Imagine a region investing billions in new wind power. The technology works. Electricity is produced. Emissions are reduced. The project is considered a success. But a few years later, you discover that the transition has not been as extensive as hoped. Industry still uses fossil fuels to a large extent. The transport sector is changing more slowly than planned. Residents’ behaviors have not changed very much. How can that be? The technology worked. The answer is that technology almost never changes a system on its own. A system consists of much more than technology. It consists of laws, business models, behaviors and infrastructure. All of these parts affect each other. If one part changes while the others stand still, improvements often occur, but rarely real system change.
This is where many innovation initiatives go wrong. They focus on projects. But they forget the system.
When innovation is confused with system change
Many organizations are good at creating innovative projects. They develop new technology, test new services and carry out exciting pilots. The results can be impressive. The problem is that innovation does not automatically lead to change.
A system only changes when several parts start moving at the same time. It is a bit like trying to get an orchestra to play a new symphony by just replacing the violinist. The instrument may play differently, but the rest of the orchestra continues to play the same piece as before.
Social systems work in the same way. A new technology can be brilliant, but if the business model is missing, it will not scale up. If legislation prevents its use, development will stop. If people do not change their behavior, the innovation will have limited effect. If the infrastructure does not support the solution, use will be difficult. System change therefore requires several dimensions to develop in parallel.
The five system dimensions
When analyzing major societal challenges, five recurring system dimensions often emerge.
- The first is technology. Here we find products, services, digitalization, research and technical innovations.
- The second is business models. Here are the economic drivers that determine whether an innovation is actually used or not.
- The third is laws and regulations. These set the rules of the game for what is possible, permitted or attractive.
- The fourth is behaviour. Here are people’s habits, norms, cultures and everyday decisions.
- The fifth is infrastructure. It is about the physical and organisational structures that enable or hinder change.
The interesting thing is that these dimensions almost always influence each other. This is why systems innovation is less about optimising one dimension and more about creating movement in several at the same time.
The electric car as an example
The electric car illustrates this clearly. If development had only focused on technology, the transition would probably have been much slower. It was not enough to build better batteries.
Business models needed to be developed so that cars became economically attractive. Laws and regulations needed to be changed through environmental requirements, bonus programmes and policy instruments. Infrastructure needed to be expanded in the form of charging stations. Behaviour needed to change so that people began to see the electric car as a natural choice rather than an experiment.
It was the interaction between these dimensions that created the real change. If any of the dimensions had been missing, development would have slowed down considerably.
When the portfolio becomes more important than the projects
If the goal is system change, it is not enough to evaluate projects individually. You need to understand how the projects interact. For example, a technical innovation project may depend on a regulatory project that changes the legislation. At the same time, a behavioral project can create acceptance among users and an infrastructure project can make the solution available.
Each project may appear small when viewed in isolation. But together they can create a leverage effect that is significantly greater than the sum of their parts. That is why the most interesting question is not which projects are best. The most interesting question is which projects complement each other.
The path to the third horizon
This is where the Three Horizons model becomes particularly useful. The first horizon is about improving the existing system. The second horizon is about exploring alternative solutions and transition models. The third horizon is about the future system that does not yet fully exist.
Many organizations invest almost all their energy in the first horizon. They improve, streamline and optimize. Others invest in single large innovation projects in the second horizon.
But real system transformation only occurs when several initiatives together begin to create the conditions for the third horizon. This is where portfolio thinking becomes crucial. One project rarely changes a system. But a well-orchestrated portfolio of projects can do it.
Climate change as a system challenge
If we only invest in technology, the climate change will probably not succeed. If we only change behaviors, it will not succeed either. If we only change legislation, the effect will be limited. The problem is too complex.
We need new energy technology. We need business models that make sustainable solutions competitive. We need rules that guide development in the right direction. We need behavioral changes in individuals and organizations. We need infrastructure that supports the new solutions. All five dimensions must move simultaneously.
That is precisely why the climate issue is so difficult. And that is why traditional project management is often not enough.
The project manager as a system actor
In such a landscape, the role of the project manager is also changing. Traditionally, project managers have been primarily responsible for their own project. Budget, schedule, deliveries and results. But in system innovation, this perspective is not enough.
The project manager must understand how their own project affects other initiatives and how other initiatives affect their own. A project manager for a technology development project needs to understand what behavioral changes are required for the technology to be used. A project manager working with legislation needs to understand what technological opportunities are being developed. A project manager working with behavioral change needs to understand what infrastructural barriers people face.
It’s not about everyone knowing everything. It’s about everyone needing to understand that they are part of a larger system.
The real task of the system strategist
This is where the system strategist comes in. Many people think that portfolio management is about choosing the best projects. But in system innovation, it’s often about something else. It’s about creating the right combination of projects.
A system strategist therefore doesn’t just look at results. The system strategist looks at impact. Results are about what a project delivers. Impact is about what changes in the system. That’s a crucial difference. One project can deliver exactly according to plan and still have little system impact. Another project may seem small but create crucial conditions for many other projects to succeed.
The task of the systems strategist is therefore to identify connections, dependencies and reinforcing effects between the projects. It is less about control and more about orchestration.
When small projects create big changes
Perhaps the most fascinating feature of systems innovation is that the effects are often disproportionate. Small changes in the right combination can create very large results. A new regulatory framework can open the market for a new technology. A new business model can make the technology economically attractive. An infrastructure investment can make use easy. A behavioral campaign can create acceptance. Suddenly the whole system starts moving.
None of these efforts would have been enough on their own. But together they create a breakthrough. It is a bit like building a bridge. Each individual part may seem insignificant. But only when all the parts work together does something arise that can actually carry people across to the other side.
From project logic to system logic
Many of the great challenges of our time are characterized by the fact that they cannot be solved by individual measures. Climate change. Public health. Energy supply. Skills supply. Digital transformation. These problems are not complicated. They are complex. And complex problems require a different logic.
Project logic focuses on a solution. System logic focuses on the interaction between many solutions. Project logic asks what to do. System logic asks what needs to change. It is a difference that may seem subtle but that changes the entire way of thinking about innovation.
Building the future together
Perhaps this is why system innovation is fundamentally less about innovation and more about collaboration. The big change rarely occurs through the individual breakthrough. It occurs when many people, projects and initiatives start moving in the same direction without necessarily doing the same thing.
The real challenge is therefore not to create more projects. The real challenge is to create portfolios where the projects reinforce each other across the system dimensions of Technology, Business Models, Laws and Regulations, Behaviors and Infrastructure.
Only then do we begin to approach the third horizon. Only then do we begin to create the conditions for real system change. Big societal challenges are rarely solved by big projects. They are more often solved by many smaller initiatives that, when connected in the right way, change the direction of the entire system.
That is where the real power of systems innovation lies. Not in the individual project, but in the interaction between them. Not in the results of each activity, but in the effects that arise between the activities. It is when we start to see the portfolio as a system, rather than as a simple collection of projects, that we can create the changes that future generations will need and our complex challenges actually require.
