Review of current system & portfolio practices in the development sector: Organizational perspectives and collaborative experiments

21 min readMay 2, 2024

Building on interviews with colleagues in development organizations, donor & partner governments and foundations, this article explores the adoption of system and portfolio-based approaches in the development sector focusing on organizational motivations and challenges, changes in the network of the development sector actors, and types of collaborative experiments initiated around the novel approach. The aim is to take steps towards understanding how this type of approach for system change can be institutionalized in the sector and become one of the main ways of operating for delivering transformative impact.

Summary

While there is a broad consensus that linear, fragmented, projectized ways of doing development & public policy are not a match for the type of context we live in today, there is less consensus about what alternatives look like. In this space, system and portfolio approaches have emerged during the last few years and a new field is beginning to slowly emerge.
Currently, there is a diversity in interpretations of system and portfolio-based approaches by the development sector organizations. This is connected to different logics and theories of transformative change in complex systems. Also, the intent with the adoption of the novel approach can vary along the dimension of organizational efficiency vs place-based transformations.
Organizations engage with portfolio-based approaches with different intents and in different roles. For example, OECD OPSI takes forward the innovation portfolio management for partners; the European Commission funds place-based portfolios e.g. within the M4EG program; while UNDP facilitates place-based and thematic portfolios for system transformations.
When it comes to the motivations of development sector partners to experiment with system and portfolio-based approaches, these include increased effectiveness & efficiency of the use of funds for place-based transformations; response to the post-colonial critique; creation of visibility as a frontrunner; the potential of joint risk-taking; the opportunity of collective learning from an entire portfolio (coherence & dynamic evolution); and directionality added to internal and external activities.
Challenges encountered by partners engaged in the experimentation with system and portfolio-based approaches are connected to resources and time constraints that emerge from the prevailing logics & constraints of current organizational structures premised on fragmentation & projectization; organizational leadership dynamics; the influence of dominant organizational culture and mindsets; the difficulties of adopting the ‘portfolio language’/jargon; prevailing funding structures and cycles; and a shortage of both time and capacity to engage with numerous local partners.
The structure of the development sector ecosystem is undergoing changes driven by a rapidly changing context. The experimentation with system and portfolio-based approaches has led to new actors joining the space, such as innovative consultancies developing the logic of transformative change in systems and facilitating portfolios on the ground, and the emergence of new roles and relationships, for example, ‘learning partners’.
Since 2020, three noticeable types of collaborative experiments emerged in the development sector ecosystem: systemic investments; thematic and place-based portfolio interventions; and monitoring, evaluation and learning (MEL) for the context of system change.
This study revealed areas for further exploration and analysis. One is a need to co-create institutional structures to enable a co-ownership of place-based portfolios by several international partners as well as local stakeholders. Another area connects to the need to create and implement spaces and tools for collective learning from portfolios. Finally, there is a need to understand what mechanisms can enable the institutionalization of novel approaches on the level of the entire sector and their interconnection with organizational changes needed.
This study is based on the interviews with representatives of ten development sector organizations conducted in spring 2023 and insights shared within portfolio practitioner gatherings and the M&E Sandbox webinars run during 2023.

In search of approaches to deliver transformative impact in uncertain times

In times of multiple crises, with a need to address complex and intertwined societal and environmental challenges, the old ways of working in the development sector do not appear to be suitable any more. The reliance on disconnected projects and fragmented efforts was questioned and shown to be inefficient for the purpose. With this, the adoption of new and substantially different ways of operating is seen by many organizations as crucial for staying relevant and able to create a positive, transformative impact in an increasingly turbulent world.

Recently — especially from 2019 and augmented by the Covid-19 pandemic in 2020 — the exploration of alternative and potentially more relevant ways of working in the development sector has intensified. Novel system and portfolio-based approaches appeared appealing to many organizations as such that, unlike still prevailing ways of working, have the potential to generate transformative impact. For example, portfolio-based approaches proved to enable the reframing of problems, opening up new solutions and policy spaces. To deliver their full potential, these approaches require intense collaborations and structures for co-owning and co-managing portfolios that would allow leveraging transformative impact through a joint effort of many actors. However, they also call for changes along many dimensions in organizations adopting them.

Thus, on one hand, the adoption of the system and portfolio-based approaches is appealing since it opens up opportunities to create a greater impact together. On the other hand, it is challenging since a shift to collaborative portfolio management would require organizational changes in many actors as well as institutional changes on the level of the entire development sector.

