Three ‘System Builder’ Strategies that are Amplifying the Impact of Impact Investors

Impact investors are in the middle of an exciting strategic shift. As they try to make the world work better, these ambitious funders have found a way to take on harder, more complex challenges and deliver greater impact.

They are leaning in to support ‘System Building’. Investments in fragmented portfolios of individual projects are being replaced by a strategy that supports the creation of integrated systems. It takes a big picture view of hard challenges and enables public donors, philanthropies, and commercial organizations to act more effectively on urgent challenges like climate change, public health, or access to crucial services like electricity, education, and livelihoods.

System Builders create interconnected solutions where multiple parts work together to deliver sustainable impact. Over the last two years the number of efforts that intentionally focus on this strategy for change and innovation has grown rapidly.

As a hands-on advisor to international innovation and activist change programs, I’ve had a front row seat to this exciting revolution. This report provides an overview of the System Building support strategies that I’m seeing today, along with the practical ways that investors are putting them into action.

Stop Investing in Good Ideas (Make Systems Instead)

For most of the last 25 years, impact investors created portfolios of good ideas, individual initiatives that focused on specific levers of change or particularly promising innovations. The hope was that a well selected portfolio would ‘move the needle’ in meaningful ways.

Unfortunately, despite substantial investment, the impact on hard complex challenges was often limited. The problem has been that complex challenges can’t be addressed with a few pointed actions.

Lots of things need to work together to make the world work differently. As a result, well intentioned, but fragmented, project funding failed to address hard messy problems, scale up solutions, or be sustainable operate over time.

This persistent shortfall is driving the shift to a System Building approach. Instead of supporting a collection of individual projects, funds are now being directed to create working systems, where interconnected capabilities span across a complex challenge.

Here’s an example. Imagine you are trying to support family and community farmers in an area facing periodic food shortfalls. A traditional project investment portfolio might look for a collection of good ideas; things like an AI empowered mobile app to provide market information to farmers, a policy advocacy project, some community engagement, etc.

It’s an intriguing proposal, but many other similar stand-alone initiatives have failed to deliver impact or be widely adopted. This is because sustainable improvement in a complex system like an agricultural farm requires a number of tightly integrated capabilities to work together. The farmer must adopt improved farm practices, and support better land use, and find better supply chains to market, and build market demand, and access supporting services like banking.

While an individual mobile app might make a difference, there is a much greater opportunity to improve the farmer’s well being and agricultural output by making this entire system working better.

System Builders embrace this bigger view of the job. They deliver impact by bringing together a selection of participants, technoglogy, and resources to build new and better systems.

For impact investors System Building creates opportunities to make scarce funding deliver greater results. Instead of investing in a fragmented portfolio of good ideas, you can select projects that interconnect and enable a whole system.

Admittedly this is hard work and it stretches an investor’s roles. However, the shift to funding and supporting System Builders delivers multiple benefits.

• Important Problems: Investors can choose to tackle harder and more complex problems
• Powerful Solutions: Investments deliver greater impact and are more likely to work in practice
• Sustainable Operations: Solutions are financially and operationally sustainable
• Cost Effective Response: Building a better system is often one of the most cost effective ways of dealing with hard long term challenges.

Three System Building Strategies for Investors

Impact investors are actively pursuing these opportunities. Their System Building support strategies have been falling into three broad categories.

All three take advantage of the creative power of systems. And they aren’t mutually exclusive strategies. That means an investor can begin supporting System Building efforts by taking action in one area, and then gradually deepen their impact by expanding their range of support.

(I’m particularly excited by the pioneers who are leaning into Strategy #3. These ‘system stewards’ are stepping up to leverage their insight and position in uniquely powerful ways.)

Let’s take a look at how these concepts are being adopted today.

Strategy 1: Target Investments for System Building

The first strategy is about strategically targeting spending, with the goal of creating high impact systems that address hard challenges. You are looking for opportunities to build complete systems, instead of investing in a fragmented portfolio of good ideas.

