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1.1. BLURRING BOUNDARIES AND HYBRID ORGANIZATIONS
In the last decades, the orthodox three-sector (i.e. government, business, non profit) perception of
contemporary society seems to be under siege. Indeed, the boundaries among sectors are
fundamentally blurring, paving the way to a chaotic hotchpotch of roles, uncertainty and unforeseen
Corporate approaches and techniques have been increasingly applied to non profit organizations
(NPOs), generating hybrid1
organizations. Stemming from market-oriented practices and corporate
management, venture philanthropy and social entrepreneurship2
arise as the most innovative and
effective approaches to achieve social change.
Hence, “measurable outcome”, “performance evaluation” and “cost-effectiveness”, has become the
buzzwords of the non profit sector, too. In other words, “non-profit are internalizing the culture and
the techniques of market organizations and making them their own”.3
We may say that NPOs are
changing their organizational DNA, mutating into hybrid organizations.
, are encouraging the adoption of business-like attitudes in the context of non
profit management. Therefore, strategies and best practices from the corporate world have been
quickly exported and applied into the non profit realm. NPOs are increasingly engaged into
revenue-generating activities, just like their for profit colleagues.
In sum, the phenomena described, namely the marketization and the commercialization of the non
profit sector, are definitely eroding the very meaning and the underpinnings of traditional sector
On the other side, the corporate world of global business, is increasingly taking the responsibilities
for its economic and financial operations. The trend is triggered by several factors among which:
corporate scandals and frauds (e.g. Enron, Parmalat), multiple critics (e.g. NGOs, activists), a
raising in public awareness and a shift in customers’ preferences. As a matter of fact, corporate
responsibility seems to be the business imperative of what we may call the Post-Enron/Post-
See “Blurred Boundaries and Muddled Motives. A World of Shifting Social Responsibilities”. A Report from the W.K.
Kellogg Foundation, November 2003.
For an extensive paper on the meaning of social entrepreneurship, see: Dees, G. (2001). “The Meaning of Social
Entrepreneurship”, Duke University, The Fuqua School of Business, May 30 2001.
Visit www.fuqua.duke.edu/centers/case/documents/dees_SE.pdf to download the full document.
Young, D. and Salamon, L. M. (2002). “Commercialization, Social Ventures, and For-Profit Competition” in
Salamon, L. M. (ed.) The State of Nonprofit America. Washington D.C. : Brookings Institution Press, p.436.
In this regard, see Drucker’s seminal book: Drucker, P. F. (1990) Managing the Non-profit Organization. New York:
Harper Collins. In addition, Porter, Michael E. and Mark R. Kramer. (1999). “Philanthropy’s New Agenda: Creating
Value.” Harvard Business Review, November-December, pages 121-130.
Parmalat Era. In other words, the responsibility of the firm is not only to make profits, maximizing
shareholders’ value, but to meet obligations to multiple stakeholders and serve society, as well.
Businesses are asked to move beyond the traditional trade-off between the economic and the social
spheres. The appropriate role of business in contemporary society is changing, blurring the
boundaries among the three sectorial perception.
Firms are acquiring “social” responsibilities, i.e. responsibilities towards their stakeholders.
Therefore, in this context, new concepts arise:
1. CORPORATE SOCIAL RESPONSIBILITY (CSR): “is the commitment of business to contribute to
sustainable economic development, working with employees, their families, the local
community and the society at large to improve their quality of life”5
2. CORPORATE CITIZENSHIP (CC): “is the impact and outcomes of the strategies and operating
practices that a company has in its relationships with primary and secondary stakeholders,
societies and the natural environment”6
We may say that firms are changing their corporate DNA, mutating into hybrid companies.
Naturally, the blurring of the sectors and the arising of such hybrid companies is conflicting with
the opinions of three-sectors’ believers. In this regard we may say that, Milton Friedman’s mantra,
namely, “the business of the business is the business”, seems to be still alive and kicking7
According to this view, we just need: (1) corporations, accountable just to their shareholders, to
make profits and (2) governments, accountable to all the constituencies, to serve the public good.
Holme, R., Watts, P. (2000). “CSR: Making Good Business Sense”, World Business Council for Sustainable
Development (WBCSD), p.10. Visit www.wbcsd.org for further informations.
Waddock, S. (2005). “The Progress of Corporate Responsibility/ Citizenship”, Presentation Slides, Master In
Corporate Citizenship, Fondaca Active Citizenship Foundation, Roma, June 21 2005. As a matter of fact, I had the
chance to meet Prof. Waddock during my internship at Pfizer Italy, where, as a company’s representative, I participated
in the first edition of Fondaca’s Master In Corporate Citizenship.
