The Theory of Change has become an established method for describing how a desired future can be achieved through a chain of assumptions, interventions and mechanisms. The method is often used in project logic, social development and sustainability work. Basically, the Theory of Change is about mapping a logical chain between a long-term change and the steps that need to take place on the way there.
However, when the method is applied to system innovation, it needs to be expanded significantly because systems are characterized by complexity, many actors, different power relations and dynamic feedback loops.
Understanding the Theory of Change from a systems perspective is therefore about connecting the long-term development of the system level with the concrete initiatives that can be taken in the near future. It is precisely this connection that creates relevance for innovation work in complex social issues.
From project logic to system logic
The classic project-based Theory of Change often takes its starting point in a linear logic. The goal is defined, which interventions need to be made and which assumptions need to be true. In a system, this is not enough. A project is a limited part of a larger pattern, while a system consists of many actors, policies, social norms and structures that influence each other over time.
When the Theory of Change is used for system innovation, several additional components therefore need to be included. These include policies that govern the behavior of actors, economic incentives that can promote or hinder change, institutions that both enable and limit the scope for action, power structures that determine who gets to define the problem, and social norms that shape shared beliefs.
The system-level Theory of Change therefore needs to be able to handle many simultaneous logics of change rather than a single chain of cause and effect.
Thinking causally in complex systems
The Theory of Change is based on causal logic, but in system innovation this logic must be handled with humility. Causality in complex systems is rarely unambiguous, and changes often arise through the interaction of several factors, each of which only partially affects the outcome. System innovation is therefore about formulating assumptions that are not only linear but also circular and relational.
As a systems innovation leader, you need to ask questions such as:
- What needs to change in the actors’ behaviors for the system to develop towards the desired future?
- What policies currently govern behaviors and what mechanisms can change them?
- What social norms support or hinder change?
- What institutions need to be strengthened, changed, or supplemented?
The causal chain is thus transformed into a network of dependencies. By visualizing this network, it becomes clearer where the levers are. Levers are the points where small efforts can have a disproportionately large effect on the system. Identifying these levers is a central part of the Theory of Change in systems innovation.
Examples from societal development
Take, for example, the transition to sustainable mobility solutions in a city. At the project level, a Theory of Change could be about more people cycling and therefore the city building more bike lanes. It is a simple chain.
From a systems perspective, there are significantly more components that need to be included. This includes policies such as parking standards, road safety legislation and incentives for car ownership. This includes social norms around the status associated with car ownership. This includes planning principles that determine where housing is built in relation to workplaces. This includes institutions such as public transport companies and construction companies that together influence the mobility system. When the Theory of Change is used at this level, it becomes clearer that cycle paths are part of a larger mechanism where behaviour, norms, economics and infrastructure interact.
Examples from sustainability and circularity
In a circular economy, the Theory of Change needs to be able to capture how producer responsibility, behavioural changes, business models and regulations affect each other over time. A project could focus on the recycling of textiles, but a systems-based Theory of Change needs to include the entire value chain. This means that one needs to understand how design principles, consumption patterns, logistics systems and investment decisions affect which alternatives are possible. The system innovation leader then needs to connect the long-term system goals with the interventions that can actually be initiated here and now.
How to make assumptions explicit
Theory of Change is essentially a way of making tacit assumptions visible. For systems innovation, this is crucial because much of the system’s inertia lies in assumptions that are rarely stated. The assumption that residents want the car as their primary means of transportation can be governing without anyone expressing it. The assumption that economic growth must always happen in a certain way can hinder circular development. The systems innovation leader therefore needs to help actors formulate these assumptions so that they can be challenged.
One way to do this is to create diagrams where each step in the change logic has an explicit assumption linked to it. These assumptions can then be tested through pilot projects, experiments and co-creation processes.
Using the Theory of Change as a system innovation leader
For the Theory of Change to truly be useful in system innovation, it must function as a co-creative tool. It is important to involve actors from different parts of the system because their perspectives together create a more complete understanding of which mechanisms actually affect the system. As a system innovation leader, you need to create structures where these different perspectives can meet and make both conflicts, dependencies and opportunities visible.
You also need to be able to move between the overall system picture and the concrete possible interventions. The Theory of Change then becomes a navigation tool that helps to hold the whole together while doing things in practice.
In urban development, it can be about linking long-term goals of social inclusion to short-term initiatives such as citizen dialogues, changed detailed plans, new economic models for construction projects or local innovations. In sustainability work, it can be about linking global climate goals to local measures and the behavior of actors.
The systemic Theory of Change as a bridge between vision and experiment
What makes the Theory of Change particularly valuable in system innovation is that it links three levels. It connects the vision of the future to the mechanism that describes how that future can arise and further to the experiments needed to test whether the assumptions are correct. In this way, the Theory of Change creates a flexible structure that does not lock itself into a single solution but rather holds together a common direction.
The system innovation leader uses the Theory of Change to communicate complexity in an understandable way, create consensus and build a common logic that makes it possible to act despite uncertainty. At the same time, the method becomes a way of understanding what efforts are needed in the near future to support long-term change.
