The Collaborative Economy
How to Make Partnerships Work?
Part 1. Individual vs. Collective Value Creation
April 2020 - It is becoming increasingly clear that value is no longer created by firms alone, but by entering multi-stakeholder partnerships (1). Partnerships form interesting opportunities to fulfil both corporate as sustainability-related missions (2). A global survey by the UN pointed out that 78% of CEOs believes organizations should enter multi- stakeholder partnerships (3). An interesting phenomenon that emerges in these partnerships, in the tension between individual vs. collective value creation. For the partners, this often comes unexpected.
In the initiation stage, partners are off to a flying start. They find each other in a joint mission to create social and/ or environmental value. Based on this joint ambition, municipalities and/ or governments provide funding – which marks the official start of the partnership. In this stage partners are eager to get started and the grant proposal often functions as the strategic plan. In the beginning, this does not yet matter. Partners are driven to start achieving their mission and each contribute from their own knowledge, experience and perspective. It is this exact drive for value creation that makes partnerships vulnerable. The DNA of the partners from public-, private-, academic- and non-profit sectors, are often quite different. They speak different languages, have different goals and culture and ethos vary (4). Although this forms one the core strengths of the partnership, if the process of collective value creation isn’t carefully orchestrated (5), the differences may set the partnership at risk.
The solution is much closer than it may seem once the partners have started to experience the downside of their dissimilarities. If partnerships build in a strategic pause between the initiation and implementation stage, they allow themselves to build a foundation for long-term value creation. Where the grant proposal emphasizes the collective strength of the partnership, the strategic plan should allow room for individual value creation as well. Although the notion of individual action (and benefits) may seem counter intuitive in a collaboration, it is key for the partnership to work (6). If each partner can blossom individually, the collective value creation of the partnership will be multiplied.
How to make room for this individual value creation? The first step is to build in a strategic pause between the initiation and implementation stage to draft a strategic plan. It is advisable for this plan to consist of a clear action plan for the collective as well as individual value creation. This requires the partners to be fully transparent about their individual long-term strategic ambitions. As a next step, business models form an effective tool between strategy and implementation (7). Next to a collaborative partnership model, designing individual (sustainable) business models for the partners is equally important. Business models consist of the value proposition, value creation and value capture (8). Although value capture may seem counter intuitive to a partnership with a social or environmental mission, it is essential for sustainable value creation. Both the partnership as the individual partners need to be financially solid to achieve their long-term mission. In addition, the process of drafting the collective and individual business models, provides crucial insights for the value creation in the implementation stage. Together, the individual and collective business models form all the pieces of the puzzle. Once the partnership moves into the process of value creation, individual and collective action will no longer clash - but rather complement each other.
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In an attempt to contribute to the collaborative economy, this is the first piece in a series on how to make partnerships work. Het Klimaatkantoor supports organisations and partnerships in creating a broader notion of value – not only for companies, but for individuals, organisations and the wider society.
References
1. Beattie, V., & Smith, S. (2013). Value creation and business models: refocusing the intellectual capital debate. Br. Acc. Rev.. http://dx.doi.org/10.1016/j.bar.2013.06.001.
2. Hartman, L. P., & Dhanda, K. K. (2018). Cross-Sector Partnerships: An Examination of Success Factors. Business and Society Review, 123(1), 181-214.
3. Lacy, P., Cooper, T., Hayward, R., & Neuberger, L. (2010). A new era of sustainability, CEO reflections on progress to date, challenges ahead and the impact of the journey toward a sustainable economy. UN Global Compact–Accenture CEO Study (pp. 1–59). Retrieved from http://www. accenture.com/sitecollectiondocuments/pdf/accenture_a_new_era_ of_sustainability_ceo_study.pdf.
4. e.g. Bryson, J. M., Crosby, B. C., & Stone, M. M. (2006). The design and implementation of cross-sector collaborations: Propositions from the literature. Public Administration Review, 66, 44–55.
5. Röhrbeck, R., Konnertz, L., & Knab, S. (2013). Collaborative business modelling for systemic and sustainability innovations. International Journal of Technology Management, 63(1/2), 4–23.
6. Zollo, L. (2018). How to Develop win-win Situations in cross-Sector Partnerships? Some ‘‘Pracademic’’Insights. Annual Review of Social Partnerships 2018, Issue 13, December 2018.
7. Teece, D.J. (2010). Business models, business strategy and innovation. Bus. Model 43,172e194. https://doi.org/10.1016/j.lrp.2009.07.003.
8. Richardson, J. (2008). The business model: an integrative framework for strategy execution. Strategic Change, Volume 17, Issue 5-6, August 2008, p. 133-144. DOI: 10.1002/jsc.821