See the recent survey conducted by the magazine The Economist: “The Good Company. A sceptical look at corporate
social responsibility”, in The Economist, January 22nd
2005. Visit www.economist.com/surveys for more
On the other side, according to Joel Bakan8
, CSR is just a scam to hide corporations’ “pathological
pursuit of profit and power”. The law school professor believes that only governments, not firms,
have the responsibility to cope with the questions regarding industrial, social and environmental
issues and design effective policies.
From different perspectives and for different reasons, both market evangelists and corporations’
watchdogs agree on a rejection of the very concept of CSR and the underlying blurring of the
sectors. Both of them are asking to go back to the good old days of the three-sectors partition. Is it
still possible? Can we do that? Are governments enough powerful institutions to come back to the
days of old?
At this point, we need to take into consideration the changing role of the last but not least sector:
government. How does the blurring boundaries trend affect it? How is its role being re-designed?
Since the late 80s, the neo-liberal agenda, universally known as the Washington Consensus9
dictated the “rolling-back” of the state from its traditional functions and responsibilities, paving the
way to privatization and deregulation policies. Government lost its powers over the multi-national
company, which arose as “Global Actor No.1”.10
Bluntly put, governments were de-legitimized while, at the same time, the “invisible hand” of free
markets was legitimized as the institution to tackle with all the global issues. It seems that sectors
are starting to blur, isn’t it?
But the faith in the self-regulating forces of global free markets, loudly bumped into the Mexican
, first, and the global financial crisis originated in South East Asia (1997-1999), later.
Therefore, the untrammelled forces of über alles turbo-capitalism must be governed, otherwise they
See Bakan, J. (2004). The Corporation: The Pathological Pursuit of Profit and Power. New York: Simon & Schuster.
Visit www.thecorporation.com for informations on the book, the movie and further initiatives.
The term, provided by John Williams, refers to a set of global policy recommendations, among which: privatization,
deregulation and trade liberalizations.
Petrella, R. (1997). “Globalization and Internationalization: The Dynamics of the Emerging World Order” in R.
Boyer, D. Drache (Eds.) States against Markets: The Limits of Globalization, London and New York: Routledge, p .74.
See Krugman, P. (1995). “Dutch Tulip and Emerging Markets”, Foreign Affairs, 74/4:28-44, p 31-5.
are likely to spiral out of control. At this point, free-market was replaced by the non profit sector,
following the guidelines of the so-called Post-Washington Consensus.
According to this new version of the Consensus, “ the state needed to be replaced not so much by
the market as by civil society organisations that represented the aspirations of the people and that
Therefore, governments were replaced in their roles by the business and the non profit worlds.
Even governments mutated into hybrid organizations, losing their original functions to acquire new
ones. As to say, government has been de-legitimized by business and by nonprofits, losing its
powers and roles within the society. Therefore, supposing that going back to the days of old is a
feasible option (which is not), government has no power to do that.
In conclusion, from the scenario depicted, we may infer that: each one of the traditional three
sectors have been affected by blurring boundaries phenomena; everything has changed and we
cannot re-establish the status quo again. We need new paradigm to cope with this changed scenarios.
Actually, new rules for new realities.
Chandoke, N. (2002). “The Limits of Global Civil Society” in H. Anheier, M. Glasius, M. Kaldor (Eds.), Global
Civil Society 2002, Oxford: Oxford University Press, p.45.
1.2. CROSS-SECTOR PARTNERSHIPS
As a matter of course, we cannot go back to the three-sectors partition. We cannot re-establish the
status quo, since the old rules of the game are not working anymore. Indeed, as the Three-Failures
suggests, each one of the sectors fails, while other sectors’ interventions demonstrate their
inability to fix the problem, within a cyclical loop of failures and domino effects:
Market failure – Market and price system cannot successfully handle “pure public goods”14
the “free-rider” issue arises. To deal with such a “market failure”, government intervenes through a
non-market mechanism ( e.g. taxation15
), following the choices of the median voter.
Government failure - But government fails to answer to minority needs and concerns. Democracy
demonstrates its inherent limits, as Alexis de Tocqueville’s concept of the “dictatorship of the
majority” arises. Thus, according to Weisbrod, when “market failures” and “government failures”
arise, the non profit sector comes into action. In addition, NPOs have a competitive advantage over
traditional for-profits to tackle with “contract failures”16
Non profit failure - Anyway, even NPOs fail (e.g. paternalism, particularism, productive
inefficiency, etc.), closing the loop of the “three sector fallacy”: market and government come back
in the game, again, to solve the “non profit failures”.