To better understand the prospects for the institutionalization of system and portfolio-based approaches in the development sector, this article analyzes the internal challenges and motivations of different organizations involved in the experimentation with the novel approaches. The analysis is based on a series of interviews conducted in spring 2023 with representatives of such organizations as the Bill and Melinda Gates Foundation (BMGF), the Center for Public Impact (CPI), the European Commission, the International Development Innovation Alliance (IDIA), the organization for Economic Co-operation and Development (OECD), the Swedish International Development Cooperation Agency (SIDA), UNDP (Strategic Innovation Unit and several Country Offices), Rohini Nilekani Philanthropies, Climate-KIC, and the TransCap Initiative. Thus, most of the actors interviewed for this piece operate in the Global North. However, there is a small but growing cohort of actors emerging in the Global South (for example, societal platforms) whose perspectives would allow to understand a bigger picture and need to be explored in the future. Additionally, insights from the portfolio practitioner gatherings and the M&E Sandbox webinars run in 2023, both hosted by SIU UNDP, are included in this study.

Previous attempts to rethink how the development sector can be more effective

The recent developments are not a totally new phenomenon for the development sector and the attempts to work differently have been known for years. Thus, almost two decades ago, the Paris Declaration on Aid Effectiveness(2005) and Accra Agenda for Action (2008) were endorsed by many OECD partners, developing countries and civil society organizations. The Paris Declaration proposed five principles for making aid more effective — the importance of local ownership of strategies, the need for alignment and harmonization for partner countries to avoid duplication and to direct efforts toward the objectives (co)owned by local actors were emphasized. Two other pillars of the Declaration — Results and Mutual accountability — were centered on measuring development results and making them transparent. In its turn, the Accra Agenda for Action was aimed to “strengthen and deepen implementation of the Paris Declaration” and, for this, proposed four main areas for improvement. This included the restatement of Ownership by countries of their development processes. Another pillar was Inclusive partnerships, which emphasized the need for full participation of all involved partners, developing countries, and civil society in those countries. The Delivering results pillar was focused on “real and measurable impact on development”. And finally, Capacity development was aimed “to build the ability of countries to manage their own future”. The most recent effort on aid effectiveness of this kind — the Busan Partnership agreement(2011) — reiterated those principles, further strengthening the focus on results and transparency.

Most of these pillars and priority areas resonate with the current exploration of system and portfolio-based approaches. Importantly, this new wave of exploration is also different. For example, it embraces recent critiques of the development sector (e.g. post-colonial critique, and critique of the impact measurement in complex environments) and aims to go beyond declarations towards establishing and spreading new practices. This is often done through creating spaces for joint learning, exchange of experiences, and creating communities of practice at different levels. Moreover, collaborative experiments were set up to explore various aspects of portfolio-based approaches and structures needed to embed them further. These developments can be a promising way for the institutionalization of the novel approaches in the sector; likely, changes on different levels — in individuals, organizations, and on the level of entire sector — will be needed to achieve it.

The diverse perspectives on system and portfolio-based approaches and associated motivations

The conversations with the development sector partners revealed some of their motivations to engage in the experimentation with system and portfolio-based approaches. However, to better position those motivations, it is useful to distinguish different perspectives on the novel approaches. Thus, some organizations are interested in applying them primarily to strengthen their capabilities to work with innovations. This strain of portfolio-based approaches is fostered by the OECD OPSI — an organization that supports development sector partners in adopting innovation portfolio management. OECD OPSI described its approach as aimed “to increase the impact of development assistance as well as increase innovation within development organizations, including adopting new ways of working and scaling promising innovations.” According to a representative of the OECD OPSI we interviewed, currently, many partners operate reactively, making micro-decisions that result in scattered projects. They expect that the adoption of the innovation portfolio management would help partners to be more proactive and strategic and would make it possible for them to better balance activities with tangible, measurable results with more systemic, long-term initiatives. Another goal of the OECD OPSI approach is to help development organizations meet a variety of expectations, in the range from priorities of their national governments to those of local change-makers. However, this perspective on the portfolio-based approaches does not assume them to be driven by local stakeholders of complex challenges but rather by partner organizations.

