Chapter Two

The Collaborative Value Creation Spectrum

A Deeper Understanding of Value

To achieve a deeper understanding of collaborative value creation, we need new ways of conceptualizing and analyzing it. This chapter elaborates the first component of the CVC Framework: the Collaborative Value Creation Spectrum (CVCS), which provides new conceptualization, units of analysis, and definitional terms of reference. We envision value creation as a spectrum that recognizes collaboration as an activity that can produce varying amounts of value. It serves as a mapping mechanism to help partners locate and track their value-creation efforts. The goal is to understand what it takes to move across the spectrum from low value toward ever-higher levels of value creation. Many “minimalist partnerships”1 produce just enough marginal benefits to survive, but such underachievement constitutes collaborative negligence. Being a collaboration underachiever is tantamount to throwing value away. Intelligent and responsible leadership and management aim to achieve ever-higher levels of collaborative value. To accomplish this, first identify and understand the key sources of collaborative value, which constitute focal points of analysis. Then specify and understand the resulting key types of value produced from these sources.

Figure 2.1 presents the Collaborative Value Creation Spectrum, which runs from lower collaborative value to higher collaborative value. The next section of this chapter explains and analyzes in detail how the four sources of value indicated in the figure—resource directionality, resource complementarity, resource nature, and linked interests—can produce ever-higher levels of value. Similarly, a subsequent section defines and shows how and why the resultant four types of value in the figure—associational value, transferred-asset value, interaction value, and synergistic value—are associated with movement from lower to higher levels. By the end of the chapter, we will be able to fill in the empty cells of the Collaborative Value Creation Spectrum in Figure 2.1.

Figure 2.1. The Collaborative Value Creation Spectrum

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In effect, the VCS component addresses two basic questions:

1. Where does value come from?
2. What types of value are created?

Within the CVC Framework, this component serves as a conceptual and analytical reference point for the other four components. Value sources and types are building blocks in the analytics of collaborative value creation. Accordingly, each of the subsequent chapters will further deepen our understanding of sources and types as we address a key question: What enables a collaboration to generate greater value? Those chapters examine the generation of value in terms of mindsets, evolving relationship stages, underlying collaboration processes, and outcomes as they affect individuals, organizations, and society in terms of economic, social, and environmental value.

Sources of Collaborative Value

To understand what gives rise to value creation as a collaboration moves across the spectrum toward greater value, one needs to identify and examine where value might come from. We have identified four interrelated yet distinctive underlying sources that can serve as focal points for analyzing and designing collaborations to generate greater value. Each value source addresses a key analytical question:

1. Who provides the resources, and how?
(Source of value: Resource Directionality)
2. How good is our resource fit?
(Source of value: Resource Complementarity)
3. What kinds of resources are deployed?
(Source of value: Resource Nature)
4. What are our shared interests?
(Source of value: Linked Interests)

We will now examine each of these sources.

Resource Directionality: Who Creates the Value?

The question of who brings value to the partnering table is fundamental to analyzing value creation. Although businesses and nonprofits can, do, and should create value on their own, cross-sector partnerships provide the opportunity to create different and multiple kinds of value. In collaborations, the degree and nature of the interaction can vary greatly, with significant implications for value creation. Within such collaborations, it is important to recognize that value creation can occur because of unilateral resource flows coming mainly from one of the partners, a situation to which we refer as sole creation. Or the flows can be bilateral, coming from each partner as a reciprocal exchange, and yet they can be parallel and independent: you give me something, and I’ll give you something. This type of exchange is what we call dual creation. When the partners increase their interactions and combine resources, the resulting value creation from their conjoined efforts is what we label co-creation.

We conceive of this interaction range as moving along the VCS from sole creation to co-creation. The VCS is a mapping mechanism that enables organizations to identify where their value-creating actions fall along the spectrum. There is always some element of sole creation, but the greater the preponderance of co-creation, the greater the potential for value generation. Conjoining resources creates a new asset configuration that did not exist before. There are two key collaboration-assessment questions for partners, one descriptive and the other analytical:

1. To what degree are we co-creating value, that is, where do we fall on the spectrum?
2. What is our opportunity for increasing the degree of co-creation, that is, by moving further along the spectrum?

We can answer these questions in part by examining the flows, illustrated in the three depictions in Figure 2.2, that present the resource directionality of the VCS. If the flow is unilateral, with most of the value largely coming from one partner, then the collaboration is out of balance—a one-way street potentially leading to a dead end. Extreme one-sided creation of value is not sustainable in an alliance, because the lack of reciprocity erodes a sense of fairness in the generation and capture of benefits. In contrast, when both parties are putting commensurate resources into the alliance, albeit in separate and parallel fashion, then more value will be created. These bilateral flows provide the basis for a reciprocal exchange and more durable relationship—each partner is putting in and getting out a fair share. Nevertheless, even greater value-creation potential lies in integrating efforts and conjoining resources so that the partners are more fully co-creating value.

Figure 2.2. The Value Creation Spectrum: Resource Directionality

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Thus there are three types of resource flows: sole creation of value, dual creation of value, and co-creation of value. Although it is important to ask what I am giving to and getting out of the collaboration, it is even more powerful to focus on the partnership as the unit of analysis and to concentrate on making the collective pie bigger. The case examples that follow illustrate resource directionality, the first source of collaborative value, through the three types of resource flows.