Historically, investors in innovation and change developed a mixed portfolio of well chosen projects; light weight pilots, tech projects, policy advocacy, and other ‘low hanging fruit’ where each investment was individually promising. Unfortunately in practice, these collections of individual projects often fell short when the problems were complex and solutions were difficult.

So, instead of assuming that a mix of individual projects will magically come together to address a complex challenge, investors in System Building step back and think more broadly. They create a blueprint of their overall vision and use this big picture view to guide investment decisions.

They strategically invest in projects that lead to the creation of a complete impactful system. Here are several ways those targeted investments can contribute to the whole system’s success.

• Fill System Gaps — Systems must have every part in place to work in the real world. A single missing piece can derail the entire operation. This is a demanding standard. Fortunately, with a big picture view of your system you can ask “Where are the gaps that need to be filled in this system?” “What needs to be done for ALL the parts to be in place?
• Invest in Levers of Impact — There are also opportunities for amplifying impact that come with System Building. Strategically chosen investments can target levers of impact within a system. You can uncover powerful opportunities by asking, “Where will the broader system help amplify the impact of an investment?” “How will specific projects unlock impact within the system?”
• Lay Future Groundwork — Many project investments get green-lit based on their immediate impact. Unfortunately, those quick wins can fail to recognize the foundational capabilities that needs to be put in place. Stepping back to see the long term system vision allows you to ask, “Are there places where the future success depends on laying the groundwork now?” “What hard system problems needs to be addressed now, before we push forward in other areas?”
• Avoid Waste and Duplication — Duplicating investments can be a waste. Seeing where others are acting across the system lets you direct investments to where they are most needed. It’s also possible to avoid wasting investments on ideas that simply don’t matter. Seeing the whole system allows you to see when an attractive project is outside the scope of the system you want to build.

This bigger picture thinking enables a shift in investment priorities. Investors move away from projects that are attractive on their own merits but make comparatively little contributions to the whole system. Instead, they can put together a portfolio where the different initiatives fit together and support a whole working system.

Strategy 1 in Practice — Investment Selection

There are several paths to action for investors who want to enable whole systems by better targeting their investment choices.

1.1 — Set an Ambitious System Building Goal: System Builders focus their efforts by clearly defining an ambitious goal. They aren’t simply waiting for others to present them with proposals. They take time to imagine the overall system that can deliver their vision and can tell a powerful story about how the system will deliver impact.

1.2 — Draw a Big Picture View of the System: In my experience, a clear well structured visual model of your system is the single most important tool for enabling ambitious system innovation. It should be concise (usually one page) and bring together all the interconnected parts. It allows you to see how the whole system works.

Developing this system vision is also an excellent opportunity for creative collaboration amongst stakeholders who otherwise might not talk with one another. And once you’re done, you have an accessible picture of the system’s real world complexity, which can be shared across the various projects, investors, and participants.

1.3 — Map System Gaps, Levers, and Actions: This big picture view of the system is a powerful working tool for targeting System Building investments. You can use the model to ask where gaps exist, where levers for system impact might be pressed, and where other potentially overlapping investments are already in motion. This lets you target where investments can deliver the biggest impact across the whole system.

1.4 — Compare Multi-System Investments: Some investors in System Building have the added challenge of working across multiple systems. These systems might be in different domains, such as addressing climate change in either agriculture or transportation. Or in some cases the systems may be in different contexts, for example in different countries.

These multi-system investors can explore strategic tradeoffs by creating parallel system models, one model for each major system. This makes it possible to understand what the differences are between two System Building opportunities and to evaluate which investments are needed in each system.

Strategy 2: Help System Building Projects Succeed

In the first strategy System Building investors targets their support where it will make the greatest impact across a complex system. This means the right kind of work is being done in the right place.

But that doesn’t mean that the individual initiatives will be successful. System Building is hard. So, there is an opportunity to dive down one more level and support on the ground system innovators.

Each project is likely to involve its own complex combination of people, organizations, technology and resources. That means each project team must deal with difficult system building issues. Putting this all together and making it work in our messy fast changing world is long hard creative journey.