Theory of Change as a dynamic tool in complex systems
Unlike traditional project logic, a system-based Theory of Change needs to be continuously updated. When systems move, assumptions, behaviors and mechanisms change. This means that the Theory of Change should not be seen as a blueprint but as a living mind map that helps actors maintain focus on their common direction.
By combining the Theory of Change with methods for co-creation, stakeholder mapping, scenario development and experimental innovation, system change can occur both deeper and faster. The method then becomes a bridge between the existing system and the system that needs to be shaped.
Example: A system-based Theory of Change for circular business models.
The model is created for system innovation and includes actors, policy, behaviors, institutions, power structures and feedback loops.
1. Long-term system change
An economic system where circular business models are the norm and where resources circulate in value chains in multiple cycles. Climate impact is greatly reduced and companies make money by extending lifespan, reuse, sharing, repair and regenerative processes. Customers have strong incentives to choose circular alternatives and legislation favors these alternatives over linear ones.
Underlying assumptions
- Circular business models must be simpler, cheaper or better than linear alternatives to become the norm.
- Companies need governance, incentives and competence to be able to implement the transition.
- Customers need changed norms, attitudes and offers to change behavior.
- Institutions need to create structural conditions that enable circularity.
2. System mechanisms that drive change
Here, mechanisms that link current efforts to future change are visualized. These correspond to the “causal nodes” in a Theory of Change.
Economic mechanisms
- Shifted cost structures where it becomes cheaper to reuse than to produce new.
- New business models that are based on services, functions and performance.
- High residual value management that rewards products designed for long life and repairability.
Policy mechanisms
- Producer responsibility that covers the entire life cycle.
- Circular design requirements in relevant sectors.
- Controls that promote repair and reuse.
Social norms and behaviors
- Normalization of buying second-hand, sharing, renting and repairing.
- Customers expect transparency around sustainability and life cycle data.
- Increased status in being resource efficient.
Institutional mechanisms
- New platforms for traceability and material flows.
- High-quality repair networks and sharing services.
- Standards and certifications for circularity.
Feedback loops
- The more people who use circular solutions, the better the infrastructure and lower the prices.
- The more residual value that is created, the stronger the business incentive for design for circularity.
- The more products in circulation, the easier it becomes for customers to choose circular again.
3. Levers for system change
These are points where small efforts have a large system effect.
Lever 1: The design phase
If the product is designed for modular repair and reuse, the entire value chain becomes simpler.
Small changes in design can create large-scale effects.
Lever 2: Policies and public procurement
When public actors demand circular solutions, they strongly influence the market.
Procurement can change incentives for entire sectors.
Lever 3: The business model shift
Going from selling a product to offering a service or function fundamentally changes the economy.
The company starts to make money when the product lasts longer.
Lever 4: The shift in norms
When it becomes socially accepted or desirable to live circularly, the market follows.
Norms often change quickly and can create strong behavioral changes.
4. Short-term actions that can be taken now
These are concrete actions that actors in the system can initiate, linked to the system mechanisms above.
Company-level actions
- Develop circular life cycle models.
- Train staff in repair and residual value analysis.
- Build traceability solutions for materials and components.
- Test servitization on a small scale.
Policy and societal level actions
- Introduce repair bonuses.
- Set circular requirements in public procurement.
- Develop standards and certifications that promote circular design.
Customer and behavioral level actions
- Communication that makes repair, reuse and sharing more attractive.
- Clear pricing that shows costs over the life cycle.
5. Visualized system-based Theory of Change
Here follows a visualization structured as a text-based diagram model. Feel free to use it directly in presentations or as a basis for graphic design.
LONG-TERM CHANGE
Circular business models are the norm in the market
↓
CENTRAL MECHANISMS
Economic incentives
Policy governance
Social norms
Institutional support
Feedback loops
↓
LEVELERS
Design for circularity
Public procurement
Business model innovation
Norm change
↓
SHORT-TERM INTERVENTIONS
Pilot projects for circular servitization
Repair incentives and training
Circular design strategy
Policy changes and requirements
Communication and behavioral influence
↓
ASSUMPTIONS
Customers accept new offers
The policy environment supports the transition
Companies can shift business logic
The market rewards sustainable choices
↓
RESULTS
Circular flows
Strong economic incentives
Lower climate impact
Higher resource efficiency
6. How a system innovation leader uses this Theory of Change
A system innovation leader can use the model in several ways.
To create consensus
By bringing together stakeholders and reviewing the model, a common picture of how circular business models are connected to policies, behaviors, and structures can be created.
To prioritize efforts
By identifying which levers are most relevant in the current system, it becomes easier to choose which efforts to prioritize.
To track change over time
The model acts as a map that can be updated as the system changes.
Assumptions can be tested and adjusted through experiments.
To create a clear innovation portfolio
The Theory of Change clarifies that different efforts are needed simultaneously and that a single project is not enough.
It helps organizations build a portfolio where short-term experiments are linked to long-term system change.