Directional Flows: Case Examples
Let us turn now to two collaborations in New Zealand2 and one in the United States.3
New Zealand: ANZ Bank and the Cancer Society of New Zealand
This fund-raising collaboration between the ANZ Bank and the Cancer Society of New Zealand involves the sale of daffodils. The bank advertises the program, mobilizes volunteer support, and collects and counts donations received through each branch. The type of the resource flow is predominantly unilateral, from the bank to the nonprofit. It is a long-standing relationship because the social value of the cause and the enabled work of the society provide associational value to the bank.
New Zealand: Genesis and HEET
This collaboration was between Genesis, a major New Zealand energy company, and the nonprofit Huntly Energy Efficiency Trust (HEET), and it illustrates the bilateral/parallel exchange type of resource flow.4 The alliance aimed to provide energy-saving curtains to low-income homes in a region where Genesis had power-generating facilities. Rather than simply providing a unilateral donation to HEET, Genesis used its marketing skills to promote the program and get other entities to donate curtains. On the other side, HEET ensured the technical appropriateness of the curtains and worked with social service agencies to identify appropriate recipients and deliver the curtains to them. Each partner was providing distinct resources and performing separate functions in a process of parallel dual value creation; both resource flows were necessary for the service delivery to function. (These were new activities for HEET, by contrast with the situation of the Cancer Society of New Zealand, discussed in the previous example; the Cancer Society of New Zealand received funds to carry on its normal activities.)
United States: Nature Conservancy and Georgia-Pacific
This example illustrates the third type of resource flow: conjoined resources. The Nature Conservancy and Georgia-Pacific, a company dealing in timber products, entered into a partnership to co-manage timbering operations in an environmentally sensitive area.5 The organizations combined the nonprofit’s knowledge of environmental science with the company’s forest-management skills to increase both organizations’ power to achieve economic and conservation goals in a sustainable manner.

Resource Complementarity: How Good Is the Mutual Fit?

A key source of value from collaboration is gaining access to another organization’s important tangible or intangible resources that are complementary to one’s own.6 In effect, partnering changes the constellation of desirable resources available to each organization. Value resides in the resource differences. Nevertheless, organizational differences can also impede the realization of the potential value of resource complementarity.

Differences in the following areas between businesses and nonprofits (and between businesses and governments7) represent possible barriers to collaboration:8

  • Mission and objectives
  • Values and motives
  • Strategies
  • Governance
  • Constituencies
  • Decision-making processes
  • Language
  • Organizational culture
  • Size and power

Sometimes the incompatibilities are too great, but partnering experiences reveal that these potential impediments are generally surmountable; sufficient organizational fit can be attained to allow the partners to tap into each other’s complementary resources, many of which are in fact embedded in these differences. In effect, obstacles can become opportunities. The CVC Framework’s fourth component—partnering processes, elaborated in Chapter Five—has to do with ways to facilitate fit. One is not eliminating all differences, because each organization’s distinctiveness is the source of complementarity. Rather, partners aim for sufficient organizational compatibility to preserve value-enhancing differences.9 The more ability the partners have to create a better fit and greater complementarity of their resources, the more they will advance along the VCS. The combining of each partner’s distinct resources achieves completeness, as conceptualized in Figure 2.3, demonstrating resource complementarity and fit. One is not seeking complete congruence. There will likely remain spheres of activity relatively untouched by the collaboration. One strives for compatibility by focusing on the sweet spot of organizational overlap. The case examples that follow illustrate resource complementarity, the second source of value.

Figure 2.3. The Collaborative Value Creation Spectrum: Resource Complementarity

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Resource Complementarity: Case Examples
The Nature Conservancy and Georgia-Pacific
This collaboration, discussed earlier, is a good example of the combination of complementary competencies: environmental sciences from the Nature Conservancy, and forestry management from Georgia-Pacific.
Home Depot and KaBOOM!
The long-standing partnership between the building supply company Home Depot and the nonprofit KaBOOM! combined the company’s building inputs and funds as well as employee volunteers with the nonprofit’s specialized knowledge and project-management skills for developing community playgrounds.10
H.E.B. and Monterrey Food Bank
When the U.S. supermarket H.E.B. expanded into Mexico, it created an alliance with the Monterrey Food Bank.11 H.E.B. had food products that had been cosmetically damaged and therefore needed to be disposed of. The Monterrey Food Bank had the distribution system to move these surpluses to needy consumers. The combination of these complementary resources enabled the creation of a collaborative social-value chain.
Yad Sarah and a Pharmaceutical Company
The large Israeli nonprofit Yad Sarah, which lent medical equipment and services to disabled and elderly citizens, undertook a collaboration with a major pharmaceutical company.12 The collaboration aimed to use the company’s volunteers to perform a variety of services. The most valuable services for the nonprofit involved the efforts of the company’s medical sales representatives, who were able to introduce and promote the nonprofit’s services to doctors and make the doctors aware of the nonprofit’s needs. This access and this network were very complementary and therefore proved quite useful. In contrast, company volunteers who provided computer training added very little value, because the nonprofit could obtain that service from existing and even more skilled volunteers. Volunteers in a third group, who were working directly with Yad Sarah clients, were not well equipped to provide any distinctive service, and the transaction costs of managing them were higher than the benefits derived.

Resource Nature: What Kinds of Resources Are Deployed?

The directionality of the flow and the complementarity of the resources are important sources of value creation, but value creation also depends on what kinds of resources the partners are mobilizing and applying to the collaboration. We place resources into three categories:

1. Generic resources
2. Organization-specific resources
3. Key success-related resources

Each type of resource has a distinct role, but they can all fulfill complementary functions, and they can all be mobilized in any collaboration.