Success depends on having advanced system building skills and sustained funding for a long creative journey. Even when they are only responsible for part of the overall system, system innovators require a lot of sophisticated skills. While teams usually come to their work with specialized expertise in a key subject domain, they will often have gaps in other system building practices such as developing business models, collaboration building, or complex system design.

To make this work even more challenging, the creative journey for building a system is normally long and winding. There are barriers along the way, as well as unanticipated opportunities to pivot and claim a new opportunity. This means that System Building teams require patient funding that comes with the flexibility to adapt as they build and learn.

Investors in System Building have come to see this as an opportunity to meaningfully expand their role. They are increasing recognizing the potential for directly supporting their innovators with these hard challenges. It is often a comparatively low cost way to amplify the impact of investments enable the success of a complex system building effort.

Strategy 2 in Practice — Project Mentoring

Because funders have enormous influence over the System Builders they support, investors are in a position to raise the bar on the thinking of innovation teams, provide crucial guidance, and offer the patient funding that is crucial for success.

2.1 — Demand a System Building Vision: Many investments are set for failure during the very earliest stage of proposal request. In an effort to manage risk and simplify decision making, it can be tempting to ask for small and specific projects featuring well defined plans. These proposals are easy to assess and easy to manage. However, they will almost certainly fail to capture the many aspects needed to succeed with complex System Building.

So, don’t ask for arbitrary simplicity from proposers. Instead, raise the bar and demand that they describe their ultimate system vision. What are all the parts? How will their part of the system be sustainably funded? How will their new system fit together with other existing systems? This demanding request may not be as clear or unchanging as a conventional project plan, but it will help you to partner with innovators who are well prepared to deliver on a System Building investment.

2.2 — Help Projects Address Hard Challenges (Mentors): Few innovators have all the skills needed to navigate a full system building journey. Some of the most effective impact investors are enable this challenging work by providing mentoring support that is specifically focused on system building challenges.

This isn’t about providing technical expertise in their specific field (most teams already have this) but rather focus on building their skills as system builders in a messy and fast moving world.

2.3 — Provide Patient Funding / Flexibility to Adapt: Over the last 20 years projects that were simple and fast moving pilots were the target of most innovation funding. Small short term budgets became the norm. This isn’t sufficient for System Building, where projects need longer term support for a sustained adaptive journey. Teams need the ability to evolve a system over time, flexibly pursuing complex system building challenges in a changing world.

Strategy 3: Provide System Stewardship

This third strategy is probably the biggest challenge for investors. Here the investor recognizes the need for someone to see across all the efforts that are taking place in the broad system.

That’s because hard problems are usually the result of complex systems with lots of moving parts. They are tied to interconnected webs of people, organizations, technology and resources. While each investment might work individually, fixing individual pieces of a complex system isn’t enough to make a significant sustainable impact.

So, investors developing Strategy 3 don’t simply focus on the investments that are being made. They also understand the spaces between the investments and how to connect with other parts of the system.

These parts of the System Building challenge often have no owner. Yet to be successful working system, someone must make sure that all these elements are in place:

• Completeness: The entire system must be complete, from end to end. All the parts must be in place, and all the actors capable of performing their part. Systems Building isn’t a case where 80% of the benefit comes from 20% of the work. A single missing piece can break the entire system.
• Diverse Connections: A host of different participants, many of whom may work in different fields and seldom talk with each other, must all work together to make the system work. Collaborations must be built based on an alignment on roles, interactions, and ways of collaborating.
• Trust and Tradeoffs: Every participant must have a motivation for doing their part. I describe this as ‘Everyone gets a pony’. It’s equally important that the tradeoffs of cost, effort, and reward among the different actors are seen as fair and sustainable. This requires trust and understanding across a diverse range of participants.
• Dynamic Flexibility: And finally, all this complexity must respond to a world filled with change and new discoveries. As problems arise and changes occur (as the inevitably will), there must be a way for the system as a whole to address the shifting challenges.

