Q: What do you mean by "blended value? Who creates this blended value?

We have historically thought of value as being either economic (and created by for-profit companies) or social (and created by nonprofit or non-governmental organizations). What the Blended Value Proposition states is that all organizations, whether for-profit or not, create value that consists of economic, social and environmental value components-and that investors (whether market-rate, charitable or some mix of the two) simultaneously generate all three forms of value through providing capital to organizations.

While all value naturally consists of a blend, certain investors and organizations are intentionally attempting to create and maximize the impact of this total, blended value. In our report, The Blended Value Map (www.blendedvalue.org), we explored five key areas in which both investors and organizations are working to maximize this blended value. These areas are:

• Corporate Social Responsibility,
• Social Enterprise,
• Social Investing,
• Strategic/Effective Philanthropy and
• Sustainable Development.

Q: From your research, what did you find that these areas of work have in common?

In the last five to ten years, there has been an explosion of interest in these fields. Countless new organizations have been launched, business articles been published and new programs have cropped up at conferences, business schools and universities. What all these efforts appear to have in common is pursuit of more than simple economic value and more than basic social impact. They all appear to be advancing different parts of what may be viewed as a shared agenda of simultaneously valuing social equity, environmental sustainability and economic development.

When you understand that each of these five areas is attempting to advance what is in many ways a shared agenda, the issues faced by those within the silos are strikingly similar between silos. We called these "cross-cutting" issues. All share the challenges of creating more efficient capital markets and developing common metrics. All face leadership and organizational development concerns, as well as policy and regulatory issues.

Q: Can you elaborate on these cross-cutting issues?

The capital challenge refers to the inefficiency of the social capital market and the inadequate supply of appropriate financial instruments to finance blended value creation. This challenge is due, in part, to the unclear role and readiness on the part of foundations and other investors to support alternative asset class offerings. And it is also due to the fact that the mainstream capital markets don't know ho to fully assess the blended value of non-traditional business enterprise.

The measurement and performance metrics issue concerns a lack of consensus on how best to approach the creation of a single, commonly endorsed set of metrics by which to assess the performance of non-financial aspects of both organizations and capital funds. Key issues that arise as we explore the world of measuring and performance metrics include the lack of consistently effective approaches and tools for measuring and reporting social value, and the lack of confidence in what is measured by those seeking to document the value of their work.

The leadership and organizational development challenges of pursuing blended value are also not limited to any particular silo, but are common to the whole. In general terms, achieving organizational capacity involves a number of related areas, including leadership and management, financial sustainability, governance, strategic planning, scale and funding capacity building.

It is clear that these ventures and funds don't operate in a vacuum, but are directly effected by policy, tax and regulatory frameworks that influence how capital is invested and how returns are valued. Challenges in the area of policy and regulation include developing a common advocacy agenda to support the creation of a more supportive enabling environment to support this work, then coordinated lobbying for that agenda and against initiatives that do not affirm the work of blended funds and firms. If we are to be successful in moving an effective policy agenda to support healthy corporations, communities and ecosystems capable of maximizing their full, blended value potential, we first need to bring a larger set of players together from across their silos to create and advocate for this policy agenda.

Q: How do these fields relate to one another?

While there are many things these fields have in common, we discovered that they are currently organized as "silos." By silo we mean a self-defined group organized around a common subject that has depth but is not well connected or integrated with other groups, even if they have much in common and have actors working on related cross-cutting challenges, such as those we discussed earlier. All these actors could learn from the others, but as it stands, the lessons learned tend to remain within the relative vacuum of each area or silo.

Q: What are the implications of being organized as silos?

By organizing as silos, these areas are missing an opportunity to leverage the impressive knowledge and work they have been creating. Only by leveraging knowledge and work across the various areas of activity can these challenges be most effectively met and the potential of blended value fully realized.

Q: How do you think these issues can be resolved?

The goal of our work has been to identify opportunities for coordinated action across this field of related work in order to increase the effectiveness of these organizations in pursuing both economic returns and social/environmental impacts. We believe our work should be organized, at least in part, along the lines of value networks wherein actors from various silos could come together to work collaboratively on these common areas of concern and challenge. We have suggested areas of value networking based upon our interviews and research, to act as a starting place from which to begin discussions. We believe that these initial ideas will require broader, open dialogue with the widest set of domestic and international stakeholders if each of us is to respond most effectively to the challenges confronting us.

Q: How do you envision this coordinated action? What differentiates it from the various collaborative efforts that have been taking place in these areas?

Consolidating efforts toward achieving common goals is extremely challenging, however, we believe the benefits are far greater and as actors see that their own issues are best addressed in concert with others, we feel they will drive this process of value networking themselves, perhaps with focused support of a "network orchestrator" or other facilitating support.

There are a host of different initiatives and collaborative experiments from which we can draw lessons. That being said, traditionally when nonprofits approach "collaboration" they have done so to achieve a specific (usually short-term!) project goal, such as reducing costs or getting a single piece of legislation passed.

We envision something different…

What we envision is an approach to collaboration that is grounded upon specific value creation for participating organizations in which parties become forward looking as opposed to inward looking. Many successful for-profit firms such as eBay and Cisco have understood the potential from configuring their relationships within a network to capitalize upon the next wave of opportunity. We see coordinated action in this light, as a way to capture dynamic value opportunities.

Q: What would need to exist to make this happen?

We believe we all need to work toward the creation of a web of supported opportunities to exchange visions, coordinate work and connect the best parts of each silo is required to move this forward. Please note: We are not calling for the creation of a new organization, but rather asking that foundations invest in existing organizations and initiatives in order to allow current investments to be leveraged more effectively. It is not about funding the capacity of individual organizations, but rather building the capacity of entire networks which might then be able to function in a more efficient manner with greater leverage overall.

This means making better use of our best skills and tools - taking what business has to offer and combining it with the most advanced public policy and community/social enterprise practice. Making this happen requires a fundamental shift in mindset - a new, expanded vision of our work that focuses not on social enterprise or CSR or any specific silo itself, but rather upon the larger whole of which each of these is a part. From this greater vision of our collective potential to maximize the full value of our work, a new level of commitment will be needed - a commitment to linking our efforts together through value networks. It will also require long-term commitments to building the new conceptual framework and institutions capable of advancing the different parts of this common agenda - a new infrastructure to support organizations pursuing blended value.

While there is great and exciting potential for those involved in this area to "self-organize" in order to advance shared aspects of this agenda, it will not happen of its own accord. Capital to provide adequate resources to support these networks is required, but it is not sufficient alone to make this happen. "Network orchestrators" are also required - several entities capable of assisting in the coordination of the various participants, the timely allocation of various resources and the necessary support for what could be a complex global dialogue and work. We believe these orchestrators need to evolve from the combined vision of the related communities of investors and practitioners-those within the five silos.

The foundation community will also need to play a key role in supporting the creation of the necessary infrastructure to build these networks-but at this point, most foundations seem themselves to be focused on the silos and not the whole. We will have to see if the foundation community is capable of rising above traditional "grantmaking" practice to embrace a greater vision of both the potential of the individual groups they are funding, and the larger value the foundation community has the possible to help create.