Another perspective on portfolio-based approaches is, on the contrary, aimed at empowering local stakeholders to address complex challenges through place-based and thematic portfolios and in collaboration with partners. Thus, several interviewees representing this perspective highlighted the importance of seeing local actors as those in the ‘driving seat’. Ideally, they would see local actors orchestrating a portfolio of interventions in collaboration with other actors. However, currently, country offices of UNDP appear to play such an orchestration role in many portfolio interventions, while trying to build capacities locally to take over the role (for example, this is particularly evident in the scope of the M4EG program). In connection with this perspective on portfolio-based approaches, the interviewees shared several motivations for adopting or experimenting with them. This includes more efficient use of funds to contribute to a transformative impact; response to the post-colonial critique; creating a visibility of a frontrunner in the context of system change; possibility of joint risk-taking; opportunity of joint learning from an entire portfolio; and directionality added.

A summary of the identified motivations of the development sector partners to experiment with the portfolio-based approaches

Interestingly, the interviewees shared that the adoption of portfolio-based approaches that aimed at transformative impact, also required their organizations to change internally. Already now the teams involved in the portfolio interventions need to work differently. For example, a representative of the Gates Foundation shared how their team supports the design and implementation of a thematic needs-based portfolio, while also exploring what it means for the work in their organization. They emphasized that the portfolio level involves thinking about how different subunits (in their organization) contribute to higher-level outcomes or changes within national country systems, in other words, how different technical areas contribute to common goals. For this, their team is developing a theory of change and a learning agenda at the portfolio level to track contributions and prioritize interventions. The team itself adopted a range of new practices — from weekly stand-up meetings to share updates and foster connections among team members to monthly meetings that provide a platform for deep dives into specific topics, and biannual retreats that aim to address broader questions, promote collaborations and learning, and host strategic conversations about priorities based on partner feedback.

Interestingly, representatives of at least two development sector organizations (BMGF and SIDA) shared that their organizations allow for broad autonomy across teams. This means that each team in the organization can operate differently. At the same time, several thematic teams can be active in the same geography. While this contributes to a variety of approaches within one organization and the flexibility for teams, this also creates a challenge in terms of coordination and learning. In organizations with such structures, it would be important to create mechanisms for mutual learning and greater internal collaborations when moving to a wider adoption of portfolio-based approaches.

Two interviewees from the International Development Innovation Alliance (IDIA) — which unites 15 development sector partners — emphasized the growing interest and appetite among their members to learn from each other, collaborate on funding approaches, and implement more equitable mechanisms in the development work. The interest from partners is driven by a recognition that traditional approaches may not lead to sustained impact. Some partners are willing to engage in conversation about equity and system change. A representative of SIDA, reiterated some of these points, saying that the portfolio approach would allow organizations like theirs to join forces with other partners, pooling resources to create comprehensive and impactful programs and portfolios. Thus, portfolio-based approaches align with the ‘partner coordination’ concept, when multiple partners come together to contribute to a larger project or program significantly pushing them beyond exchanging information to sharing resources & decisions.

While motivations can vary, a starting point to engage with new approaches is sometimes connected to one particularly inspiring event or individual. Thus, a representative of the European Commission shared that inspiration and exposure to new perspectives are important for employees of big bureaucratic organizations to start exploring new approaches. In the interview, they shared how an inspirational event in the past led to the involvement of their organization in supporting portfolio interventions in collaboration with UNDP. Similarly, another interviewee shared that the interest in systems innovation in their organization grew after hearing Tom Mitchell’s story about Climate-KIC’s transformation from an innovation entrepreneur to a systems innovation actor. Thus, inspiring individuals and exposure to inspiring events, books, concepts and ideas should not be underestimated as triggers for shifting the development sector towards novel approaches and practices.

Challenges on the way to fully adopting new approaches by development sector organizations

Trying a new practice is an experiment for an organization through which it can learn about the challenges to be overcome on the way of embedding it. In this study, the interviewees from the development organizations shared a number of challenges they encountered internally when engaging with place-based and thematic portfolio-based approaches. These challenges connect to such factors as time and resources available, organizational dynamics and leadership, mindsets and culture prevailing in an organization that emerge from the prevailing logics & constraints of current organizational structures premised on fragmentation & projectization;, the need to adopt emerging ‘portfolio language’/jargon, mismatch with the existing funding structures and cycles, as well as challenges and time constraints to engage with many local partners.

Thus, many admit that time and effort are required to make integrated investments, create collaboration agreements between grantees, and foster connections across projects. Shortage of time hardens the implementation of learning loops and facilitation of discussions across broader portfolios, and, with this, poses constraints to ‘in-depth portfolio management’.

