Some questions on system innovation for sustainability

This evening I had a Skype chat with Anna Birney, who is the head of System Innovation Lab at Forum for the Future, to meet and to exchange views and ideas about the topic. I learned a little bit more about the new strategy FFF has just launched and explained Anna what I’ve been doing in relation to system innovation in the past five years. Both Anna and I share the opinion that the theories around system innovation and transitions, although useful to understand how systemic change occurs in socio-technical systems, has so far been a little bit slack in providing pointers and leverage points to transform systems at practical level. I also must add to this that, the discourse has been predominantly techno-centred and not much emphasis has been put on social innovations in system innovation experiments. This is, in my opinion, mainly due to the fact that the theories have been coming out of the European Union context which is primarily post-industrial, advanced in technological innovation and dominated by a Western worldview of well-being. I know through some of my contacts in academia that research in system innovation area is now starting to investigate emerging and bottom-of-the-pyramid economies (for example the program led by Rob Raven) and validity of models and theories in different socio-cultural contexts. I have been mulling over some questions about system innovation especially in the context of companies and innovation teams for a long time now. I’ll list them here. But first I’ll introduce the multi-level perspective on system innovations which has been developed over the years mainly by Rene Kemp and Frank Geels who are well-known scholars in this area (see Kemp, 1994; Geels, 2005a, 2005b; Geels and Schot, 2007).

In order to investigate innovation at system level, not only technological change but also changes in user practices, markets, regulations, culture and infrastructure, which altogether constitute the socio-technical regime, should be addressed. This model portrays the dynamic nature of system innovation through a layered structure. According to this model, the stability increases and rate of change decreases towards upper levels of the socio-technical system, but the depth and influence of change increases towards lower levels. Nevertheless the change does not happen in a linear fashion and the relationship between the three levels is similar to a nested hierarchy. The layers have internal dynamics as well as influencing changes at other levels and the central focus is at the middle where the socio-technical regime resides. Geels (2005a, p.83) explains “First, novelties emerge in technological and/or market niches. Niches are crucial for system innovation, since they provide the seeds of change. The emergence of niches is strongly influenced by existing regimes and landscape, … [T]he influence from the regimes on niches is stronger and more direct than the influences from landscapes, which is more diffuse and indirect” . The niches are loosely structured and there is much less co-ordination among actors. The regimes are more structured than niches and the rules of the regimes have co-ordinating effects on actors through a strong guidance of the activities of the actors. Landscapes are even more structured than regimes and are more difficult to change. Nevertheless, as the figure suggests, landscapes influence change both on niches and regimes; in return, niches (may) change the regimes, and the new regime changes the landscape in the longer term. The socio-technical landscape in this model is relatively static, stands for the external context and represents the physical, technical and material setting supporting the society, and cannot be changed by the actors in the short-term. Landscapes are constituted by rapid external shocks, long-term changes and factors that do not change or change only very slowly. In order to manage systemic transitions, the lowest level of MLP model, i.e. the niches, play an important role since radical innovation takes place in niches whereas in socio-technical regimes innovation is incremental. The niches consist of promising innovations and they have to be protected in order to enable them to develop from an idea or a prototype to a technology which is actually used.

With references to the MLP model, here are my questions:

1. How does sustainability issues relate to this model? My answer to this is that they are among the landscape developments and put the socio-technical regime under pressure (but only if influence the regime immediately). Some of the responses have been to enforce regulatory measures on companies which respond to these regulatory measures through compliance. On the other hand, given that governmental policy is developed with a short-term outlook, the legislative enforcements, although helping with optimisation and efficiency increases, are not likely to be the most effective leverage points to transform systems. In cases where sustainability issues are significantly relevant to a particular sector, and if companies are a little bit forward looking, there may be some voluntary action taken with a longer-term approach as seen in some of the fresh produce growing industries strategising to respond to impacts of climate change on their business. However, unless the signals from the landscape are immediately relevant to the socio-technical regime, the regime will continue with business-as-usual. This leads to the second question, which was also a question of Anna;

2. What will be the impact of landscape changes on the companies which are part of the incumbent socio-technical regime? Given the traditional business planning periods are considered very short-term in the context system innovation, those companies which fail to adopt transformational strategies are likely to go out of business. This is similar to some publishing companies, which did not have the foresight about the impacts of increasing self-publishing, becoming bankrupt suddenly. Although technologies do not come by overnight, those companies with short planning periods may not be able to adapt the changes that are being “cooked” currently but which will become “market norms” a short while beyond the preferred business planning periods of short-termist companies. On the other hand, for those companies with foresight about the impact of unfolding meta-level changes, the problem is how to manage the organisational transformation. Here I think the concept of creative destruction in a Schumpeterian way is highly relevant. Since niche innovations are particularly important in transforming socio-technical regimes, the rest of my questions are related to them and I don’t have answers to these questions as yet;

3. Niche innovations are counter to and threatening for the incumbent regimes and their business/market logic. In this case, how best to protect them and manage their maturation while avoiding the sudden collapse of the incumbent regimes? Who is going to carry out this mediatory management job? If everything will be left to the self-organising dynamics within the system, how will maturation of these niches be guaranteed? If there’s no guarantee possible, what’s our Plan B?

4. Recently there have been a lot of interest in these niches mainly in sustainable and social entrepreneurship discourses. On the other hand, these discourses does not really reference their theories or activities to sustainability science. What is the actual potential of niches in enabling systemic transformations for sustainability (especially since sustainability can only be assessed at the systemic level, that is no niche innovations can be claimed to be “sustainable” and also sustainability cannot be assessed before the fact, that is before there is a new socio-technical system with observable and measurable properties)?;

4. And finally, it has been observed that while these niches are maturing, there have been value changes in their associated entrepreneurial contexts to become aligned with the values of the socio-technical regime that is aimed to be changed. How can the individuals -the entrepreneurs- be empowered so that the value compromises they have to make to place their innovations in the market and compete with established companies and technologies do not exceed levels to nullify their change agency?

References I used in this post:

Geels, F. W. (2005a). Technological transitions and system innovations: a co-evolutionary and socio-technical analysis. Cheltenham, UK ; Northampton, Mass.: Edward Elgar Pub.

Geels, F. W. (2005b). Processes and patterns in transitions and system innovations: Refining the co-evolutionary multi-level perspective. Technological Forecasting and Social Change, 72(6 SPEC. ISS.), 681-696.

Geels, F. W., & Schot, J. (2007). Typology of sociotechnical transition pathways. Research Policy, 36(3), 399-417.

Kemp, R. (1994). Technology and the transition to environmental sustainability: the problem of technological regime shifts. Futures, 26(10), 1023-1046.