understanding differences, why they exist, and how they might serve to build a stronger collaboration.

Empathy

Out of understanding can emerge empathy. You need to break down stereotypes and gain respect for the things your partner does and how your partner does those things. Empathy fosters reciprocity; respect begets respect. In this stage, you begin to identify with your partner and are able to put yourself in your partner’s shoes. Being empathetic also sharpens your ability to understand how your partner sees and reacts to you.

Emotional Connection

Two critical forces feed the powerful pool of the partners’ emotions. The first is interpersonal chemistry. Understanding and empathy foster positive relationships. The quality of the relationships between individuals from the different partner organizations can be a significant determinant of the alliance’s effectiveness. If people click, collaboration can flourish. If the chemistry is bad, collaboration can curdle. Consequently, considerable care must be given to choosing the key people who will be managing the interface, and to creating opportunities for them to develop positive relationships. In the course of an ongoing alliance, key individuals inevitably get shifted to other positions or may even leave their organizations. The act of choosing their replacements takes place at a critical juncture, and you would be wise to engage your partner in some prescreening of the candidates to ensure compatibility. Strong relational bonds serve as shock absorbers and risk managers. They enable the partners to work together more effectively in dealing with the unexpected problems and opportunities that will arise. The second force feeding emotional connection grows out of the social cause toward which the collaboration is directed. Deep, shared belief in the importance of the cause is a powerful source of energy. This intrinsic motivation transcends the value calculus of the individual partnering organizations and is a primary driver in alliances that have entered the transformational stage.

Commitment

The glue of bonding is commitment. Top leadership must be committed to the collaboration if it is to be strategic. Furthermore, if the collaboration is to be transformative, the leaders must nurture and multiply commitment by motivating, empowering, and enabling individuals throughout the organization. Commitment is institutionalized when appropriate incentive structures are established and when collaborative value-creating behavior continues after the initial champions have moved on. The mindset transformation has evolved from “us and them” to “us.” Leadership may change, but organizational integration remains. It is vital for there to be congruence of commitment between the partners. Lopsidedness in the area of commitment leads to an unbalanced, unsustainable alliance. You must start building commitment early in the relationship, since what you are seeking is the long-term commitment essential to transformational change.

8. Governing and Organizing

Collaborative alliances are a form of social enterprise requiring thoughtful governance and careful organization in three areas: (1) roles and responsibilities, (2) planning and decision making, and (3) conflict and power management. According to Bryson, Crosby, and Middleton Stone, “the leadership challenge in cross-sector collaboration may . . . be viewed as the challenge of aligning initial conditions, structures, processes, outcomes and accountabilities such that good things happen in a sustained way over time—indeed, so that public value can be created.”2

Roles and Responsibilities

Just as it is vital to have clarity of purpose, it is also important to be clear about what roles each partner will play and what each will assume responsibility for. Formulating an explicit agreement together about who will be accountable for what eliminates recriminations due to vagueness. For those roles and responsibilities that are joint, it is important to set ground rules about how the coordinated efforts will be carried out. Reaching such agreements does not mean that roles and responsibilities are static. Processes are both intentional and emergent. They require iterative recalibration as the relationship progresses and as internal and external situations change. These adjustments become more significant contributors to the co-creation of value as they progress from reactive to proactive to adaptive to transformative.

To ensure effective stewardship of the responsibilities and the realization of this maturing process of creative adjustment, it is important to have managers of the collaboration relationship. They need to be highly and broadly respected individuals within their organizations. Furthermore, they need to be endowed with sufficient authority and ability to mobilize and manage the resources, actions, and interactions that are required to perform the designated roles and fulfill the assigned responsibilities.

Planning and Decision Making

As strategic social alliances progress from philanthropic to transactional to integrative to transformational relationships, they become increasingly complex and require ever more careful planning in terms of both design and operation. Nevertheless, the dynamic and organic nature of collaboration means that part of the planning will be emergent as conditions dictate new paths. The decision making involved in planning and operating an alliance needs to be shared and participatory. Clarity about the scope of decision-making authority is important so that the partners will not unknowingly and unduly infringe on each other’s separate organizational realms. The degree of collaborative governance is significantly shaped by the amount of decision-making discretion given to each partner. It can be quite beneficial to create multiple mechanisms for engagement and interaction among a broad range of the employees of both partners, as well as for engagement and interaction among a broad range of the partners’ external stakeholders. These mechanisms increase the pool of collective knowledge and the opportunities for discovering distinct capabilities and innovative collaborative combinations. Furthermore, fostering that kind of participation promotes the bonding process.

