Imagine someone asking you to invest a hundred million kronor in a project. You are given only one condition. The project must be guaranteed to succeed. Not with a high probability, but absolutely certain. What would happen?
Most people would immediately start reducing risks. They would choose proven technology, well-known suppliers, established business models and solutions that already work. The greater the demand for security, the less room there is for truly innovative thinking.
This is where the great paradox of innovation arises. While we say that we want groundbreaking innovations, we often build our control systems to avoid the very uncertainties that make innovation possible. This is one of the biggest challenges in the public sector, research funding, large companies and international development programs. We want to create the solutions of the future, but at the same time we want to be able to report on the results before the solutions even exist. This is why theory of change has become an increasingly important way of thinking. Not for planning the innovation in detail, but for planning the effect that the innovation will create.
Innovation cannot be guaranteed
Innovation is not a factory where the right instructions automatically lead to the right results. On the contrary, many of history’s most important innovations arise through unexpected combinations, failures, detours and experiments that no one could have planned from the start.
Anyone who tries to control innovation work with the same logic used to build a highway will therefore often be disappointed. The highway can be designed in detail because the end result is already known. Innovation, on the other hand, is about discovering something that does not yet exist. The more guarantees an organization requires before it dares to invest, the less likely the disruptive innovation that is actually hoped for becomes.
This does not mean that innovation should be aimless. On the contrary, innovation may need more structure than many other activities. The difference is that the structure needs to focus on effects rather than solutions.
From solution logic to effect logic
Many projects start with an idea. Someone has invented a new technology, developed a new method or built a prototype. Then, they try to find a problem that the idea can solve.
Theory of change turns the whole argument upside down. Instead, you start by asking what change the world actually needs.
- What effect do we want to achieve?
- What social problem are we trying to solve?
- What development do we want to contribute to?
Once these questions have become clear, a significantly greater scope for innovation opens up, since many different solutions can lead to the same goal. This is what is usually described as effect logic. The focus shifts from what we should build to what change we want to achieve.
The theory of change builds a logical chain
A theory of change describes how today’s activities are expected to lead to tomorrow’s effects. It does not start with technology but with the future.
- First, the long-term societal goals or utility goals that you want to contribute to are defined. This could be about reduced climate emissions, better public health, strengthened competitiveness or increased social inclusion.
- Then, the long-term effects that need to occur for these goals to become a reality are identified.
- Then, the short-term results that must be achieved in order for the long-term effects to emerge are analyzed.
- Finally, the abilities that people, organizations or systems need to develop today are identified in order for these results to be possible.
In this way, a logical chain is built from today’s activities to tomorrow’s social change. The interesting thing is that this chain does not talk about exactly which innovation should be developed. Instead, it describes the direction in which the innovation needs to move.
Why brilliant ideas sometimes fail
History is full of inventions that have been technically brilliant but have never had an impact. This does not mean that the ideas were bad. The problem is often that they have not been sufficiently connected to the needs that the outside world perceives as important. A researcher can develop a fantastic new technology that saves fifteen percent energy in a certain industrial process. If society’s major investments are also about electrification, the circular economy or biodiversity, the technology may still have difficulty finding financing. Not because it is bad. But because it does not fit into the logic of change that the outside world is trying to create at that moment.
Innovation is therefore not just about having the right solution. It is also about solving the right problem.
Starting at the other end
Theory of Change helps us think backwards. Instead of asking how to sell our idea, we ask what social problem needs to be solved. If society has identified the need for a more sustainable transport system, the next question is what effects are needed to get there. Once these effects have become clear, organizations can begin to identify what results need to be achieved in the short term.
Then it becomes natural to develop the skills, collaborations and experiments that increase the probability that the right innovations will actually arise. Innovation then becomes not an end in itself but a means to create the desired change.
That is why public actors dare to invest
Venture capital often works according to a simple logic. Out of ten investments, nine can fail if the tenth is a huge success.
Public investments rarely work like that. Here it is about tax money, social responsibility and long-term legitimacy. This means that the public sector needs to be able to show why resources are being used even before the big innovation exists. Here the theory of change becomes particularly important.
If a project can show that it develops new skills, strengthens collaboration between actors, builds test environments, spreads knowledge and creates new innovation capabilities, the investment becomes easier to justify even if no one knows exactly which future innovation will be the big success.
So you are not just investing in a single idea. You are investing in the conditions for many future ideas to arise.
Innovation is an ecosystem
A common misconception is that innovation is primarily about the inventor. In reality, innovation is almost always the result of an entire ecosystem. Universities develop knowledge. Companies develop products. The public sector creates regulations. Investors finance development. Customers test new solutions.
When the theory of change is used, these connections become clearer. Then the project is no longer just about the performance of the organization itself, but about how the actors of the entire system together contribute to the desired effects. This is close to systems innovation, where the focus shifts from individual products to how entire social systems change over time.
Creativity needs direction
There is sometimes a perception that creativity means thinking completely freely. This is only partially true. The most powerful creative processes often arise when freedom is combined with a clear purpose.
The theory of change therefore does not function as a creative method in itself. It does not generate the ideas. It creates the direction that makes the ideas more likely to become relevant. When people know what problem needs to be solved, it also becomes easier to think creatively about how it can be solved. It is similar to how an artist works. A blank canvas can feel overwhelming, but a clear theme often frees the imagination.
From project management to learning management
Another important consequence of change theory is that the focus shifts from delivery to learning. If the goal is only to deliver a finished solution, failures become costly. If the goal instead is to gradually create the capabilities and results that lead to the desired effects, each experiment becomes a source of new knowledge.
This allows organizations to dare to try more ideas while still being able to show that development is going in the right direction. Learning then becomes part of the result.
Change theory and systems innovation
In systems innovation, change theory is particularly useful because systems are so complex that no one can plan exactly how the change will happen. No one knows what combination of technology, behavioral changes, policy development, business models and cultural changes will ultimately create the big breakthrough.
However, it is possible to describe the effects you want to see. It is possible to formulate which abilities need to be developed. It is possible to identify which collaborations need to arise. It is possible to create arenas where experiments can be carried out. And it is possible to monitor whether the system is actually moving in the right direction. In this way, the theory of change becomes a kind of compass rather than a map.
The most important task of leadership
For leaders, this means a changed perspective. Instead of demanding detailed answers about what the future should look like, the leader needs to create clarity about why the change is needed. The leader needs to formulate desired effects, create psychological security for experiments, follow up on learning and ensure that the organization’s resources are used in line with the long-term direction. This requires courage.
It is much easier to steer towards activities than towards effects, since activities can be counted while effects often develop over a long period of time. But that is precisely why the logic of effects becomes so important when the world changes faster than our plans.
Planning for the Unknown
Perhaps the most important insight of the theory of change is that it accepts a fundamental truth about innovation. We don’t know which idea will change the world. But we can create the best possible conditions for it to occur. This means shifting our focus from trying to control innovation to developing the people, organizations, and systems that make innovation possible.
This is also why the theory of change has become a central part of many societal challenges. It offers a way to combine responsibility with creativity, long-term direction with experimentation, and courage with innovation thoughts.
Perhaps this is where the innovation leadership of the future will differ from that of yesterday. Not by getting better at predicting the future, but by getting better at creating the conditions where the solutions of the future can emerge.