A summary of the challenges encountered by the development sector partners when experimenting with the system and portfolio-based approaches

In some organizations, there is organizational support for novel approaches, but the interviewees admit that the extent of discussions on the topic at the leadership level is not always clear. Some mention that a leadership team in their organization is stretched, and demonstrating effectiveness as a team is crucial. Resistance or difficulties in securing approval may hinder organizations from fully embracing a portfolio-based approach. Another challenge lies in convincing the top management of partner organizations and ensuring that the new approach aligns with their governments’ objectives. As one interviewee suggested, if a new practice is not institutionalized in the organization, it can easily revert back to its old way of working.

Dominant mindsets and prevailing organizational cultures represent another set of challenges for early adopters of system and portfolio-based approaches. While single individuals can be motivated to work differently, they can lack resources, power and possibilities to change their entire organizations. It might also be challenging to turn a one-time experiment with e.g. portfolio sensemaking into a continuous practice in an organization. For example, one interviewee shared about a lack of frequent touch-points and sharing of learnings after an initial prioritization of goals. A common mindset in many organizations is the orientation on tangible results which is not particularly productive for portfolio-based approaches aimed at system transformations. Another typical cultural barrier is the so-called ‘quest for certainty’ that goes against the emerging nature of portfolio-based approaches and the very nature of addressing complex challenges. Not least, the short-termism in decision-making is counterproductive for portfolio approaches aimed at system transformations that require long-term approaches to foster changes over prolonged periods.

Another limiting factor is the inclination of some development sector partners to stick to long-term relationships with local partners, potentially limiting the exploration of new opportunities. This can be reinforced by the resistance of some desk officers to spending a substantial amount of time developing a nuanced understanding of a local context. It is also important to acknowledge that partner organizations may not have the time and capacity to work directly with smaller local organizations. However, if the implementation of a portfolio-based approach assumes the empowerment of local actors, local intermediaries can take over the role of orchestrating collaborations on the local level. For example, Rohini Nilekani Philanthropies shared their work to grow communities locally, so they can be stronger partners for collaborative portfolio management.

Dominant in organizations funding structures and cycles are another challenge mentioned by the interviewees. It can be difficult to align portfolio goals with earmarked funding for specific topics or find a way to work within existing budgeting cycles. Current financial structures can make financial reporting on a portfolio level rather challenging. When it comes to a broader finance field, it was characterized as rather conservative. One interviewee highlighted that the public sector, despite having significant purchasing power, is quite slow in adopting novel approaches and contributing to the changes.

The language that emerges around the system and portfolio-based approaches is regarded by some as another potentially challenging factor. One interviewee called it ‘jargon’ and emphasized the importance of ‘demystifying’ it and focusing on practical aspects of the approach. The interviewee raised concerns with regard to the proliferation of buzzwords and jargon within organizations like UNDP and fear that they may become checkboxes rather than drivers of real change. On the other hand, another interviewee made a point about the importance of language in shaping mindsets and fostering shared understandings. These two perspectives suggest that the new language is both a sign of a new community of practice emerging and a challenge for its expansion. Finally, some say that they already manage thousands of contracts, which can be considered a portfolio; how to explain to employees that system and portfolio-based approaches are something substantially different?

Summing up, unlocking opportunities on the ecosystem level appears to be tightly connected to the organizational changes. Most of the factors discussed above reflect a mismatch between the dominant organizational structures, mindsets and ways of working and those that would be needed for the embedding of system and portfolio-based approaches as one of the main ways of working in the development sector. Participation in learning partnerships, festivals, and collaborative initiatives was mentioned as a means to accelerate learning and knowledge sharing in the field, potentially leading to a faster and more profound shift in the development sector.

Shifts in the development sector actor ecosystem: new actors, roles and relationships

The boundaries of the development sector ecosystem are not static and, naturally, undergo changes when facing the need to adopt new ways of working in times of multiple crises. Thus, actors engaged in the exploration of system and portfolio-based approaches can be found far beyond the traditional boundaries of the development sector. Often, new actors joining the space are motivated to respond to particular challenges and needs. Some of them (e.g. innovative consultancies like Agirre Center, Chôra Foundation, and Dark Matter Labs) partner with established development sector actors, contributing knowledge and supporting portfolio interventions on the ground. Others, focus on specific niches, like the TransCap Initiative aiming to enable systemic investing or CPI exploring how to do monitoring and evaluation in the context of system change.