Conflict and Power Management

Conflict is both inevitable and desirable in collaborations. Conflict avoidance can be counterproductive. Disagreements represent potential opportunities for collaborative learning and advancement. The key to a productive outcome lies in how the disagreements are managed. Expecting problems, and being open to jointly finding solutions, will reduce emotional intensity and foster constructive solutions. This requires openness to different points of view and willingness to air conflicts. The supporting mindset aims to build bridges of understanding between the areas of disagreement. A power imbalance between the two partners, either on the side of the business or on the side of the nonprofit, is one source of potential conflict. But conflict may arise for many reasons as well, such as differences in resources, size, and prestige. At the same time, the existence of such differences does not automatically cause conflict. The elephant and the mouse can live happily ever after, but they do need to be careful where they step.3 The governance of the collaboration should aim to create equal footing and find ways to capture power-based synergies that increase interdependence so as to ensure mutual influence in the decision-making processes.

9. Communicating

Communication lubricates the collaboration machinery. Its quality fundamentally shapes the bonding, governing, and organizing processes, which in turn can also enable or stifle communication. For example, weak bonds or hierarchical relationships can hinder communication, and vice versa. There are three key communication categories: interorganizational communication, internal communication, and external communication.

Interorganizational Communication

The first and most critical category of communication is communication between the partner organizations. It should be characterized by clarity, honesty, constructiveness, respect, and caring. One of its key functions is to create a distinct and stable identity for the partnership.4 As for frequency, more is better.

Internal Communication

Each partner needs to communicate to its internal organization about the importance and evolution of the alliance, to ensure comprehension and commitment.

External Communication

The partners need to communicate and engage with their respective external constituencies. For external audiences, the partners need to agree on content and joint communications, to ensure that there is consistency of message. Partners should formulate a communications strategy that deals with content, audiences, form, and timing. To be a good communicator, one should also be a good listener. Empathetic, active listening fosters openness.

10. Building Trust

Trust is earned, not given. It is an output of the actions and interactions of the partners. But once created it in turn becomes an input into the partnership processes. Communication builds trust, as Bruce Burtch has emphasized:

Effective communication is the platform upon which trust and a strong relationship are built. Your communication should be open, honest, and regular. When challenges arise, you must address them immediately, coming from the position of “What can we do to solve this challenge in such a way that will strengthen the partnership and further our goals?” Your partners, and your own organization, will appreciate your being frank and reacting in a timely way. Indeed, working through such challenges will strengthen the trust among all participants, and prepare you for when future challenges arise.5

Trust is one of the most valuable intangible assets of a partnership. You build it continuously by keeping your word by doing what you said you were going to do. Dependability is an early building block. Sharing proprietary information, expertise, knowledge, and relationships adds more blocks. Having confidentiality agreements reduces risk and fosters greater openness. Ensuring that your partner is receiving a fair share of the collaboration’s co-created value motivates your partner’s greater willingness to increase investments and assume greater risks.

11. Learning

The most vibrant partnerships thrive on continuous collaborative learning. There is an ongoing search, individually and jointly, on two fronts.

Collaborating on Processes

First, the partners must learn how to work and learn together more effectively; that is, they must learn how to push the organizational and operational processes and frontiers outward to create an even more powerful collaboration.

Maximizing Value

Second, the partners must learn how to co-generate even greater value at the individual, organizational, and societal levels. Both partners must be willing to change. As joint solutions to problems are found, the partners must be receptive to expeditiously integrating adaptations into their respective organizations and into their ways of working together. There must be a process of converting new information into knowledge and then creatively generating innovations.

12. Transforming

Collaborations generate multiple types of value at multiple levels, but in their most powerful form they produce transformative effects on societal problems and on partnering organizations. To achieve this aspirational level, one needs to integrate the preceding eleven smart collaborative practices. The scope of collaboration broadens into multiparty, multisector collaborative networks. Priority is placed on system-altering innovation that is life-changing. Resource synergism is leveraged to the maximum. Significant internal organizational changes emerge to enable these transformative processes and outcomes. Value focus is on the societal level; derivative benefits accrue at all other levels. The world is changed for the better.

Toward the Future

This will be the collaboration century. Cross-sector collaboration is experiencing an accelerating upward trajectory. More firms and nonprofits are collaborating, and they are generating more value. Yet the potential exists for even greater collaborative value creation for the partnering organizations and their people, but also for co-creating innovative and transformative solutions to a multitude of major societal problems. It is our hope that this book will contribute to the realization of that critical collective aspiration.

Notes

1. Chandler, 2003.

2. Bryson, Crosby, and Middleton Stone, 2006, p. 52.

3. Austin and Leonard, 2008.

4. Koschmann, Kuhn, and Pfarrer, 2012.

5. Burtch, 2013, p. 136.