How the @#$%&! do you transform the system?

A very interesting thing for those of us who seek to transform the system is to understand precisely how these transformations take place, to be able to channel them in the desired direction. When we started this adventure called Cirklo, one of the most recurrent discussions was “how the @#$%&! can we transform capitalism?”

Five years later we’ve learned more about systemic change. That’s one of the reasons we are currently part of B Corps (System B for Latin America), a global community of companies that have a shared purpose:

”To transform businesses into a force for good, using the power of the market to solve social and environmental problems.”

B Corps is one of the most important initiatives that seeks to transform the system from the bottom up to build a much more inclusive form of capitalism. It’s about unifying the effort of actors that are not satisfied with the old system to change its course. If we had a map, Treasure Island would be a place where companies have redefined their mission: they continue to seek the profitability of their shareholders, but at the same level of importance — from their core business — creating a positive social impact for their employees, the communities in which they operate and the environment.

And how does it happen?

The systemic change is something quite complex to understand but we’ll try to explain a tool that has helped us understand it much better. It is the Multi-level Perspective proposed by Frank Geels, one of the great experts in the subject of transitions.

The Multi-level Perspective conceives the economy, technology and society as a great system where diverse actors interact in different ways. When a great change or innovation is introduced in this system, a tension is generated between the actors, ideas and values that dominate the system and the innovators that seek to create a new social equilibrium.

In broad terms, these change processes occur at three different levels:

  1. The regime. It is the configuration present in a system and has multiple dimensions: the market, the industry, science, technology, politics and culture. In each of these dimensions there are well-established practices, processes, norms, principles, actors and relationships (status quo).
  2. The landscape. It is the context or scenario in which a regime is inserted, and therefore, affects it. Suppose that different phenomena of economic, political, social and environmental nature take place in the landscape.
  3. The niche. It is a “protected space” outside the regime in which new technologies, processes or forms of organization are incubated. This incubation process takes time before the innovations are mature and can be incorporated into the regime.

According to Geels, a transition is the result of interactions between these three levels, and may be of a different nature. For example, if the landscape does not exert enough pressure on the regime, it will contribute to its reinforcement and maintain it in the same trajectory. On the contrary, when the landscape exerts enough pressure, tensions can arise that cause uncertainty among the different actors of the regime and their destabilization. When this happens, windows of opportunity open to allow innovations that have been incubated in the niche to enter the regime and change the trajectory of one or several of its dimensions.

Multi-level Perspective (SPANISH ONLY). Adapted from Geels (2002) and Geels & Schot (2007)

In a following article that Geels wrote with Johan Schot — another great expert on the subject — , they explained that there are different types of transitions depending on the nature and synchrony (timing) of the interactions. For example, if at any given moment the landscape exerts enough pressure on the regime and windows of opportunity open up, but the innovations in the niche are not mature enough, they will not affect the regime and the windows may close. Different innovations that are sufficiently mature might also coexist in the niche, compete against or complementing each other to alter the trajectory of the regime.

It must be very clear that transitions can take a long time and will always face resistance within the regime that seeks to maintain the status quo.

Towards a more responsible capitalism

The Multi-level Perspective can help explain the emergence of an initiative like B Corps and how it contributes to transforming capitalism. I will try to exemplify how the three levels we mentioned would look like today:

The current regime

The role of companies is to create value for their shareholders. The ideology of the free market prevails, where the State must take its hands off the economy and let the market allocate the resources in a more efficient way, “bringing welfare to the majority.” The institutions, standards and regulations of the regime are built around this logic. The responsibility to resolve social and environmental challenges has been placed solely in the hands of the State and civil society.

The current landscape

If we could imagine it as a great cloud, it would be loaded with the most recent financial crisis and its effects derived from irresponsible practices, a growing gap between rich and poor countries, the pressures of climate change, humanitarian crises like that of refugees, but also of new values promoted by younger generations (millennials), the collaborative economy or the Sustainable Development Goals, which are exerting pressure on the current regime and opening windows of opportunity.

The niche

A network of multiple actors is incubating different initiatives at the niche level. Some of them are mature enough to enter or challenge the regime and begin to alter its rules and define new directions for the market economy. The example with B Corps is that, in the United States, they have begun to pressure local congresses so that at the public policy level, new corporate and legal structures are created that favor these types of companies and may one day become the standard of business. Currently, B Corps have been accepted as a legal form of business in 31 states of the US and there are legislative initiatives in Colombia and Argentina to adopt this figure.

Three points to take into account… and act

Three points to take into account… and act

1. Old capitalism is in full transition process and both companies as well as entrepreneurs are becoming agents of sustainable development that not only generate economic but also social value. One of the most important initiatives to promote this change are B Corps.

2. We are at a critical moment where there is an open window of opportunity to transform the current regime. Companies, entrepreneurs and organizations that are not able to understand, adjust or drive these changes, run the risk of becoming inconsequential or disappearing altogether.

3. One of the challenges for System B in Latin America is to generate a critical mass of B Corps, so that we may greatly promote changes at the public policy level and thus move towards a much more responsible form of capitalism in the region.

At Cirklo we work with organizations that want to push these transformations. If you are interested in learning more about System B or what you need to become a B Corp, contact us.

We’d like to thank Xoán Fernández for his contribution to the explanation of the Multi-level Perspective (1) and his observations to improve the article. If you’re in Colombia and want to have a very interesting conversation on entrepreneurship and social innovation, seek him here.

If the article sparked your interest and you want to learn more about transitions and the Multi-level Perspective, you have to read Geels (2002). If you want to dig deeper, our recommendation is that you take a look at the article that he wrote with Schot (2007).

Bibliography

Geels, F. W. (2002). Technological transitions as evolutionary reconfiguration processes: a multi-level perspective and a case-study. Research policy, 31(8), 1257–1274.

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

Originally published at medium.com on October 14, 2016.