Unless there is someone to guide efforts across the whole system, these cross system features seldom occur spontaneously. This is because missing pieces are often found in the gaps between different actors. Failures to collaborate derail progress when there is no one to build bridges or establish trust across parties. And things get stuck, when there is no one to see the cross system problem and marshal a response that engages multiple participants.

In short, impactful System Building really needs a steward who owns the overall success of the system, not just its individual parts. In Do Bigger Things*, Jenny Wilde’s and my book on system innovation, we call this role the “System Choreographer”.

In this stewardship role, Choreographers don’t just focus on individual components of a system. They view success from a big picture perspective, seeing across the entire system. Choreographers sit above the fray, often acting as a trusted convener, someone who isn’t invested in the interests of specific actors. They typically have excellent people skills which helps them build collaborations, negotiate tradeoffs, and bring people along on the journey with powerful storytelling.

The best system stewards are expert generalists, someone who understands how the different fields work together and can engage with varied specialists that are part of different system building teams.

Strategy 3 in Practice — System Stewardship

The impact of system stewardship can be substantial, but team size needed for this role can be surprisingly small. The choreographer doesn’t need to do all the work. Instead, a small group with carefully curated for system building skills can be the catalyst that enables others to achieve their full potential.

This is an emerging System Building strategy and it requires some bold moves on the part of investors.

3.1 — Claim the System Choreographer Role: Ironically, in bold System Building initiatives with big budgets and lots on the line, the role of system steward is often missing. Organizational structure and governance tend to follow funding streams, so for most investors the gaps and misalignment between projects are often effectively invisible and unattended.

As a result, taking responsibility for the work of a System Choreographer extends the investor’s traditional mandate. Instead of simply focusing on funding, the investor steps up to take on the unattended challenges that enable others across the system.

This is a strategic stretch, but it has potentially great rewards. The investor can actively steer the whole solution, responding to challenges that might otherwise derail the system’s success.

3.2 — Shift the Definition of Success (Whole System Measures): There and old Peter Drucker phrase, “What gets measured, gets managed.” This is certainly true for System Building, and it creates an opportunity for system stewards to extend measurement and evaluation thinking.

While there are well developed practices for measuring the performance of individual project investments, there are often few measures set up for the system as a whole. Yet, this is the level at which most of the impact occurs.

A bigger picture view of measurement is needed. Fortunately, when claiming the role of a system steward, the investor is well positioned to see across the multiple initiatives and measure how the system as a whole is performing. This provides a crucial level of insight that often reveals the challenges that lie between participants or span the overall system.

3.3 — Get Help with the System Steward’s Work: As more sponsors look to provide system stewardship, I’ve seen two execution strategies emerge. First, is a hands-on approach. As described above, the investor expands their role and takes on much of the Choreographer’s work themselves. For some investors, particularly those with investments that span many different systems, this isn’t a shift that they are ready to make.

So, instead of directly owning stewardship responsibilities, the investor engages an organization that is specifically designed and staffed to do a choreographer’s work. This new type of System Building support organization brings together a wide range of skills (expert generalists), as well as building working relationships that span diverse actors.

Ambitious Impact Investors are System Building

For those used to seeing investors, whether its corporate finance departments, government donors, or philanthropies as simply the ‘people who write the checks’, the call to claim a more strategic role in System Building may seem out of character.

But the need for new thinking is here. Today’s world is filled with big urgent challenges that need complex system solutions. Impact investors can leverage System Building as a way to rise to this challenge.

This shift is already underway. For most investors, this is an ambitious step which demands new thinking and practices. But across the world, innovative funders are putting these three strategies in place. And that is making it possible for them to fund and deliver system innovations that take on harder challenges and create more powerful solutions.

• Do Bigger Things — a practical guide to powerful innovation in a changing world was written for innovators and world changers who want to tackle complex challenges and deliver solutions with powerful impact. When working with innovation teams from around the world, Jenny Wilde (founder of the Response Innovation Labs) and I were frustrated by the lack of clear actionable “systems” practices that could deliver real world impact. So, in Do Bigger Things we lay out a practical guide for those who want to create innovative systems, embrace the power of complexity, and rise to the many hard challenges that shape our world. Available worldwide.