Earlier this year, a former colleague of mine, Anna Miley, posted the following thought on LinkedIn:
If there’s one thing ‘for-profits’ could learn from the charity sector to become more audience-led it’s the value of a theory of change (ToC).
A ToC is a structured and systematic approach to planning, implementing, and evaluating change initiatives (see example below from wearepurposeful.org). It outlines the causal pathways through which an organisation’s activities are expected to lead to desired outcomes.
ToC are widely used in the nonprofit and development sectors but are far less common in for-profit organisations.
Which strikes me as strange. Though understandable.
A ToC is…
Impact led – not finance-led
Long-term – not short-term
Requires genuine insight – not just information
Critcal and introspective – not the status-quo
Specific and measurable – not relying on oversimplified measures
Sounds pretty useful to me!
If you’re in a ‘for-profit’ (is there a better word for this? for consumers?) have you ever considered developing a ToC?
This struck a chord. I’m reasonably familiar with ‘Theory of Change’ from working on not-for-profit brands, but I’ve never experienced a for-profit organisation with a Theory of Change. I checked out the Harvard Business Review archive and found only one (brief) mention of ‘Theory of Change’ in a 2023 article on DEI. And I agree with Anna: there are useful ideas within Theory of Change from which any brand can benefit.
According to the Center for Theory of Change, the origins of the theory are a little tangled: like many successful ideas, it appears to have many parents. One of these is Carol Weiss who, interestingly, was a Harvard professor and author in 1995 of an intriguingly titled article:
‘Nothing as Practical as Good Theory’
The article focused on how best to evaluate the effectiveness of initiatives to improve the lives of children, youths and families. Specifically, the initiatives in question were ‘comprehensive’, in the sense that they involved a multi-pronged set of activities to simultaneously tackle the social and economic constraints that condemned children and families to poverty: these spanned social services, healthcare, education, economic policy and the built environment.
How do you untangle the effectiveness of such a comprehensive programme, when you’re pulling so many different levers simultaneously?
Most organisations face a similar issue: strategy (brand strategy or otherwise) almost never consists of a single action. Usually, it involves a combination of insight, innovation, communication, channel development, price optimisation, supply chain development and cost containment.
How can organisations tell which of these activities is helping them to achieve their desired strategy?
Carol Weiss observed that effort tended to go into identifying quantitative outcome measures that indicate the degree of success of the overall initiative, while the contribution and success of individual levers tended to be overlooked. This is often also true of brand strategies and marketing plans: most are based on some version of the brand funnel. Typically, this means that marketing and brand strategies work backwards from an overarching (financial) growth target, complemented by a set of (non-financial) outcomes, such as awareness, consideration, penetration, purchase frequency, spend and NPS, Sometimes a waterfall chart might be used to break down the anticipated growth contribution of each strand of activity. But the thinking tends to be very linear and is often summarised as a list:
‘Overall, our aim is to grow by x% over the next y months. To get there, we need to build awareness, drive market penetration and improve NPS by z points. So, we’re going to undertake activities A and B to improve awareness, activity C to drive penetration and activities D and E to improve NPS.’
This is a decent enough way to present a strategy: it has a clear logic and communicates what you intend to do (and why) in a simple way that most people are going to understand. But Carol Weiss might not like it. She might ask some uncomfortable questions that we might find difficult to answer:
- Does this way of presenting strategy fit the complexity of the underlying issues the strategy aims to solve?
- Does it hide important relationships and interdependencies between the planned activities?
- Does it hide important insights and assumptions that the strategy depends on for its success?
Carol Weiss suggested an alternative way to describe and evaluate strategy: ‘theory-based evaluation’. The idea is that any implicit theories about how and why a strategy will work should be made as explicit as possible. Inevitably, strategy involves making assumptions and sub-assumptions: exposing these is an important first step towards measuring and evaluating success, not just of the overall strategy but of each of its component parts.
The important question is not simply, ‘did the strategy succeed’, but ‘did the strategy succeed the way we thought it would?’ This creates a vital feedback loop for future strategy-setting: which of the underlying assumptions and theories of change proved to be true? And which turned out to be wrong? How can we use what we learned to make better assumptions in setting future strategy?
This isn’t just about creating great strategy: it’s about creating great strategy that gets even greater every year. Carol Weiss proposed four key benefits of theory-based evaluation:
- It focuses attention on key aspects of a strategy: theory-based evaluation helps strategists think systematically about all the potential activities they could undertake and then clarify which to focus on and why: is their prioritisation based on knowledge, hypotheses or something closer to gut instinct?
- It generates knowledge about how change actually happens: evaluation at the end of each strategy cycle generates insight that can be used to improve subsequent strategy. Over time, strategic priorities will become knowledge-based, rather than reliant on hypotheses or instinct.
- It asks strategists to make their assumptions explicit and reach consensus about what they are trying to do and why: dialogue is an absolutely critical aspect of developing theories of change. Without this, participants are likely to base strategy on tacit assumptions and perhaps even unconscious bias. Dialogue brings these biases and assumptions to the surface, as well as any conflicting theories, which can then be resolved.