For a deeper understanding of the stream of literature originated by such theory, see: Weisbrod, B.A. (1975).
"Toward a Theory of the Voluntary Non-Profit Sector in a Three-Sector Economy." Pages 171-95 in Altruism, Morality,
and Economic Theory, edited by Edmund Phelps. New York: Russell Sage. Hansmann, H. (1980). "The Role of
Nonprofit Enterprise." Yale Law Journal 89:835-901. Salamon, L. M. (1987). "Partners in Public Service: The Scope
and Theory of Government-Nonprofit Relations." Pages 99-117 in The Nonprofit Sector: A Research Handbook, edited
by Walter W. Powell. New Haven, CT: Yale University.
The term 'pure public goods,' refers to “goods or services that are both non rival (consumption by one person does not
diminish any other person's consumption of that good) and non excludable (keeping some individuals from consuming
the good is costly or impossible once it has been produced).” See Samuelson’s (1954) definition in Steinberg, R
(1987). “Economic Theories of Non Profit Organizations” in W. W. Powell. (Ed.) The Nonprofit Sector: A Research
Handbook. New Haven, CT: Yale University.
As a matter of fact, “only the state, by using the coercive power of law, can avoid free riders[…]achieve a distribution
of resources that more closely approximates the collective interests of the community”. See Douglas, J.(1987).
"Political Theories of Nonprofit Organizations." Pages 43-54 in The Nonprofit Sector: A Research Handbook edited by
Walter W. Powell. New Haven: Yale University Press.
According to Steinberg, Brown and Slivinski, NPOs may represent the answer to solve “contract failures”. Indeed,
thanks to their unique feature, i.e. the “non distribution constraint”, NPOs can enhance the level of trust (Hansmann,
1980), thus lowering transaction costs, dribbling the” information asymmetry” issue, and facilitating the transactions
related to service provisions.
Source: Powell, W. W.(Ed.) The Nonprofit Sector: A Research Handbook. New Haven, CT: Yale University.
As such a solid and consistent stream of literature demonstrated, the old rules of the games are
generating failures over and over again. We need to design new rules to live in contemporary
society - a planetary world wide web of connections, processes and players.
Actually, old-fashioned mantras such as “government should do it” and “business will take care of
it”, are not working anymore: we need new strategies and visions. As we are living “in these
complex times, when no organization can succeed on its own”, we have no other alternative but
embracing the Collaboration Challenge.17
Given these reflections, the “whatever it works”18
mind-set seems to arise as the only feasible,
down-to-earth, and effective strategy to tackle with global issues.
Hence, in an effort to bridge the silos, collaboration across different players from the different
sectors arise as the successful strategy. Hence cross-sector partnerships are thriving in this world of
blurring boundaries. Naturally, dealing with cross-sector partnerships within a context of blurring
sectors’ boundaries may sound a little bit peculiar. I guess we need a different framework to tackle
with the issue. I think we need new coordinates and a new compass to get our bearings in this new
Austin, J. (2000). The Collaboration Challenge. San Francisco: Jossey-Bass Publishers
Where the term indicates: “a non-formulaic, non-legalistic, non-political, non-categorical approach to getting the job
done”. See the already quoted Young, D. and Salamon, L. M. (2002), p.440.
1.3. BEYOND BLURRING SECTORS: THE BLENDED VALUE PROPOSITION (BVP)
Life is the blended harmony of the Yin and Yang.
The perception of reality we develop depends on the lens we use. Perceiving the contemporary
world through the lens of the blurring boundaries, seems like eating a soup with a fork: it is not the
right tool. At this point, we need to be equipped with the right tools for our scouting expedition.
In order to explore this new territory, we need to make the acquaintance of its inhabitants. In this
regard, Jed Emerson20
- a pioneer of social entrepreneurship and “an elder in the field” of venture
philanthropy, - will be our guide in this new (promise) land of the Blended Value Proposition
(BVP). According to the guru of BVP thinking:
to use the word "blur" has the connotation of something having gone astray, run amok, become
involved in mission drift or a modest distortion of reality…And it is fundamentally the wrong way
to think about what is in play, which is (at its core) value creation by organizations and those that
provide capital (in whatever form or with whatever expectation of returns) to them... This is not a
question of good or bad or what have you, but rather one of folks just looking at the world through
their existing lens and not rising above the present framework to understand the emerging, deeper
paradigm shift. Value is non-divisible. It is Whole.21
This seems to be a quantum leap in the way we perceive our realities. In other words, giving the
changed scenarios, we cannot continue to proceed with the idea that nonprofit are producing social
value and businesses are producing economic value. We cannot continue to separate the silos. And
we cannot continue to simply perceive a blurring area among increasingly interconnected silos.