Generic resources are those that are common across organizations. All businesses, for example, have and generate financial resources, and almost all nonprofits have a social service function and a positive social image. Thus a cash donation can be made by a business to a homeless shelter, and the shelter can continue to provide care for its clients; in this case, a generic cash donation goes to the nonprofit, which then provides a social service. Such resources are valuable inputs to a collaboration. Because such resources are common, however, the source of the value creation is fungible; the exchange can take place between almost any business and almost any nonprofit, and there is no differentiation of these resources according to the unique characteristics of the nonprofit organization. Therefore, in terms of quantity, one business might donate more funds than another; but in terms of quality, money is money, regardless of the source.

Organization-specific resources are particular to a company or a nonprofit. They are tangible or intangible resources that significantly differentiate one organization from others. Consequently, these resources are scarcer and potentially more valuable, if they can be appropriately engaged in the collaboration. For example, a company might have particular technical services or infrastructure, and a nonprofit might have access to and credibility with a specific population group. The mobilization of these resources holds the potential for designing collaborative undertakings that have richer value-creating possibilities because these resources are more differentiated than generic resources. For example, a bus company could provide transportation services to the residents of an elderly-housing community.

Key success-related resources constitute a smaller subset of organization-specific resources and include those that constitute the distinctive capabilities central to the company’s or nonprofit’s success. This is the constellation of drivers that enable the organizations to excel. For example, a company’s distribution network or its technology, like a nonprofit’s knowledge of a social problem or its service-delivery configuration, may be a key determinant of success. When these most valued resources are deployed, the collaboration is leveraging the organizations’ most powerful assets, thereby opening the door to even higher levels of value creation.

As one applies different kinds of resources to the collaboration, value creation is ratcheted upward to higher levels; generally, generic resources are the most prevalent, with organization-specific assets less prevalent and key success-related assets least prevalent; but their importance is inversely related to their prevalence, as shown in the tangent and inverted triangles in Figure 2.4. The deployment of these resources is not mutually exclusive. All three types are to some degree reinforcing and can be mobilized simultaneously. The case examples that follow illustrate resource nature, the third source of value, through the three types of resources.

Figure 2.4. The Collaborative Value Creation Spectrum: Resource Nature

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Resource Nature: Case Examples
Yad Sarah and the Pharmaceutical Company
In this previously described collaboration, the first resource—the medical sales representatives—represented a distinctive competency of the company, whereas the other two resources did not. Probing which type of resources the collaborative value will come from helps partners construct a more productive and mutually beneficial exchange.
A British Retailer and a Breast Cancer Nonprofit
An evolving collaboration between a British retailer and a nonprofit focused on breast cancer also shows the value of combining distinct types of resources.13 In the initial relationship, the retailer’s lingerie department selected the nonprofit as the recipient of its annual charitable donation. This philanthropic donation simply contributed to the nonprofit’s ongoing work. Any company could have made a similar cash donation. Two years later, the company moved from this disbursement of generic resources to leveraging its sales and branding skills—two organization-specific resources—so as to create a special brand of several lingerie products to be put on sale during Breast Cancer Awareness Month, with proceeds benefiting the charity. This marketing effort dramatically increased revenues for the charity, by comparison with the company’s earlier cash donation. As a next phase in this collaboration, the two partners combined their core competencies to enable an even higher level of value co-creation: they joined together to create a new product line of postoperative lingerie for women who had undergone breast surgery. The store used its distinctive capacities for product design and marketing, and the nonprofit contributed its unique access to and bonds with the target consumers by holding focus groups, offering design recommendations, and testing out prototypes. Thus we see how the partnership was able to advance to higher levels on the Collaborative Value Creation Spectrum by shifting from generic to organization-specific to key success-related resources.

Linked Interests: What Interests Do We Share?

Another source of value is rooted in the linkages between the partners’ respective interests. The greater the partners’ perception that their interests are linked to the creation of value for each other, the greater their underlying, driving motivation for co-generating value. Understanding value linkages across organizations is complicated because of varying perceptions of interests and value. Partners in cross-sector collaborations do not necessarily have the same objectives. They may be seeking different things from the partnership. There is not necessarily a common currency with which to measure value created or the fairness of its division. It depends on each partner’s perception of what is valuable. Consequently, it is very important that each partner gain a clear understanding of what the other values and is seeking from the collaboration. A vital partnering process is the reconciliation of divergent views so as to achieve fusion of value frames.14 In effect, the greater the clarity of perceived mutuality of interests and joint opportunity, the greater will be the potential for realizing the co-creation of value.15

The potential value residing in linked interests can be assessed in terms of breadth and depth.16 The partners may have a broad range of connected interests, which would increase the value potential, but the connections may be weak. In contrast, there may be relatively few connections, but they may be quite deep, which could be a powerful motivating force. As depicted in Figure 2.5, the lowest value potential exists when the linked interests are narrow and shallow, which means that there are a few superficial connections. There is moderate potential if there is greater breadth, although little depth; many trees are good, but shallow roots cannot always withstand adverse winds. There is also moderate potential if there is depth, but only in a narrow range of interests; deep roots give strength, but lightning can topple that single tree. A broad set of deeply linked interests is the most robust value configuration because of the amplitude of possibilities and the durability of the engagement. If each partner perceives its self-interest as linked not only to the other’s but also to creating value for the larger society, then the potential is even greater for moving across the Collaborative Value Creation Spectrum to higher co-creation at the societal level. The case examples that follow illustrate linked interests, the fourth source of value.