- It can be used to influence an organisation’s mindset: the successes and failures of past strategy often evolve into stories that affect an organisation’s culture and mindset. This is something I encounter frequently, often in the form of limiting beliefs that are deeply embedded in company folklore, often with little or no basis in fact. Strategies and activities that run counter to these beliefs often receive little support. Theory-based evaluation puts these stories to the test and encourages organisations to be more broad-minded in the range of activities they consider.
I’d also add that a Theory of Change approach discourages a binary assessment of strategy:
‘Did it work, or didn’t it?’
A strategy that’s 90% ‘right’ may or may not achieve the desired outcome: this depends on how important the 10% is that’s ‘wrong’. This also means that just because a strategy achieves a desired outcome doesn’t make it 100% right. So, it’s always worth revisiting the different strands of a strategy and understanding which underlying assumptions and sub-assumptions turned out to be incorrect and how these can be improved in future strategy. This way of thinking about strategy also takes some of the pressure off the strategic planning process: you don’t need to be 100% right all the time. You just need to get better with each successive cycle.
I’m not going to attempt to provide a comprehensive or detailed description of the process through which a Theory of Change is developed. There are plenty of online resources and toolkits that contain all the detail and guidance you’ll ever need (The Center for Theory of Change is helpful, and the UK Government Analysis Function has a detailed TOC toolkit for the truly committed). Although they differ in their detail, approaches to Theory of Change broadly involve the following steps:
- Agree who to involve: map stakeholders who will be affected by the strategy and consider who will be able to add the most value to the process.
- Establish the context: articulate the opportunities, issues and challenges you want to respond to (and why), including underlying social, political, economic, technological and environmental conditions.
- Define the long-term ambition: describe what the strategy ultimately seeks to accomplish, and for whose benefit.
- Establish desired outcomes: identify the underlying goals or measures that will need to be achieved to deliver the desired long-term ambition,
- Identify activities: work backwards to prioritise the activities that are most likely to deliver on each identified outcome.
- State your assumptions: discuss and agree the hypotheses involved in linking the activities, outcomes and long-term ambition, given the context. Make these explicit.
- Identify risks: consider the limitations of the strategy and its underlying assumptions, and discuss how these could be mitigated.
- Develop a strategy map and narrative: summarise the causal linkages between risks, assumptions, activities, outcomes and ambitions in a diagram, as well as in written form.
The strategic planning processes I’ve been involved in have followed similar steps, with a couple of notable exceptions:
- The long-term ambition (step 3) is usually the starting point: most brands I’ve worked with want to achieve a specific level of growth in their top or bottom line (or both), and have a defined vision or purpose they are working towards (often one I’ve helped them to articulate… Just saying….).
- The team members to involve (step 1) and the description of the context (step 2) usually follow from this.
- Steps 6 and 7 are generally absent: the aim is often to present a strategy as bullet-proof as humanly possible.
- Step 8 is typically a set of bullet points (or rows in a table accompanied by budget forecasts), but rarely is the strategy depicted in graphic form.
Steps 6 and 7 are an area where the brand planning process perhaps has the most to learn from Theory of Change. Stating assumptions and identifying risks inherent in a plan should (at least in theory) make that plan more robust and consequently more likely to succeed. This is rarely how things happen in reality. My favourite Mark Ritson article (an otherwise very helpful guide on brand and marketing planning) explains why in characteristically blunt terms:
‘Remember that, while most companies agreed their marketing spend for the coming year long before you started working on your plan, they have not allocated it yet. If your plan is better, more ambitious, more likely to transpire than that of your peers presenting after you, there is every chance senior management will take money from them and invest it with you instead… Just have a better plan than your shit colleague. And don’t feel bad about it either. Fuck them. Efficient capitalism dictates that marketing money should go to the best marketers with the best plans.’
The irony, of course, is that the ‘best’ plan is one that’s realistic about its own shortcomings, rather than the one that’s positioned as more ambitious and more likely to transpire. But that’s marketing for you. I like to believe that a competent CFO will consider strategic risk.
I’m also a big fan of strategy maps (step 8). I’ve seen (and been involved in creating) lots of types of strategy over the years: the more visual they are, the more I like them. I love that Theory of Change approaches require a visual strategy-on-a-page: this forces clarity. There are plenty of lovely examples that manage to summarise strategy in a way that’s both clear and compelling. And so much more idiosyncratic and interesting than the boring wheels and pyramids and pillared temples that brand strategy is usually served up in:
Here’s an example from a holiday charity that presents a potentially complex chain of outcomes, relationships and assumptions in a visual that feels pleasingly appropriate:
Few brand strategies are so vividly brought to life, which is a shame, because this type of visual makes it much easier for people to understand and care about strategy. My favourite ‘corporate’ example is a visual I came across in Edward Tufte’s most recent book, ‘Seeing With Fresh Eyes’: it was drawn in 1957 by Walt Disney Productions and appeared in the Wall Street Journal on 4 February 1958:
OK. It lacks some of the hallmarks of classic Theory of Change diagrams, but it shows that in talented hands, even complex strategies with interconnected relationships can be presented in a way that makes them more clearly understood, as well as bringing the brand’s unique ethos to life.
This, for me, is an example of strategy at its most sublime. And it perfectly encapsulates the point of view expressed in the title of Carol Weiss’ article:
‘There’s nothing as practical as good theory.’
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