Indeed, nonprofits are embedded in the business environment, generating economic and financial
Chuang Tzu (1981, Kuo Hsiang chu). Chuang Tzu, Tai Wan Chung-hua shu chu,Tai-pei.
The multi-faceted Emerson is currently Senior Fellow with Generation Foundation, the philanthropic arm of
Generation Investment Management (London, UK), and a fellow with the Said Business School at Oxford University.
Recognized as an international leader in the field of strategic philanthropy, social entrepreneurship and corporate
citizenship, Emerson started to developed the BVP and the Social Return On Investments (SROI) metrics in the year
2000. In this regard, consider his seminal paper: Emerson, J (2000). “The Nature of Returns: A Social Capital Markets
Inquiry into Elements of Investments and the Blended Value Proposition”. Boston: Harvard Business School. Visit
www.blendedvalue.org and www.generationim.com for further informations on his researches and activities.
In December 2005, I had the chance to meet Jed Emerson, in his retreat in the heart of Rocky Mountains, in beautiful
value as well. On the other side, firms are embedded in the society, generating social value, as well.
Thus, the very point is not about silos, it is about value. This is the paradigm shift suggested.
Actually, the core concept of the BVP is that: “value is itself a combination, a “blend” of economic,
environmental and social
factors, and maximizing
value requires taking all
three elements into
understanding of the term
challenged by the arising
of the BVP. Social and
financial values are
naturally embedded into
all traditional categories of
Value Map will help us to tackle with the issue (see picture above)23
: “ Quad A represents the
higher economic value and Quad D the lower social value of a standard investment opportunity. A
traditional analysis would demonstrate that while the social capital investments are viewed as
having greater social value, they carry lower financial reward (and therefore lower financial returns
Thus, traditional approach to value production, assumes that the Economic Value and the Social
Value are “separate and at odds”. Therefore, they are separately tracked:
1. First Stage: track the financial value.
2. Second Stage: read the social audit from an external source.
As a matter of fact, what is termed the “Traditional Value Proposition” calls for “A Zero-Sum
Dissonance”. Actually, it “freezes” the concept of value into a static, two-dimensional, linear
understanding of it.
Bonini S. and Emerson, J. (2004). “The Blended Value Map: Tracking the Intersects and Opportunities of Economic,
Social and Environmental Value Creation”. Visit http://www.blendedvalue.org/Papers/Downloads_GetFile.aspx?id=97
to download the full document.
Presentation Slide © 2004 Jed Emerson. All Rights Reserved. Reproduced by courtesy of the Author.
Emerson, J. (2000). “The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The
Blended Value Proposition”, Social Enterprise Series No.17, Harvard Business School, p.31.
Visit http://www.redf.org/results-sroi.htm to download the full document.
Once crossed the Zero-Sum Dissonance, Emerson suggests us to consider “the transformative
nature of the investment and the dynamic interplay between its social and economic components”.
He is challenging the
suggesting a revolutionary
approach: integrate both
Financial and Social Value
into Quad B, where they will
“maximizing social and
financial value creation and
In other terms, value is not
static: it is dynamically
evolving. A Cartesian
approach to value, dictates its partition into Economic Value and Social Value blocks, within a
zero-sum game. Differently, a complex and systemic approach, considers value as dynamically
generated by the continuous interaction between Economic Value and Social Value. Hence, what is
Economic Value becomes Social Value and the opposite, in a continuous cycle of transformation.
Systemic thinking represents a major revolution in the history of Western scientific thought.
Furthermore, systemic thinking converges with Eastern thought, particularly the principles of
Tao is the origin of the universe, the entia of nihility and existence, and the ultimate indivisible and
interrelated reality. It impenetrates shifts and mutations of all things; all is one. Tao is an intangible
entity, which we can’t see, touch, hear, smell, taste, but it does exist in eternity. The essence of
Taoism is the awareness of the unity and mutual interrelation of all things and events, the
experience of all phenomena in the world as manifestations of the basic oneness—Tao.26
Observing the diagram of the Tao, we may infer two main conclusions:
1. THE INTER-PENETRATING AND UBIQUITY OF YIN AND YANG:
The dark Yin and bright Yang are the two intrinsic characteristics of Tao, coexisting
harmoniously in any entity and exhibiting itself in any form. We can see from Figure 1 that
there is Yin in Yang, and Yang in Yin, no clear boundaries between the two. The two dots in
the diagram symbolize the idea that each force contains in itself already the seed of its
In this regard, consider as a starting point, the seminal book by Capra, F. (1975). The Tao with Physics, Boston:
Shambhala, where modern quantum physics converges with Eastern thought. Particularly, see Lang, K.R. and Zhang, J.