Figure 2.5. The Collaborative Value Creation Spectrum: Linked Interests

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Linked Interests: Case Examples
The British Retailer and the Breast Cancer Nonprofit
These two partners’ linked interests were focused on the same group of stakeholders—women in the at-risk age group. Although this was a narrow bond, there was depth to both partners’ linked interests in this group.
Ralston Purina and the American Humane Association
This pet food manufacturer teamed up with a humane society because of both partners’ deeply shared interest in promoting pet adoptions in order to reduce animal euthanasia.17
Rainforest Expeditions and an Amazon Community
Breadth and depth of interests were present in the partnership between the ecotourism company Rainforest Expeditions and the indigenous Ese’eja community in the Peruvian Amazon, a partnership formed to jointly create and operate a nature resort.18 Shared interests across a broad range of educational, cultural, conservational, managerial, and financial activities were essential to the success of the venture. The depth of these shared commitment is revealed by the twenty-year term of the partnership agreement.

How to Analyze Potential Sources of Value

By delineating the four sources of value, the Collaborative Value Creation Spectrum provides a path for systematically identifying and analyzing where collaborative value can be derived from. This allows us to think more strategically about the sources, their combinations and interactions, and the resultant value they produce. Although the four sources are interrelated, each is distinctive and addresses different dimensions of value creation. One should therefore examine each one to assess the potential that it holds for building a new collaboration or strengthening an existing alliance. One is addressing the question “Are we tapping to the fullest the value potential embedded in each possible source?” In addition to a focused analysis of specific sources, one should then examine the entire constellation to understand the interconnections. One should assess the relative availability of each source, since this can vary by collaborating context. The next analytical step is to identify the possibilities of combining the different sources to determine the answer to the question “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, for example, the resources would be flowing from both partners and would move beyond a bilateral exchange to enter into a conjoined fusion of resources. The resources would be complementary, and the organizational fit would be compatible, thereby adding new capabilities to the integrated effort. Key success-related resources would be deployed so as to leverage the distinctive competencies of each partner. The collaboration would be propelled 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.

Figure 2.6 summarizes how the sources of value evolve as they move across the Collaborative Value Creation Spectrum from low to high value. In effect, we are filling in the cells of the sources portion of the VCS shown in Figure 2.1. Resource directionality ranges from sole creation, with unilateral resource flows, to dual creation, with parallel and bilateral resource exchange, to co-creation, with resources conjoined. Resource complementarity has low value when the resources are unconnected and misfit, but then value increases when they are connected and compatible; highest value comes when they attain a highly complementary fit. Resource nature reveals modest value with generic resources commonly available, but it increases in worth as differentiated organization-specific assets are mobilized, and it attains highest value when the partners’ distinctive core competencies, the keys to their individual success, are deployed for the collaboration. Linked interests are weak when they are narrow and shallow, and they grow in value as they broaden and deepen.

Figure 2.6. The Collaborative Value Creation Spectrum and Sources of Value

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Types of Value

The four sources of value give rise to different types of value. In the literature as well as in practice, the benefits of collaboration are generally categorized in terms of economic, social, and environmental value. These are useful aggregate categorizations because they demonstrate the predominant types of value created. Nevertheless, we can gain a more refined understanding of value creation by identifying and examining more precise types of collaborative value. The Collaborative Value Creation Spectrum disaggregates economic, social, and environmental benefits into four underlying precursor types of value in relation to co-creation:

1. Associational value
2. Transferred-asset value
3. Interaction value
4. Synergistic value

Each of these interrelated types of value has multiple manifestations, and so we will also specify those value subsets. The more specific we can be, the more robust will be our analytics of value creation. Too often the full value of a collaboration is unrecognized because such specificity is lacking. A collaboration can produce some or all of these types of value, but in differing amounts. Therefore, it is important for partners to know or project the value configuration, that is, the mix of types of value that the collaboration will produce. The value function of each type can vary; not all types of value and their subsets are equally significant to a partner. For example, obtaining associational value that could enhance the organization’s reputation may be most important to one partner, whereas obtaining a particular transferred asset, such as technology, may be most important to the other. We will now examine each of these four types of value.

Associational Value

The first type of value is that which arises from being seen by others as associated with your partner. The mere act of cross-sector collaboration can generate reputational enhancement, a subset of associational value. Over two-thirds of the respondents in a global survey agreed with the statement “My respect for a company would go up if it partnered with an NGO to help solve social problems.”19 The positive association is fundamentally related to the production of value for society, with the nonprofit being a vehicle for achieving that. Analogously, a nonprofit’s image can be enhanced simply because it was selected as a partner by a well-regarded company, a signal that the nonprofit is an organization worth supporting. This basic form of associational value is intrinsic to collaborating; it represents a minimum base level of value accruing to most collaborations.

