System Boundaries

Essence

The most complex societal challenges defy any simple understanding of where they begin and end, of causes and effects. And as the scope of a system broadens, so does its complexity—systems are always nested within bigger systems while overlapping and interacting with many adjacent systems. Yet to find an entry point for action, you will have to draw some boundaries. Otherwise, you won’t be able to do any meaningful systems analysis and coalition building.

A key concept for thinking about boundary setting is the system/challenge constellation, the nexus between a socio-technical system and a particular societal challenge that the system is grappling with.

By “socio-technical system”, we mean energy, mobility, and food systems, cities and landscapes, marine systems and coastal zones, and industrial supply chains—essentially systems in which humans, nature, and technology (in the broadest sense) interact. And by “societal challenge” we mean problems like pollution, biodiversity loss, deforestation, overfishing, poverty, and mental illness, and objectives such as decarbonization, justice, resilience, and health. Examples of system/challenge constellations from our own work include regenerative agriculture in the American Midwest, net-zero mobility in Switzerland, and circular construction in Dublin. Systemic investing requires context, and system/challenge constellations are a useful framework to conceive of such contexts and serve as the basis for boundary setting.

How you bound a particular system/challenge constellation matters greatly, because these boundaries will inform what your research focuses on, which stakeholders you invite into the process, and what you will determine as strategically important. Setting boundaries creates the frame within which you will later develop an intervention strategy and design an investment portfolio.

Example

In the early stage of our net-zero mobility prototype in Switzerland, we centered our mission on the electrification of personal transportation in the country (i.e., moving from gasoline and diesel-powered cars to electric vehicles). As the process advanced and our understanding of the Swiss mobility system deepened, we realized that the boundaries we had drawn around the system were too narrow. The electrification of personal transport meant that we were limiting the scope of our systemic investment program to technological substitution alone (swapping one type of car for another). Not only would this not result in transformative change but also possibly create unintended and negative consequences like increasing the number of cars on the road.

This thought process then led us to reframe the boundaries around our system/challenge constellation toward a more holistic understanding of mobility as having affordable access to daily needs and wants, without necessarily needing to travel in a personally-owned car. Broadening the boundaries in this way led us to include topics previously out of scope, such as shared mobility, aspects of traffic management and spatial planning, and the generation of low-carbon electricity. And this in turn led us to change the way we eventually thought about the investment strategy of our program, leading to the inclusion of a greater number of financial levers and asset classes.

Guidance

Embrace working in context

Systemic investing requires context. That’s because systems are idiosyncratic entities—no two systems are the same, no matter how similar they might appear. In other words, each system is characterized by its own set of cultural, political, economic, social, and environmental factors, and the way a specific system will undergo transformation will be unique.

In general, the more specific you define a context, the easier it will be to perform systems analysis and do coalition building. Yet, as we highlight below, this drive toward specificity stands in tension with other important factors. There are trade-offs involved in setting system boundaries, and there is no silver bullet for getting the context right. So what’s important is that you embrace working in context and understand that as a critical success factor of your systemic investment work.

Begin with a problem statement

Problem statements are useful departure points for systemic investment work. They provide a quick route to giving shape and meaning to the effort while allowing an initial outreach effort. One simple but useful framework to articulate such statements is “5Ws”:

What is the challenge?
Who is affected by it?
Where does it take place?
When does it arise?
Why is it worth solving?

Strategic considerations for boundary setting

In defining your system/challenge constellation, here are some key strategic considerations:

