The controversy over the recent Obama health reforms points up the enormous complexities of the U.S. health care system. At issue are two seemingly intractable values: ensuring quality health care for every American, and bringing skyrocketing medical costs under control.
Countries all over the world, including Canada, are experiencing the same dilemma. A key challenge for health organizations is to find new and innovative ways to create value. Ivey professor Oana Branzei focuses her research on the mechanisms that underpin value creation, by looking at interactions that bridge the public and private good. In a recent study published in the Journal of Business Ethics, she and Ivey PhD and post-doctoral fellow Marlene Janzen Le Ber explored value creation in cross sector partnerships in health care.
Oana Branzei,Associate Professor, Strategy
In the paper Branzei and Le Ber studied four cross sector partnerships, each consisting of a unit of a large hospital and a leading for-profit organization. These were mature partnerships in the fields of energy conservation, telecommunications, diagnostic imaging, and minimally invasive surgery. Branzei and Le Ber chose these partnerships because they were the first of their kind for the organizations involved, designed to come up with brand new ideas for cutting edge solutions. “This study looks at how two parties who have different understandings of value can come together to create value that they could not have imagined beforehand,” says Branzei.
Organizations understand value in two different ways. One way is looking at how value was created in the past. The other is thinking about how value can be created in the future. In their study, Branzei and Le Ber created a model of value creation using “value frames.” A value frame is an interpretation that describes how a partner thinks about value. A for-profit organization thinks of value in terms of commercial gain. A health care organization, on the other hand, thinks about benefits to patients.
In the model, the value frames of the cross sector partners are far apart at the start of their relationship. Over time, both parties seek to gradually push their value frames closer until they begin to overlap. This process takes place in four stages: frame negotiation, frame elasticity, frame plasticity, and frame fusion. Through frame negotiation, the parties share and interpret their ideas of value. The next stage, frame elasticity, allows the parties to experiment with these ideas. They stretch their frames towards each other, but like rubber bands they return to where they were. As partners begin to understand each another and become more comfortable in the relationship, the frames become more plastic, taking on a certain shape and stability. Frame fusion occurs when the parties have accomplished a degree of overlap that enables them to think about value in a similar way, and act on how to achieve it.
The key insight from the study is that transformative value creation comes from the interactions and relationships between people across the partnership. “The mechanisms of value creation are very relational in the sense that they can only be developed looking forward to a future that is shared with another partner,” says Branzei. “Value creation is transformative because you can reach combinations with a partner that were out of reach beforehand.”
Value creation is a process that happens gradually and takes place frame by frame. Building relationships at each stage requires “coordination mechanisms” between individuals and across organizations. The interactive nature is described by one of the managers talking about the negotiation frame: “So right from the outset you’ve got to openly share what you’re thinking about each other, and the trust and integrity have to be there.”
The process can be very uncomfortable for the parties involved, says Branzei. “It really requires a lot of commitment. But we found that the partners who struggle the most to come up with overlapping value understandings have the greatest potential to co-create value.” In this study, three of the four partnerships achieved frame fusion.
An important implication for managers is that it’s possible to think about creating value in more than one way. “A new understanding of value, developed with your partner, does not transform your identity as an organization, nor how you create value in other aspects of your operation,” says Branzei. “It is transformative only within that relationship. The trick is finding two partners who are committed to a process that can be long and not very fruitful at the beginning.”
Although managers understand the importance of change, most organizations tend to be fairly rigid in their ideas about what value is and how value can be created. Branzei suggests that thinking about social benefit and the public good can create value possibilities even for very commercial businesses. “We can’t fully sustain value on commercial grounds alone,” she says. “We have to stretch how we think about value in order to generate more value. What we argue in our paper is that we need to liberate our thinking about value before we can reach that value creation potential.”
Professor Branzei is the David G. Burgoyne Faculty Fellow