To understand this value further, one needs to move from the generic act of partnering to the specifics of the partnering relationship, which reveal the subsets of associational value. Each organization brings to the partnership its particular reputation, in terms of how well known it is, what it is known for, and whom it is known by. This represents the potential associational value. How fully that potential is realized will be shaped by the degree of complementarity and fit between the partners.20 The partners harvest associational value in many forms—that is, value subsets, such as enhanced projected credibility and desirability in the eyes of their respective stakeholders—because of the association. These stakeholder perceptions in turn can manifest themselves as multiple additional subsets of associational value, such as greater affinity for the organizations; better employee recruitment, retention, and motivation; higher client patronage of their products and services; stronger community and governmental support; and additional attractiveness to investors and donors.21 One survey confirmed this signaling effect of collaboration, finding that respondents indicated that a company’s commitment to social issues was important when they decided which companies they wanted in their communities (84 percent of respondents), where they wanted to work (77 percent), and which stocks and mutual funds they would invest in (66 percent).22

To realize this value, partners need to communicate effectively to stakeholders (see Chapter Five). As a collaborative relationship becomes closer, the partners’ employees as well as the public at large and other outside stakeholder groups increasingly see the identity of each partner as interrelated. Associational value magnifies as the collaboration moves from sole creation to co-creation across the Collaborative Value Creation Spectrum. Nevertheless, just as there is imputed pride of association, there can also be presumed guilt by association: one partner can be exposed to negative associational value because of the inappropriate behavior of the other partner in activities outside the partnership. For example, if one partner comes under attack for some perceived negative practice, then the other partner’s stakeholders may question the organization’s judgment or its desirability on account of the affiliation with the criticized partner. The case examples that follow illustrate the concept of associational value.

Associational Value: Case Examples
ANZ Bank and the Cancer Society of New Zealand
These parties found significant associational value. The widespread and longstanding Daffodil Day fund-raising event assured the partners of high visibility for their collaboration, thereby enhancing their reputations as caring organizations contributing to the community. This relationship, and their identification with each other as important institutions and with the cause, provided reinforcing associational value by signaling both their worthiness as partners and their community responsibility.
Unilever and the World Wildlife Fund
In 1996, Unilever, the leading buyer of seafood products, and the World Wildlife Fund, a major international conservation organization, were drawn together by linked interests in ensuring healthy oceans and sustainable fisheries.23 Their collaboration resulted in the creation of the Marine Stewardship Council (MSC) and the subsequent certification system for sustainable seafood products. The MSC’s eco-labeling—along with other, analogous, nonprofit-endorsed certification labeling for sustainable forestry products, fair trade products, and other types of products—fundamentally represents associational value for collaborating companies. The collaborating organizations’ brands and reputations are enhanced by the eco-labels, which signal underlying social or environmental value creation.24
British American Tobacco and Earthwatch Europe
The British American Tobacco (BAT) Company sought a partnership with Earthwatch Europe as a collaborative pathway into the larger NGO and public policy communities.25 The company was already participating in the NGO’s workshops for its Corporate Environmental Responsibility Group and desired a deeper relationship that would give it projected credibility and access to the nonprofit’s networks. The partners entered into a three-year contract, with funding that would enable the nonprofit to carry on important field research and have a positive influence on BAT’s conservation practices in its agricultural production in developing countries. The controversial nature of the tobacco industry made such a relationship risky for Earthwatch Europe, exposing it to the possibility of criticism from some of its stakeholders, that is, the possibility of negative affiliation value. Consequently, the nonprofit, with the agreement of the company, kept the collaboration at a low visibility level with the general public but did communicate about it with policymakers and certain other NGOs. This selective visibility generated associational value for the company with these specific stakeholder groups of interest.

Transferred-Asset Value

The second type of value is the benefit represented by the receipt of an asset that has been transferred by one partner to the other. The significance of the transfer will depend on the magnitude and nature of the asset and how it is used. We have seen from our discussion of sources of value that, for example, the transfer of key success-related resources that are highly complementary and conjoined will produce a more valued benefit. And, generally, more is better.

There are important additional dimensions for understanding and assessing these transferred assets. They can be depreciable assets; these get used up. For example, a company’s cash donation gets spent, or a nonprofit’s service gets delivered. Other transferred assets are durable assets, such as equipment or buildings; they last longer and continue to produce benefits. Durable assets can also be intangible. For example, a nonprofit can learn a new skill from a company, or the company can gain new knowledge about a community or a social problem from the nonprofit. The partner absorbs this new understanding and begins to use it. In effect, such capacity-enhancing assets become internalized by the recipient and enable an ongoing stream of benefits. Depreciable and durable assets are both valuable, but the recipients need to assess the functions that both are serving, relative to needs, and determine the optimum mix.

What is even more fundamental is the importance of recognizing that once an asset has been transferred, it is no longer part of the value exchange of the collaboration. Those assets and their value-creating capacity are now in the hands of the recipient and are not dependent on the other partner. Consequently, for asset transfer to continue to be valuable, the partners must renew the value proposition of their partnership. They can do this either by providing more assets of a similar kind or new types of depreciable or durable assets that would be deemed valuable by the partner. Renewability of transferred assets is a prerequisite for a collaboration’s longevity. The case example that follows illustrates the concept of transferred-asset value.

Transferred-Asset Value: Case Example
A British Energy Supplier and an NGO Focused on Learning Disabilities
In 2005, a British energy supplier made its charity of choice a nonprofit that specialized in assisting people with learning disabilities. The asset transfer was a cash donation of funds raised by company’s employees.26 The employees’ fund-raising activity finished, and the funds were spent. In effect, the value of the depreciable assets was used up. To renew the collaboration, the nonprofit created a new value proposition in the form of providing training on disability awareness to all the company’s employees, and specialized training on dealing with skill-challenged customers for select staff servicing this group. This training, in turn, led to the development of improved protocols for the company’s communication with its customers. This was a transfer of durable assets in the form of new capabilities. Subsequently, the nonprofit trained the company’s trainers, thereby completing the asset transfer and the partnership cycle, since there was no further asset base to be transferred and with which to renew the value proposition.

