Systems innovation can be understood as a change in the structure of a complex system that generates new patterns to its operations and behavior. Such changes are not achieved by changing any of the parts but require a reorganization of the connections and flows of information within the system. As Rachel Wharton of London Funders writes “Systems change is about addressing the root causes of social problems, which are often intractable and embedded in networks of cause and effect. It is an intentional process designed to fundamentally alter the components and structures that cause the system to behave in a certain way.”
In this article we take a look at two good examples of systems-level innovations: 3D printing and distributed ledgers. The first good example of systems innovation is 3D printing, or more generally distributed manufacturing. Why would this qualify as systems innovation? It qualifies because it is a reorganizing of the whole manufacturing system that is different to the way it was done in the past and one that will lead to that system exhibiting new dynamics and behaviors. As we will illustrate it reorganizes the system in such a way as to address fundamental issues so that the new model will not go on creating the same problems as before.
Historically we have done manufacturing through the traditional centralized approach; the factory being the icon of this model. It is based around a model of mass production so as to reduce unit cost and push-out standardized products to end-users. An innovation within that paradigm would be to maybe improve a machine on the production line and thus make it more efficient while leaving the basic pattern to how we produce and distribute manufactured goods unchanged. This is, however, not what distributed manufacturing does.
Firstly 3D printing engenders a restructuring in that core design pattern of centralization; which is critical to how the whole system is organized. Instead of bringing everything into the center, concentrating production capabilities in a few large facilities and focusing on improving the efficiency of those units, distributed manufacturing flips this around and pushes that production capability out to the end-users.
As a consequence of making such a major design pattern change to the system the outcome of how the system behaves would be very different. Many of the issues we have with our current system would immediately disappear. For example, if implemented at scale distributed manufacturing would totally rewire the global logistics and supply chain network; not only this but it would also rewrite our demand for basic materials and reshape the face of retail and commerce. It would turn end users into producers and it would likely change the current linear model into a cyclical model; thus solving many current issues surrounding pollution and overconsumption. This is systems change.
There is an interesting thing to note here. Where as you might think the 3D printing revolution is all about the technology, it is not, 3D printers have been around for many decades before anyone really became interested in them. The difference was that before they were seen as just tools for making prototypes that would then be mass produced, what change was simply that we started to look at them as personal fabricators and start to conceive of distributed manufacturing.
Distributed Ledger Technology
Another good example of systems innovation would be triple-entry accounting or more generally distributed ledger technology (DLT). DLT makes it possible for a network of computers to maintain a shared, secure, and trusted ledger of valuable assets and exchanges without anyone controlling the network or anyone being able to alter the ledger without the consent of other nodes in the network. Why are DLTs a good example of systems innovation? Primarily because they represent a change on probably the most fundamental level of economic organization, that is to say how we record the ownership and exchange of valued assets of all kind.
Today in advanced economies the ownership of assets is recorded in digital databases and who gets to manage and update those databases is, of course, a central locus of power and authority in society. Traditionally those databases have been centralized as we created a set of industrial age bureaucratic institutions to record ownership and manage those records; the banks, insurance companies, hospitals and a myriad of other public institutions that were backed and regulated by the national legal system. Aside from owning large amounts of weapons being able to define who has what and how it is exchanged is an ultimate source of power within society, changing this would rewrite very fundamental structures underpinning our modern economies, but this is exactly what distributed ledger technology does.
By moving the storage and validation of valuable records and exchanges to a distributed system and away from the centralized institutions of government and enterprises, they could rewire the flow of power and value within society, that is a structural change within the economy. One obvious implication is that it restructures power imbalances within society, as people come to own their own data and records of value. This would have a huge impact on an issue that is of great concern currently, inequality, but we can note that there was no revolution to overthrow the capitalists or an election to create a universal basic income, both of which would be symptom level interventions. The structure of the system is changed and that creates new dynamics that render the old ones no longer relevant.
This is the nature of evolution, change happens not necessarily by the old things disappearing, but by the context changing, those things that do not adapt may well go on existing but are no longer relevant to the new issues at hand, while those things that do adapt become relevant and we start to invest our resources and attention in those. Just as the stone age did not end because we ran out of stones but because a new technological paradigm emerged and just as our societies no longer worry about witches anymore because the whole cultural paradigm within our societies has changed; system level change and evolution creates a new context within which the old issues become irrelevant, as resources start to flow in new directions, bypassing those that have failed to adapt while starting to flow through those that present the optimal path given the new context, that is how whole complex adaptive systems change.
Londonfunders.org.uk. (2018). Systems change: what it is and how to do it | London Funders. [online] Available at: https://londonfunders.org.uk/systems-change-what-it-and-how-do-it [Accessed 24 Jul. 2018].
(2020). Retrieved 19 August 2020, from https://quoteinvestigator.com/2018/01/07/stone-age/#:~:text=The%20Stone%20Age%20didn't,for%20more%20than%20twenty%20years
(2020). Retrieved 19 August 2020, from https://quoteinvestigator.com/2018/01/07/stone-age/#:~:text=The%20Stone%20Age%20didn't,for%20more%20than%20twenty%20years.