Systems Innovation Overview

Updated: Aug 19

The term systems innovation has become popular in the past decades but the term is often left as somewhat vague, so let’s start by presenting a working definition. Systems innovation can be understood as a combination of systems thinking and the process of innovation so as to enable transformative change within a complex system.

There are three primary aspects here, systems thinking, innovation and complex systems. Systems thinking is a way of looking at the world, it is what we would call a holistic paradigm meaning that it enables us to look at, analyze and talk about whole systems rather than simply looking at their parts. According to the Oxford dictionary Innovation is to “make changes in something established, especially by introducing new methods, ideas, or products.”[1] A complex system is typically a large-scale system composed of many interdependent parts that are relatively autonomous. All of the large-scale systems we are interested in our economy are complex adaptive systems, food systems, energy systems, political systems, health systems, financial systems etc. Thus systems innovation is about using systems thinking to enable transformative change within these complex organizations. 


Firstly, what is innovation? Innovation is about the creation of something that is both new and of value, however, it is also about its adoption and implementation so as to change some established way of doing things. The key aspects of innovation are that of creativity and change. However, innovation is different from pure creativity in that it is looking at both ends of the equation, both the creation of something new and useful but also its adoption and usage within society so as to enable real change in the world around us.

According to Stephen Shapiro innovation is simply “Staying relevant.”[2] This is an important aspect of innovation, whereas pure creativity is often about things that exist in the abstract – they are somewhat “timeless” and “come from within” so to speak, like a painting or piece of classical music – however, innovation is about responding to the environment. It is seeing how the world is changing and building something that will be relevant for that world of tomorrow, it is really what enables us to adapt to the changing environment. It is the introduction of a new solution that adds value because it fits with the overall context within which it is introduced. That is why adoption is important, if it is not adopted that is because it does not fit with the current context and deliver value, thus it may be creative but it is not really innovation because it has not actually changed anything.

Complex Systems

Typically when we talk about innovation we think of things – some kind of a technology, like a mobile phone, an electric bike, an app or some other new product. We have got really good at creating, designing and redesigning things, after many centuries of perfecting our industrial model we have created a lot of things, indeed we might say we have created too many things. This type of innovation is focused on parts; building a better car, which is just one part in the transport system; making a better solar panel which is just one part in an energy system; creating a better medical device which is one part in the health system.

Whereas much of our traditional thinking is focused on parts and closed forms of incremental innovation, many of the challenges we face today require a different form of change, a different form of innovation, a form of innovation that changes systems not just parts. The world is changing in profound ways as we move from the industrial age into an age of information, globalization, and sustainability. As our industrial age systems of organization come to the end of their life-cycle we find ourselves increasingly challenged with building whole new networked systems. The real design challenges are shifting from building things to building systems; not another house but designing a whole smart city; not another power plant but a whole smart grid, not another car but an integrated transport service.

As the social innovator Indy Johar states it[3] “Whilst it’s cute and nice and relevant to be talking about the lovely nice things, underneath those nice things are a bunch of institutions and institutional behaviors that structure how we make our world, and to innovate we’re gonna have to innovate those.” What is missing today are organizations and systems that work. We have no shortage of thousands of different drugs but we don’t seem to be able to build health systems that really work the way they should. We are very good at building cars with the latest technology in fuel efficiency, but we don’t seem to be able to build a transport system that works for all including the environment. As billions of more people join the global economy from emerging markets we find ourselves in a world of more and more people, who want more and more things, and that equation is no longer adding up. What we really need is to organize those things better, we need to build systems, and this takes systems level innovation, which is something we are not used to.

We all have an idea for what innovation is, but what is innovation when you are dealing with a complex system? What does innovation look like when applied to redesigning how a whole political system works, or the public administration for millions of people, thousands of departments and sub-departments. This is not just a change in scale it is also a change in quality. It requires a different kind of thinking and innovation. It is not something we are accustomed to, however, it is a form of innovation that we have to learn to do if we as enterprises, as governments, as open societies are going to survive in a complex integrated global economy.

Systems Thinking

Systems thinking looks at the world in terms of connections; patterns of organization and how the system behavior emerges out of those patterns. Systems innovation is different because it is innovation not in things but in connections and organization, it is aimed at changing the basic structure of an organization. We are not trying to change the parts, everything that we do in systems innovation will be about changing connections so as to realize a different form of emergent behavior and functionality within the system.