L. “ A Taoist Foundation of Systems Modeling and Thinking“, Department of Information and System Management,
HK University of Science and Technology (HKUST), Hongkong.
Lang and Zhang, p. 2.
opposite. The two round seeds coincide with the cyclic pattern of the whole, which affirms
the invariance between parts and whole. Yin and Yang is a highly abstract yet most common
concept that basically captures the very nature of this world, and can thus be used to
describe any thing or any phenomena on this world in general.27
2. THE DYNAMIC PATTERN OF TAO:
The continuous cyclic movement of the two poles Yin and Yang, generates the Tao:
“The Yang returns cyclically to its beginning, the Yin attains its maximum and gives place
to the Yang.(Kuei Ku Tzu, fourth century B. C.)”28
Figure 1(left): The Diagram of Tao. Figure 2 (right): The Dynamic Unity of Polar Opposites. Source: Capra, F.
(1975). The Tao with Physics, Boston: Shambhala, p.167.
Drawing on the Taoist philosophical tradition, I dare to say that Value is generated by the dynamic
interaction between Economic Value and Social Value just as Tao is generated by the rhythmical
interplay between Yin and Yang. Thus, Value Blends from one form to another as the Tao does it.
Actually, I developed what we may call a Taoist Foundation of the Blended Value Proposition. A
millenary philosophical tradition to support a state-of-the-art framework. A blend of past and
future for the development of the present. Emerson’s proposition, provides us with a new lens to
approach contemporary reality. The world of blurring sectors has now been fixed up into its
For-profit and non-profit are, therefore, blended into a dynamic, non-linear fourth dimension where
the traditional model of Returns on Investment (ROI) is blended with the Social Returns On
Investment (SROI) and then replaced by the Blended ROI: “the Blended ROI is the tool by which
one assess the returns generated by the application of social capital in this integrated marketplace.”
Lang and Zhang, p.4.
Kuei Ku Tzu, (1978; Chao Chuan-pi chu). Kuei-ku-tzu chu shih, Tai-pei.
As a matter of fact, both non-profit organizations (NPOs) and for profit organizations (FPOs), are
pursing social and financial value maximization. The traditional separation for profit/ non profit is
Figure 3: Tao and BVP: A Natural Fit. I modified Capra’s diagram, in order to explain
the dynamic of the Blended Value Proposition(BVP).
increasingly losing its meaning. Bluntly put, both NPOs and FPOs are morphing into hybrid
organizations, pursuing blended value maximization. Well beyond the debate about the blurring of
the sectors, we are talking about organizations – whatever for profit or non profit – maximizing
In conclusion, every organization –whether government, business or nonprofit – is producing value,
actually, blended value. Now, the hotchpotch of roles, uncertainty and unforeseen contingencies,
starts to make sense. Given this holistic framework, we can apply best practices from the corporate
world to non-profit organizations, export nonprofits’ values in the business environment, and
address public policies accordingly.
All these players must communicate and achieve much more than mere sector blurring: both
organizations share the same goal, namely, value production. Value cannot be separated and
classified according to an old-fashioned Cartesian model. We now know that the whole is more
than the sum of the single parts. Therefore, we need to get rid of traditional mind-sets and move to
different approaches and paradigms.
Value is Energy and, therefore, according to the First Law of Thermodynamics, Energy is
continuously converted from one form to another. Energy blends, just as the Tao blends. We cannot
freeze Energy into static (organizational) forms. Therefore Value cannot be separated into armoured
silos (i.e. the sectors: government, business, non profit) but only converted from one form (financial
value) to another (social value).
Indeed, every organization generates value which is blending from one form to another
continuously. Again, as Emerson suggested, value is “fundamentally non-divisible, whole and
blended”. The BVP vision is giving us the chance to explore this unknown new land of partnerships
and alliances, equipped with a functioning compass and a more detailed map of the territory.
Bearing in mind these assumptions, we are going to explore the land of business-to-business (b2B)
partnerships, business-to-nonprofit (b2n) partnerships and business-to-government (b2g)
partnerships. The latter will be further analyzed through the development of the case-study
regarding the Matricole d’Argento initiative.
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