The Next Step in Impact: Exploring the Theory of Transformation

Explore how the Theory of Transformation can drive deeper, systemic change and why it's a step beyond the traditional Theory of Change framework.

When we think of organizations that work to provide a public benefit, many of us likely immediately think of non-profits. And while that’s undoubtedly true and long-standing – the Peabody Education Fund, established in 1867 to support integration in the post-Civil War South, is often cited as the first modern non-profit in the U.S. – history actually shows that for-profit companies have an even more long-standing dedication to service. As William Magnuson reminds us in his book For Profit: A History of Corporations, hundreds of years ago corporations needed to obtain a charter from the ruling monarchy or government to operate. And to secure said charter, they had to demonstrate that their business would not only generate profits but also serve the public interest! For example, in 1600, the East India Company was granted corporate status only after assuring Queen Elizabeth I that its operations would enhance England's prestige and expand its naval capabilities.

As time has passed, many corporations drifted from this original service-oriented purpose and non-profits took on the mantle. But even as significant efforts were made on the ground, many community change and public service programs lacked clear, articulated goals and strategies, making their evaluation challenging. Significant resources were invested in causes, but insufficient research and planning meant root causes and potential solutions weren't always effectively identified.

This began to change with the introduction of the "Theory of Change" (ToC) framework. The Aspen Institute's Roundtable on Community Change addressed the evaluation difficulties of complex programs in their 1995 publication, "New Approaches to Evaluating Comprehensive Community Initiatives." Carol Weiss, a key contributor, argued that the vague assumptions underlying these programs made evaluation difficult. She introduced the Theory of Change concept to clearly link activities to outcomes, advocating for explicit theories to improve evaluation and accountability.

Today, the Theory of Change is a fundamental framework in the non-profit sector. In essence, it is a comprehensive logic model that brings stakeholders together to create a testable hypothesis for impact. It is consultative, evidence-based, and continually iterated based on results.

The core components of a ToC begin with imagining the future state an organization seeks to aspire to, meaning organizations define their ultimate impact and vision, set goals, and identify the necessary steps to achieve these long-term outcomes. Next, they articulate the assumptions and root causes behind how and why their activities will drive change. Mapping activities to outcomes involves detailing the inputs (resources like time, money, and staff), specific actions, direct outputs (quantifiable results), and the subsequent short-term and intermediate changes leading to the ultimate impact.

Additionally, developing a causal and linear pathway is crucial, as it illustrates the logical sequence of activities leading to desired outcomes, often using visual tools like flowcharts. ToC also includes establishing specific indicators for measuring progress and success at each stage and creating a framework for ongoing monitoring and evaluation. This detailed roadmap ensures strategic planning, clear communication with stakeholders, accountability through measurable outcomes, proper human and financial resourcing, and a structured approach to evaluation and learning, ultimately enhancing the impact of non-profits.

While ToC has provided organizations with a robust framework for strategic planning, the complexity of today’s greatest challenges – be it climate change, poverty, or access to healthcare – calls for more innovative approaches that can help drive even more systemic and holistic change. 

Systems change calls for something different: theory of transformation

The Theory of Change often assumes a linear cause-and-effect relationship between activities and outcomes, which may not reflect the complex and dynamic nature of social change. Real-world problems often involve multiple, interrelated factors that cannot be easily mapped in a linear framework. Enter the Theory of Transformation (ToT).

ToT is a broader and more dynamic framework that focuses on deep, systemic change – thus making it a strong fit for the concept of systemic investing. It emphasizes shifts in underlying structures, power dynamics, cultural norms, and societal values. According to Blue Marble Evaluation, “A theory of change specifies how a project or program attains desired outcomes. Transformation is not a project. It is multi-dimensional, multi-faceted, and multilevel, cutting across national borders and intervention silos, across sectors and specialized interests, connecting local and global, and sustaining across time. A theory of transformation incorporates and integrates multiple theories of change operating at many levels that, knitted together, explain how major systems transformation occurs.”

Key elements of ToT include understanding the broader social, economic, and political context, analyzing and addressing power relations and inequalities, shifting societal values and cultural beliefs, changing policies, institutions, and systems that uphold existing conditions, and ensuring long-term, sustainable change. It requires many stakeholders across domains, pulling various levers, with several theories of change being implemented at once. It’s non-linear and holistic, recognizing the complexity of social systems and the need for adaptive, iterative strategies.

ToT faces several challenges, including high resource requirements due to the extensive analysis and ongoing adaptation needed to address systemic issues, which can strain organizational capacity. Achieving deep, systemic transformation usually takes a long time, making it difficult to maintain momentum and support over extended periods, often clashing with funding cycles and short-term stakeholder expectations. Additionally, ToT involves engaging with a wide range of stakeholders, including those with differing or conflicting interests, leading to coordination and alignment challenges. Finally, the broad and systemic nature of ToT makes it difficult to establish clear metrics and indicators for success, as traditional evaluation methods may not capture the nuanced, long-term impacts of transformative efforts.

Can we bring in lessons from for-profits?

Modern for-profit companies typically do not incorporate ToC or ToT models because their primary focus is on profit maximization and financial performance, which are better supported by traditional business planning tools. And yet, what if addressing a public challenge and making a profit were less mutually exclusive, as was the case so many years ago?

Ideally, we want to transform systems and drive strong financial returns. As this nascent concept of Theory of Transformation is still emerging, I’d argue that we need to try to incorporate profitability and economic results into it. This is what will be required to assure that we are delivering durable, long-standing enterprises – ones that are building human and natural systems rejuvenation into their business models. Driving systems change requires the corporate sector to get involved, but they won’t unless they understand (and see) the business benefit. But crucially, we must be sure to drive financial results within the limits of our natural resources. We want to create businesses that work in partnership with our planet and in service of people and all our various stakeholders, e.g. customers, employees, communities, etc. 

Ultimately, our goal should be to restore the true purpose of business—serving the public good. And by integrating the rigor and frameworks of the non-profit sector with a systemic investing approach, we believe this will guide us toward transformative change, creating a new dominant mental model that reshapes how businesses and investors think and operate.