As the world embarks on a transition to save the planet and make the world a healthier and happier place, we have witnessed considerable demand for the adoption of new tools, frameworks and mindsets. This includes new business models and ESG frameworks, purpose and impact among them.
Defining and aligning your strategy to purpose, mission and/or a progressive impact business model are all a great start, but alone they’re not enough for effective outcomes-driven decision-making.
A Theory of Change that backs strategy with evidence and a clear pathway for success is powerful, and we argue, essential to long-term sustainability to manage risk and unintended consequences.
For example, complex systems that require layers of input such as in the manufacturing and delivery of goods — including goods that may be intended to create positive impact — can quickly evolve into risks that can not only cost business but incur significant damage to trust and reputation.
The ripple effects encountered in complex systems, without proper consideration, are blind spots to key decision-makers. In worst-case scenarios, this can create harm for the people or environments that were intended to benefit. With a Theory of Change, not only do you gather insights of your operating ecosystem but develop more precise clarity of the impact outcomes you will create, and how you’re going to get there.
Do you remember TOMS shoes? Launched in 2006, their buy-one-give-one (BOGO) model took the world by storm and inspired a generation. It appeared for-profit businesses could be wildly profitable and also driven by a social purpose. By 2013 the company was valued at US$625million, and over the course of running its BOGO program, reportedly donated over 95million shoes to children in developing countries.
It may come as no surprise that running the operations of this scale was soon met with mega logistical challenges, along with serious questions about their impact.
Questions like, had they hurt local shoe manufacturing industries and jobs in the developing countries in which they were donating? How were their partners managing the distribution of shoes — were there strings attached? Were there better ways to make a difference than gifting shoes?
By 2013, the company had hired a research team to help answer and develop solutions to these questions, and improve their impact. They launched new products like coffee beans and glasses with the same one-for-one model, but by 2019, over a decade after launching, the company filed for bankruptcy. Whilst well-intended, the giving model was complex, costly and bore consequences that perhaps could have been foreseen had they grounded their business and impact model in a Theory of Change. Since then, under new leadership, they’ve disbanded from their famous one-for-one model and now pledge one-third of profits to grassroots movements.
Whilst TOMS BOGO model and simple messaging had dramatic reach, they were caught out by the scale, logistics and unintended consequences of their giving. There were ripple effects they didn’t consider. There were blind spots from the beginning.
We wonder what could have been, had TOMS managed its risks by proactively defining its impact and outcomes before launching; if the ripple effects of such an ambitious operation were better considered from the beginning; if they had strategically linked business activities with outcomes that could be measured and validated. What could they have achieved? And what would they be pioneering now?
A Theory of Change — an evidenced-based model that links activities with meaningful outcomes — could have ensured TOMS give back promises were delivered upon, and sustainably transformed their organisation. A Theory of Change is the formwork that gives environmental and social outcomes and objectives integrity. Simply put, it validates an organisation’s impact.
TOMS had a bold and recognisable mission but didn’t considered the wider ecosystem and outcomes. And they paid a price for that. To build robust solutions that enable you to sustain your business, and impact, for the long run requires a design that is based on evidence-based research and applicable to a clear strategy and pathway.