Interaction Value

The third type of value results from the partners’ interactions. The interaction processes in question consist of the set of intangibles that constitute a type of value. What is particularly distinctive about these intangibles is that they are not just outputs of the value-creation process but also inputs to it. Co-creating value both produces and requires these intangibles. Whereas conventional economic analysis considers interactions to be a transaction cost, our framing views interactions as a source of benefits.

Like the other types of value, interaction value has multiple value subsets, and each can carry differing worth for different partners. For example, relationships are one subset of interaction value. Some researchers of the collaborative relationships involved in the implementation of programs for corporate social responsibility (CSR) contend that the actual value of CSR “transcends any single transaction” and instead “stems from the deep, meaningful and enduring relationships” that CSR entails.27 This relational capital is embedded in the intangible of trust, another subset of interaction value. A trustworthy relationship serves as a mechanism for risk mitigation because it enables the partners to assume greater risks in their joint value-producing endeavors, thereby extending the frontiers of collaborative creativity.28 Interaction intangibles can become capabilities that not only enhance the existing collaboration but also are applicable to the individual activities of the partners, beyond the specific collaboration, either in other alliances or within each organization. Other broadly applicable capabilities related to interaction value include understanding and valuing differences, joint problem solving, communication, coordination, trust building, and conflict resolution. As more complex, deeper, and integrated relationships develop through alliances, the interactions intensify accordingly, and greater and more valuable intangibles emerge. The case examples that follow illustrate the concept of interaction value.

Interaction Value: Case Examples
Natura and a Public School
Natura, Brazil’s leading cosmetic company, initiated its first cross-sector alliance with a nearby public school.29 Through this experience, the company learned how to interact and build deep relations with an external social organization. These interaction capabilities gave it the confidence and skills to undertake much larger and much more complex collaborations.
Farmacias Ahumada and la Fundación Las Rosas
Farmacias Ahumada, one of Chile’s leading pharmacy chains, had a collaboration with a nonprofit that provided care to elderly people in need; in this collaboration, the company collected donations from customers in its stores.30 The company discovered that the employees who were most successful in collecting donations became the most productive salespeople, and this discovery led the company to develop with the nonprofit a training program to strengthen communication skills that incorporated emotional connection with clients.
Stora Enso and the Association for Nature Conservation
Stora Enso, a Finnish company manufacturing paper, packaging, and forestry products, used a dialogue strategy as one of its main vehicles for engaging with such NGOs as the Finnish Association for Nature Conservation.31 The interaction value being sought through such two-way communication included greater mutual understanding of perspectives, learning, and conflict management, all of which can serve as contextual risk-reduction mechanisms.
Tiffany, Global Witness, and Amnesty International
In 1998, Global Witness and Amnesty International, two advocacy organizations, fought against the flow of “conflict diamonds” by protesting against Tiffany & Co., whose CEO reacted by first ensuring that his suppliers were handling only legitimate diamonds. Then he engaged with the two NGOs, other companies, and government officials to create, in 2000, the Kimberly Process Certification Scheme.32 This engagement produced interaction value in the form of trust and credibility, subsequently leading Global Witness to praise rather than criticize Tiffany, which for Tiffany became a form of associational value. Collaborations can simultaneously produce multiple types of value.
A UK Financial Services Company and a Money-Management Education Nonprofit
A UK financial services company collaborated with a nonprofit to provide educational materials to first-year university students. This collaboration was an example of how the relational dimensions of trust, sympathy, goodwill, and solidarity fostered collaborative behavior in the partnership.33

Synergistic Value

The fourth type of value is rooted in the basic collaboration rationale that partners, by combining their resources, are able to accomplish more together than they can separately. The synergism of the resources enables innovation. The more specific focus is on value interaction. At the level of the aggregate value categories, the core premise is that collaborative creation of social or environmental value can generate economic value, and vice versa. There is a synergistic relationship, whereby the generation of one type of value gives rise sequentially or simultaneously to other types of value, creating a virtuous value circle.

Innovation is the highest form of synergistic value. When collaborators’ resources combine in unique ways to produce completely new forms of change, then there is the potential for significant organizational and systemic transformation and advancement at the microlevel, the mesolevel, and the macrolevel. In addition to creating such specific innovations, the partners develop processes and pathways to synergism. The case examples that follow illustrate the concept of synergistic value.

Synergistic Value: Case Examples
A TV Broadcaster and a Disabilities-Related Nonprofit
In anticipation of possible governmental regulations, a pay-television broadcaster in the United Kingdom collaborated with a nonprofit to address the special needs of physically impaired viewers.34 The nonprofit organized focus groups from among its clients, generating recommendations for the broadcaster, and this activity led to the creation of a special call center and a new type of remote control handset. These innovations provided social benefits for the users and generated economic benefits for the company by solidifying the company’s relationship to and retention of a customer base of 40,000 viewers.
The British Retailer and the Breast Cancer Nonprofit
The earlier cited collaboration between the British retailer and the cancer society reveals that the evolving interaction can migrate toward synergistic value. The initial charitable donation established the relationship, which then developed into the partners’ combination of their competencies to co-create an innovative product for postoperative breast cancer patients. This collaboration resulted in the synergistic creation of social value and economic value, emanating from the addition of an expanded product line that fulfilled a social need and deepened the client relationship with the business and the nonprofit.
Bell Atlantic and the New Jersey Schools
An example from the technology arena is Bell Atlantic’s partnering with the New Jersey public school system to introduce and test its high-bit-rate digital subscriber line (HDSL) fiber optics and Internet connectivity.35 The company was mobilizing its distinctive competencies, and the school system created a new technology school as the implementation site. The Stevens Institute of Technology was brought in to create an Internet-based set of curricula with the teachers. Students and parents were given access to computers, and the staff learned how to utilize the technology while also becoming more efficient and effective in managing innovative processes. This enriched educational environment simultaneously produced significant learning improvement, tested the new technology, and increased the company’s knowledge of how to serve the larger educational market, thereby broadening social value creation as well as the firm’s revenue opportunities. An even more powerful synergistic value was the subsequent technological innovation, in the form of a patent that enabled the company to create a new high-speed DSL product line in 1999.

