What is Theory of Change?

What is Theory of Change?

The new tools of innovation for organizations, companies and entrepreneurs have generated many benefits in making things easier and with better results. It is not enough to go too far to remember what were the old Business Plans of 50 pages or more, compared to what is now a Canvas. It is also recent the shift towards social networks for the promotion of companies or more modern is the inbound marketing as a vehicle by an organization to generate engagement and attraction to a constantly changing public. The Logical Framework is another type of innovation tools for the strategic planning of an organization. Little by little more are created, others are improved and many more lose their relevance. The theory of change is one of these tools.

The theory of change is not a new tool. It has more than 10 years of existence. However, in recent years there has been an increase in visibility and use thanks to two factors: the professionalization of the third sector (NGOs) and the abundant emergence of entrepreneurs and social enterprises in Mexico and the world. In the first case, in the new accountability processes that exist based on the implementation of socially responsible practices, private assistance organizations or social associations are asked to have a theory of change that determines the impact of the resources that are injected into the program or social project, cause. That is, I pay 1 peso but what impact that weight produces. The theory of change can generate this flow of projections, simulations guides that serve an organization to define where they are going. Why is something so important being requested so far? Because it is at this time that philanthropy and welfare are entering a changing stage in which they are asked to become professional in order to continue receiving resources to support their beneficiaries. Why? For reasons of the market, that is, there are other organizations that measure their impact and therefore, it is easier to demonstrate results, which is one of the main objectives of the new ways of working in the third sector.

In the case of entrepreneurs and social enterprises, the same thing happens. How to differentiate an entrepreneur from a social entrepreneur? The answer remains in doubt but one of the ways is through a theory of change. With it, beyond the increase in sales or financial survival of the company, what is sought is to obtain a social or environmental impact that accompanies the economic activity. And just as in economic terms, the company has its financial projections, a social company has its theory of change, where they can also play positive, negative scenarios, etc.

The problem with these two situations is that, today, with the boom of the theory of change, there is still a great doubt as to how to make one. There is software, there are guides, there are methodologies but it is still not clear how to perform one correctly, that is, one that a social entrepreneur or a third sector organization feels so confident to show its funders or their donors. Making a theory of change is not very difficult. However, making a good theory of change is. The same goes for a Canvas business model. If you do it in more than an hour, you’re doing it wrong. However, in order for someone to invest a large amount of money in your project, they will surely ask for more than just a canvas.

The simplest rule to make a theory of change is: add your cause, write your inputs, project your results, calculate your benefits and determine your impact. But what does all this mean? That’s precisely the problem. You can go to the dictionary and see what is the difference between benefits or impacts but it will not clear up the doubt when trying to land your project or organization.

And worse is when theories of change version of the beginning of the millennium or confused mental map version are made. I heard someone say, “The more connections there are, the better”. I only had to give a shout when I saw his theory of change.

Do not worry if you want to make a simple theory of change. The rules that you must not forget are for any theory of change:

Understand the problem you are dealing with
Identify with what resources accounts
Project effects to your actions
Compare your results
Consider positive and negative externalities
Integrate your impact
And to make a theory of change 2.0:

1. Map your stakeholders (who are affected or benefited)
2. Analyze materiality (what is important to them)
3. Understand the problem you are dealing with
4. Identify with what resources accounts
5. Project effects to your actions
6. Compare your results
7. Consider positive and negative externalities
8. Integrate your impact
9. Manage your risk (what happens if something goes wrong, and how your impact will affect that)

With this you already have to start a successful Theory of Change, we wait for your comments.

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