How meaningful is the societal issue you want to address? When the world is on fire, discerning societal challenges by importance becomes overwhelming. Action is needed on everything, everywhere, and all at once. And yet some issues enjoy higher priority than others. For instance, light pollution in urban settlements disrupts ecosystems, affects human circadian rhythms, and obscures the night sky for astronomy, but it does not pose the same existential threat as climate change or biodiversity loss.
How “transformation-ready” is the system you seek to work in? No meaningful, permanent change is accomplished by dragging a system kicking and screaming with you. For deep and structural change to become a possibility, there needs to be a certain amount of “energy” predisposing the system for change. So ask yourself:
- Where is the science settled?
- Where is there the necessary political will, and where do citizens take to the streets?
- Where are there a lot of solutions, prototypes, and demonstration effects to build on?
- Where are different stakeholders already organized?
- Where is investment capital already flowing?
What fraction of the problem can be addressed by capital deployment? Some system/challenge constellations might be meaningful and urgent but investment capital might not have much of a role to play. How much is the social media-induced deterioration of mental health in teenagers an investment issue? Sure, you might find investment opportunities in alternative social media platforms and mental health services. But is investment capital as big a lever of change as educating teenagers on the responsible use of social media, regulating exploitative social media features, and pressuring senior management of social media companies into socially responsible business practices? In contrast, a lot of system/challenge constellations do come down to finance, such as the transformation of agriculture, the move to electric transportation, and the decarbonization of energy—providing more actionable playgrounds for systemic investors.
Where is there an opportunity for additionality? Certain system/challenge constellations are being under-invested in for no other reason than fashion. What we observe in our work is a particular preference of certain investors for some systems (e.g., food) over others (e.g., transportation). So ask yourself: Where could you plug a hole?

Tactical considerations for boundary setting

In addition to the strategic considerations listed above, you should also consider a range of tactical questions in setting your system boundaries:

Where do you have agency, resources, or a network yourself? What are you particularly well positioned to work on?
What opportunistic or serendipitous circumstance could you take advantage of?
Where does the timing for systemic investing seem ripe?
Where is action already happening that you could easily plug into?
Where could you take action in the near-term that will create initial momentum to support the lift-off of your systemic investment program?

Navigate the tradeoffs that come with different scopes and scales

A number of critical success factors for systemic investing stand in an irresolvable tension related to scope and scale of your system boundaries. In general, the narrower your system boundaries, the easier it becomes to do systems analysis, build coalitions, and tailor an investment program to the idiosyncratic aspects of a system/challenge constellation.

However, working within narrow boundaries comes with trade-offs:

Scale of impact potential: The smaller the system you work in, the lower the scale of your societal impact potential. Why limit yourself to transforming a single agricultural supply chain in a country (e.g., oats in Germany) when you can transform the entire agricultural system of the European Union? But then again, is there such as thing as one EU agricultural system, or is that system really a concoction of distinct regional systems?
Deal flow: Investing is a filtering exercise—the greater the funnel at the top, the more investable opportunities, and the more transactions will be made. When focusing on the transportation system of a single city, will you find enough investable companies, projects, and non-profit initiatives, or should you rather work across an entire city-region, including suburbs? But if you do work across an entire city-region—or, indeed, dozens of city regions—will your analytical basis give you specific insights specific enough for systemically effective action, or will you just end up with a thematic investment strategy?
Capital availability: Purpose-driven investment capital increasingly wants to play at scale. This means that many investors will prefer working in larger contexts because of the ability to write bigger checks. Will you find enough investors and foundations interested in a single city, or do you need to work with a coalition of 10 or 100 cities? But if you do work with dozens of cities, how will you manage the complexity that comes with that?

Ultimately, the key is to draw system boundaries in a way that gives you a context that is both meaningful and actionable. This will require iteration and keeping an open mind.

Look for ways to work on the macro, meso, and micro levels

In some sense, all systems are local, and tangible impact is usually the result of micro-level weaving: combining different interventions and innovations in a way that lands effectively in a particular place or supply chain. And yet, these places and supply chains are shaped by factors “higher up” in the sphere of influence, at the meso level (e.g. policy and regulation, skills of labor force, availability of financing) and macro level (geopolitics, economic cycle, cultural influences).

For systemic impact in a particular system to become a possibility, it’s important to not only have visibility across but also shape outcomes on each level of influence. That’s no easy task, but there’s no micro-level gain without meso- and macro-level pain!

Tips

Don’t obsess over boundary setting. The most important point is that you work in context. It’s less important how, exactly, your system boundaries are drawn.
Consider system boundaries as a fuzzy and fluid concept. It won’t always be easy to discern what sits within scope and what outside, especially as your system boundaries will tend to shift dynamically over time. Rather than trying to get it “right” at the start, go back to your boundaries regularly over time, as your work evolves.
Borrow other people’s boundaries. You don’t necessarily need to reinvent the wheel. If someone else has defined a meaningful and actionable system/challenge constellation, consider using that as your starting point—especially if there are already other actors doing systemic work in that system, because then you can benefit from any momentum that may already exist and plug into existing activity.