What Is Systems Innovation?


Traditional innovation approaches focus on generating revenues or improving product features but can create unintended consequences for communities or the environment.

Take Airbnb for instance. Its sharing economy business model was groundbreaking by creating an online community offering accommodation and local experiences to travellers. However, Airbnb has eroded communities by contributing to housing shortages, increasing rents, and even driving out residents from inner cities. In Barcelona, Spain, the Gothic Quarter’s population has declined 45 per cent in the past decade.

The systems innovation approach, on the other hand, creates both value for the firm and positive social impact. Successful systems innovations generate returns for organizations, while also contributing to more resilient and sustainable systems and societies.

This article explores what systems innovation is, why it is important, how it differs from current approaches, and how to bring about systems innovations.

Why Is A System And Systems Thinking?

Understanding systems innovation requires understanding systems and systems thinking. This article provides a full description of both.

In short, a system is made up of a set of interdependent and interconnected components. The connections can be through the flow of materials, money, or information. They can even be invisible, such as friendships or joint community memberships. These system elements cohere to perform a specific purpose or function over time.

The human body is one example. Its components are organs, such as the heart, lungs, and brain, which are interconnected either directly or indirectly through blood vessels, nerves, and hormones. Together, they achieve a common goal or purpose – transporting oxygen and nutrients to the body’s parts.

The systems thinking approach focuses on the whole system, not just its parts. When innovators focus only on the parts, they apply cause-and-effect reasoning and might think they can predict and control outcomes through their actions.

Systems thinkers recognize that elements are often interconnected, even when connections cannot be seen. They focus as much on the connections as the elements and recognize connections as part of the system. Systems thinkers recognize that interactions among products, suppliers, and customers make it difficult to predict and control outcomes.

What Is Systems Innovation?

Systems innovation is an approach that applies systems thinking to generate new products, services, and processes.

Systems innovators see their organization as part of a system. They innovate to create a new product or service as well as to influence the system, recognizing that their success is influenced by others.

How Systems Innovation Differs From Current Innovation Approaches

Systems innovation is an approach that applies systems thinking to generate new products, services, and processes.

Compared to current innovation approaches, systems innovation has a different purpose, process, and solution.

A Different Purpose

While current innovation approaches may focus on generating short-term returns – often financial – for the organization, systems innovation seeks to create long-term good for the organization, society, and the planet.

Systems innovations are guided by a Near Star, a smaller goal aligned with the organization’s overarching purpose, or North Star. Innovators must recognize that the runway for innovation is much longer, the landscape is always changing, and they may never reach their destination. But by innovating for the long term, they are committing to a prosperous future for all. 

A Different Process

Current innovation approaches, such as stage-gate or design thinking, adopt a relatively linear pathway, with a clear beginning and end point. Systems innovations, on the other hand, follow circular and highly iterative processes.

Systems innovations can start with a problem, challenge, idea, or opportunity. Sometimes there is no beginning or end, especially within dynamic and complex systems. Innovators see a new product or service launch as a pathway to a more desirable future, one they’ve co-created with their colleagues, community, and society. They see innovation as a journey, not an event.

Different Solutions

Some innovation models focus heavily on identifying a “silver bullet” – a singular solution for the problem at hand. But since systems innovations deal with problems that are wickedly complex in nature, they ideate many solutions and prototypes as a means to learn more about the system and navigate risks.

Innovators build what we call “an ecology of actions,” that, together, nudge the system. Systems innovators are fully aware they are dealing with complex problems with no silver bullet, only best attempts. They are willing to adapt to how systems react in an iterative fashion based on how the system reacts.

Systems Innovation In Action: Suncor Re-Envisions The Future Of Mining

Suncor is a leading energy company operating in Canada’s oil sands. Much like any mine, oil sands mining creates huge pits and tailings ponds that impact the natural environment. After the land is mined, it is reclaimed and replanted.
For each mining operation, Suncor develops detailed reclamation plans that consider wider system impacts and learnings from local Indigenous communities. Through their learnings, the company envisioned a future in which small strips of land are mined and then returned to nature quickly, rather than large, open pits that take centuries to remediate.
It wasn’t desktop research that moved Suncor toward this insight; it was a series of events. For example, as innovators at Suncor learned more about the system, they realized the trucks were not coordinated; they moved independently, in different directions, completing their own assigned tasks. As team members considered coordinating truck movement, they realized the benefits of using autonomous vehicles. Each step showed that the size of the mine could be dramatically reduced. Smaller mines would reduce impacts on the land, lower production costs, and improve health and safety.
Through this process, Suncor engaged multiple stakeholders – including employees, local Indigenous communities, conservation groups, and scientists. By engaging in a cycle of reflection and action, they developed a deep understanding of the system and its actors to re-envision the future of mining – one that benefits the company, the community, and the environment.

How To Create Systems Innovations

Systems innovation requires innovators to practice the following:

Zooming In And Out

Systems innovators must first zoom out in terms of time frames (long term), geography (distant), and context (broader) to see the problem or opportunity in a wider context. They can then zoom ‘in’ to understand the finer points of processes and near-term actions. By continuously zooming in and out, they’ll see larger patterns, trends, and contextual factors as well as details. This process fosters wisdom and creativity.

Looking Left And Right

People can’t fully understand the system on their own. Just like the fable of the blind men discovering an elephant, people can only see their individual part of the system. Systems innovators recognize the value of learning from others and actively seek to learn from people with different perspectives, not just those within their own context. It is important to seek perspectives that are often neglected, such as those of Indigenous people, unborn future generations, and the natural environment. Looking left and right helps overcome biases and fosters creativity.

Seeking Patterns, Not Causality

Feedback loops in systems make it difficult to predict and control outcomes. Systems innovators do not rely on linear models of causality based on past observations; instead, they look for underlying patterns that indicate the direction of future changes. Instead of ignoring outliers, systems innovators pay attention to them in case they contain important information about deeper and invisible underlying systems and structures.

Foresighting, Not Forecasting And Planning

Since outcomes are difficult to predict, systems innovators recognize the limitations of forecasting long-term outcomes. They know there are multiple possible scenarios to be considered. Foresighting encourages systems innovators to adapt and correct course and is central to how they work to shape a more prosperous and desirable future.

Reflect: Current approaches to innovation can create severe, unintended social and environmental consequences. By using a systems approach, innovators can create new products or services that both generate returns for their organization and contribute to more resilient and sustainable systems and societies. To create systems innovations, innovators need to zoom in and out, look left and right, seek patterns, and use foresight.