How to Analyze Value Types

The first path of analysis is to examine the nature of each of the different types of value and their respective subsets, as created by the collaboration. The following list shows the usually associated subsets of associational value (emerging from the perceived worthiness of the relationship in the eyes of the partners’ internal and external stakeholders), transferred-asset value (emerging, as this phrase implies, from the exchange and sharing of resources), interaction value (emerging from the partners’ interactions), and synergistic value (emerging from the reciprocal and continuing co-generation of value):

Associational Value

  • Reputational enhancement
  • Credibility
  • Desirability
  • Affinity toward organization
  • Employee recruitment, retention, and motivation
  • Client patronage and loyalty
  • Community support
  • Government support
  • Investor and donor attractiveness

Transferred-asset Value

  • Depreciable assets
  • Durable assets
  • Renewable assets

Interaction Value

  • Relational capital
  • Trust building
  • Diversity management
  • Empathy
  • Solidarity
  • Joint problem solving
  • Conflict resolution
  • Communication
  • Coordination
  • Collaborative leadership

Synergistic Value

  • Virtuous value circle
  • Synergistic resource combinations
  • Innovative solutions
  • Synergism processes and pathways

Of particular interest is the form in which a type of value manifests itself across the Collaborative Value Creation Spectrum, as illustrated in Figure 2.7. The positioning on the VCS is a first approximation of value for each type. One then moves to a more detailed analysis of the aforementioned value subsets that emanate from each type of value, given its position. For example, associational value that has reached the level of deep identification between the partners can be examined in terms of the affinity and reputational benefits manifested by better employee recruitment and turnover rates, or by client or donor patronage, or by community or governmental support. Similar analyses can be carried out for each type.

Figure 2.7. Value Creation and Types of Value

image

The second path of analysis entails taking a holistic view and examining the values just estimated for each type, as elements of a collaborative value portfolio. From the perspective of portfolio management, one recognizes that each type of value and each subset of that value in a specific collaboration will serve a distinct function, although all these values are interrelated to some degree. The goal is to find the mix that best meets the individual and collective goals of the partnership. Consequently, there is no uniformly applicable target mix; each is collaboration-specific. In the portfolio assessment, one is estimating the relative contributions from the value types and their subsets. Such analysis, even if it yields only rough approximations, can be helpful in revealing imbalances among the types of value, in terms of the partners’ needs. For example, the left side of Figure 2.8 shows, in simplified form, a portfolio mix in which associational value has an overwhelming presence, which would raise the question of whether this “univalue” collaboration is relying too much on a single value type and leaving other forms of potential value untapped. In contrast, the right side of the figure shows a symmetrically balanced multivalue portfolio, which broadens the value mix. Equal is not necessarily optimal, however. The partners need to determine what will be, for them, the relative strategic importance of the different types of value. In some cases, emphasizing one type more than others may make sense; imbalance may be optimal. In addition, it is not just the shares but the absolute size of the value “pie” that counts; different mixes can affect the aggregate value of the portfolio. For example, a portfolio containing a dominant mix of synergistic value may create a larger aggregate value than one that is heavy on associational value, since innovations may create novel solutions that generate more significant benefits for individuals, for the collaborating organizations, and for society in general.

Figure 2.8. The Collaboration Value Portfolio

image

Reviewing the Collaborative Value Creation Spectrum

The core question is not whether we are collaborating but whether we can produce more collaborative value for individuals, organizations, and society. The collective pursuit should focus on the realization of the partnership’s full potential for creating value. The Collaborative Value Creation Spectrum provides a starting point in visualizing this aspiration. It provides a way of acknowledging that collaborations can ratchet up their value production as a function of their value sources and types. It gives us a conceptual mapping tool for identifying where a partnership’s value creation resides on the spectrum, from low-performing to high-performing collaborations. The figures throughout this chapter illustrate how sources and types of value differ across the spectrum.

Such value analysis can be made more systematic with scrutiny of the four core sources of collaborative value. First, resource directionality has to do with the question of who provides value-generating resources, and how. Resource flows hold greater value potential as resources move from sole creation to dual creation to co-creation. Second, resource complementarity has to do with how productive the fit is between the collaborators’ respective resources. The key is to preserve value-creating differences while achieving compatibility between the partners. Third, resource nature has to do with the kinds of resources deployed. Greater value can be generated through movement 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 the partners have in common. The broader and deeper the shared interests, the greater the value potential. Value analytics dictate that partners assess whether they are tapping the full potential of each source and achieving the optimum combination of sources.