This is about whole systems; we are very used to thinking of innovation as only applying to things; a self-driving car, an app, a new drone, etc. But imagine building new economies, we can actually do that today. Imagine building an economy based upon a full-cost accounting system, one that does not just account for financial capital but one that accounts for social capital and natural capital as well, that would incentivize radically different behavior. This is innovation in the institutional systems that structure human activity and we can now do this thanks to technological developments.

This kind of innovation doesn’t grow your economy by an extra 1 or 2% it actually rewrites the rules of what an economy is. These are the kind of quantum leaps that are needed today if we want to keep pace and remain relevant given the massive upheavals taking place in our world today. We are in a period of transition comparable only to that of the agrarian revolution or the move into the modern era, staying relevant within such a transformation will require innovation on a scale and depth to match that. As Jack Welch, the former CEO of General Electric put it succinctly “If the rate of change outside exceeds the rate of change inside, the end is in sight.”

Whereas management is generally about doing what we did in the past the point of innovation is change; to not do what you are doing again. In a paper entitled “Systems change: what it is and how to do it”[4] the authors write “Systems change is an intentional process designed to alter the status quo by shifting the function or structure of the identified system with purposeful interventions. It is a journey which can require a radical change in people’s attitudes as well as in the ways people work.” Systems innovators aim to transform the system in which they operate so as to no longer have a job, as there is no longer a problem to fix. As Ashoka’s Founder, Bill Drayton, once said[3] “Social entrepreneurs are not content just to give a fish or teach how to fish. They will not rest until they have revolutionized the fishing industry.”

This helps to illustrate the expansive nature of systems innovation. Systems thinking itself is holistic, holistic approaches always refer to the whole, this makes systems thinking expansive in nature, we are always reasoning upwards and thus expanding our frame of reference. Likewise doing systems innovation is the same, we are always looking upwards to the whole system we are a part of, we are always looking to see how our sphere of interest fits into broader systems. For example, rather than support a person who is building a college, we search for people who are looking at how to change the way that people learn, at different levels and scale of the education systems. The ultimate frame of reference for all of this is the whole complex global economy that we all now find ourselves a part of. This is relevant because as the world becomes more interconnected and thus interdependent a narrow focus on innovation improvements within a specific area can easily get overridden by broader processes of change.

New Institutions

At first glance, it may appear like we are able to do all sorts of things with our large organizations and all this capital we have now accumulated. But the reality is that the connectivity and complexity have happened so fast, and our institutional paradigm is so not designed for it that we are actually able to do quite little except for perpetuating what we did in the past. The analogy of a rabbit being caught in the headlights is not too far removed from where we find ourselves today. We quite simply do not have the institutional structures to operate in this kind of complex, networked, global environment with the kind of challenges it creates, what we do have is hugely inefficient and thus ineffective given the new context. It is sobering to remember that we have not yet solved, even one, of the existing global issues, from climate change to cybersecurity, to a refugee crisis, to financial instability, to soil erosion and none of them are getting any better.

But today we have a powerful new set of technologies with which to build new organizational structures. In the past decades, we have put powerful tools for computation in the hands of many and interconnected us all with telecommunications networks. This offers the potential to innovate in virtually all spheres of human activity. To rethink virtually all these systems as we turn the centralized organizations of today into the open networks of tomorrow – but doing that successfully requires new ways of thinking and systems innovation.

1. Innovate | Definition of Innovate by Oxford Dictionary on also meaning of Innovate. (2020). Retrieved 19 August 2020, from

2. Best Practices Are Stupid | Innovation Author Stephen Shapiro. (2020). Retrieved 19 August 2020, from

3. YouTube. (2018). New Foundations for Social Change: Part 2 – Indy Johar. [online] Available at: [Accessed 24 Jul. 2018].

4. (2018). Systems change: what it is and how to do it | London Funders. [online] Available at: [Accessed 24 Jul. 2018].

5. Ashoka | Everyone a Changemaker. (2018). Planting the Seeds for Social Startup Success: 10 Things to Remember When Starting a Social Enterprise. [online] Available at: [Accessed 24 Jul. 2018].

Systems Innovation

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