Broadly speaking, these four sources of value give rise to economic, social, and environmental value. A more refined value analysis examines the four underlying types of value. The first, associational value, is the most common form of value, derived simply from being related to the partner and the social cause. Greater associational value accrues as the relationship intensifies and the identities mesh. Transferred-asset value, the second type of value, has to do with benefits accruing to the receipt of depreciable or durable assets. Once the asset has been transferred, the partners need to renew the value proposition, with more of the same asset or with different valued assets, in order to ensure the longevity of the collaboration. The third type of value, interaction value, emerges in the form of those intangibles (social capital, trust, communication, and so forth) that are due to the processes of the two organizations’ collaboration. These intangible outputs are valuable capabilities applicable outside the specific collaboration, and they are also necessary value-enhancing inputs to the specific partnership. Rather than transaction costs, interaction constitutes benefits. The fourth type of value, synergistic value, is the highest manifestation of complementarity, whereby one form of value produces another form of value and creates ongoing processes and pathways for capturing the benefits of synergism. The most productive synergism is innovation, particularly when it has transformative effects on individuals, organizations, and societal systems. Value analytics requires that one view the foregoing types of value as a portfolio to be assessed and managed so that the mix is strategically optimal.

With the Collaborative Value Creation Spectrum showing the way to a deeper and more systematic method of understanding the sources and types of collaborative value, we are now ready to move on to the next chapters and learn about how the other four components of the CVC Framework enable collaborations to advance across the VCS and co-generate ever-higher levels of value. We begin in the next chapter by examining the Collaborative Value Mindset.

Questions for Reflection
1. This chapter has suggested that to achieve higher levels of collaborative value, it is important to understand the two main components of the Collaborative Value Creation Spectrum: the sources of value, and the types of value. Use one of your organization’s cross-sector collaborations as a case study, and answer the following questions that focus on the sources of value:
a. Is the exchange of resources unilateral, bilateral, or conjoined?
b. How complementary are the resources exchanged between your organization and your partner?
c. Does your organization deploy generic resources, organization-specific resources, or key success-related resources?
d. What is your partner’s fundamental interest in the collaboration, and how does that link with yours?
2. The second component of the Collaborative Value Creation Spectrum focuses on the types of value produced as a result of the interactions and deployment of the sources of value. Using the same cross-sector collaboration case study, answer the following questions that focus on the types of value:
a. What is the potential for associational value? That is, how well is your partner known, what is your partner known for, and by whom is your partner known?
b. Has your organization transferred depreciable assets or durable assets to your partner?
c. For your organization and your partner, what forms of intangible interaction value are the result of your collaborative activities?
d. What are the synergies with respect to the collaboration’s generation of economic, social, and environmental value, and to what extent have you produced system change and innovation?
3. Use the perspective of a collaborative value portfolio to map the types of value produced by all the cross-sector collaborations of your organization. Are you leaving some types of potential value untapped?
4. The Collaborative Value Creation Spectrum provides new terms of reference for defining and analyzing value creation. How do these new terms assist the development of theory and practice?
5. As noted in Chapter One, we have defined 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.”36 How do the different elements of this definition guide the analysis of the co-generation of value?

Notes

1. Jamali and Keshishian, 2009.

2. Eweje and Palakshappa, 2009.

3. Austin, 200b.

4. Eweje and Palakshappa, 2009.

5. Austin, 2000b.

6. Pfeiffer and Salancik, 1978; Davis and Cobb, 2010.

7. Cairns and Harris, 2011.

8. De Cooman, De Geiter, Pepermans, and Jegers, 2011; Crane, 2010; Kolk, Van Tulder, and Kostwinder, 2008; Seitanidi and Ryan, 2007; Bryson, Crosby, and Middleton Stone, 2006; Teegen, Doh, and Vachani, 2004; Berger, Cunningham, and Drumwright, 2004; Austin, 2000a; McFarlan, 1999; Di Maggio and Anheier, 1990; Milne, Iyer, and Gooding-Williams, 1996; Crane, 1998; Alsop, 2004; Stafford and Hartman, 2001; Green, Groenewegen, and Hofman, 2001; Shaffer and Hillman, 2000; Westley and Vredenburg, 1997.

9. Le Ber and Branzei, 2010a; Le Ber and Branzei, 2010b.

10. Sagawa and Segal, 2000; Austin and Porraz, 2002.

11. Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004.

12. Schiller and Almog-Bar, forthcoming.

13. Holmes and Smart, 2009.

14. Le Ber and Branzei, 2010a.

15. Long and Arnold, 1995.

16. Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004.

17. Austin, 2000b.

18. Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004.

19. GlobeScan, 2002.

20. Kim, Sung, and Lee, 2011.

21. Kolk, Van Dolen, and Vock, 2010; Bhattacharya, Korschun, and Sen, 2009; Bhattacharya and Sen, 2004; Bhattacharya, Sen, and Korschun, 2008; Bhattacharya, Sen, and Korschun, 2011.

22. Cone Communications, 2002.

23. Cummins, 2004.

24. Conroy, 2007.

25. McDaniel and Malone, 2012.

26. Holmes and Smart, 2009.

27. Bhattacharya, Sen, and Korschun, 2011.

28. Couchman and Fulop, 2009b.

29. Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004.

30. Austin, Reficco, Berger, Fischer, Gutierrez, Koljatic, Lozano, Ogliastri, and the Social Enterprise Knowledge Network (SEKN) Team, 2004.

31. Kourula, 2010.

32. Yaziji and Doh, 2009.

33. Jamali, Yianni, and Abdallah, 2011.

34. Holmes and Smart, 2009.

35. Kanter, 1999.

36. Austin and Seitanidi, 2012a.

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