Furthermore, established actors adopt new roles and the relationships in the ecosystem take new formats. For example, we found interesting shifts in actor roles. One is the changing perception of UNDP by others — from a ‘‘technical solution provider’ to an ‘ecosystem orchestrator’. Another is the emergence of the role of ‘learning partners’. While actors in the ecosystem navigate both ‘new’ and ‘old’ types of roles and relationships, ‘learning partnerships’ are increasingly seen as a more effective relationship for fostering system change. More and more actors regard each other as learning partners and appreciate the value of such relationships.

By changing itself internally and by piloting portfolio approaches in various contexts, UNDP — a large organization in the ecosystem — has the potential to affect the entire development sector. However, a shift in the ecosystem towards new ways of working will hardly be possible without many other actors engaging with novel approaches, contributing learnings and joining efforts in collaborative experiments.

*An evolving map of the development sector and innovation actor ecosystem on kumu*

When asked how to change the entire ecosystem, one interviewee suggested the importance of aligning based on principles rather than through tight coordination. Ensuring diversity in the ways of working appears important when moving towards portfolio-based approaches to become a mainstream practice. Various spaces for gathering and learning across the community can play an enabling role in an ecosystem shift. Such initiatives as Portfolio practitioners gathering, M&E Sandbox, and events like the Learning Festival were named as spaces that help new practices to mature. Interactions within those spaces might help actors to identify and phrase a much-awaited ‘proof’ that novel approaches work and really help to create a transformative impact. To go beyond ‘anecdotal evidence’ and ‘make the case for system innovations’, the ecosystem needs to identify and share a portfolio of evidence that would empower its actors to mainstream and institutionalize the new practice. While communication and storytelling were highlighted as ways to spread insights and learning, engaging more actors in contributing to and initiating ‘collaborative experiments’ around system and portfolio-based approaches is not less efficient.

Three prevailing types of collaborative experiments

Importantly, new and traditional actors from the development sector ecosystem already united efforts in ‘collaborative experiments’ and started learning from them together. Over the past couple of years, three types of collaborative experiments gained substantial attention in the development sector and already brought interesting insights.

Collaborative experiments initiated in the development sector tend to center around three strategic areas: Systemic fund & Transformative investing, Place-based & Thematic portfolios, and MEL

One strategic area of such collaborative experiments is connected to the need to rethink how financing should work to achieve transformative change. Experimentation in this area led to the emergence of new concepts such as ‘systemic investments’ and ‘systemic funds’. Actors like TransCap Initiative and Deep Transitions Lab enter the space with the ambition to conceptualize and pilot new investment and funding practices which they propose as more relevant for delivering system transformations. For example, Deep Transitions Lab put forward its 12 Principles for Transformative Investment. While the TransCap Initiative is piloting the so-called ‘poly-capital’ approach, deploying various types of capital to create sustainable change. In their white paper, TransCap Initiative emphasizes their focus on place-based systems and calls for the adoption of a ‘systemic investment logic’ — “an investment logic intending to deploy capital to catalyze a directional transformative change of socio-technical systems to build low-carbon, climate-resilient, just, and inclusive societies”. Experiments of this type are still in the early stages with more learning expected to come in the upcoming years.

Another type of collaborative experiments is place-based and thematic portfolios, where UNDP is driving experimentation with more than 50 ongoing portfolios in various countries across the globe. This includes country-level portfolios (e.g. in Serbia, Malawi, Thailand) and urban portfolios (e.g. within the M4EG program). This experimentation resulted in a recently published Portfolio Primer and a summary of learnings from the M4EG programme untitled “City Snapshots”. Importantly, other actors in the ecosystem also run place-based portfolio interventions. An interesting example is the deep demonstrator “Circular, Regenerative and Low-Carbon Economy in Slovenia” which Climate KIC co-creates in collaboration with the government of Slovenia. Another example on the country level comes from Denmark where the Bikuben Foundation orchestrates an ambitious portfolio towards the mission of ending youth homelessness. One important learning from the portfolio interventions with the substantial involvement of international intermediaries (such as Climate KIC and UNDP) is the question of how to support the creation of long-lasting and efficient portfolio governance structures in local contexts.

The third area of collaborative experimentation is monitoring and evaluation in the context of systemic change. This focus is not surprising, as the critique of the traditional evaluation approaches is particularly pronounced when it comes to systemic change (see for example this article). M&E Sandbox, hosted by SIU UNDP, provides a space for exchanging learnings from this kind of experiments. For example, during one of the Sandbox community gatherings the Laudes Foundation shared the ‘rubrics’ approach they developed and started applying. Another interesting example comes from our interviewee from the Center for Public Impact (CPI). CPI together with Climate KIC and SIDA created Systems Innovation Learning Partnership (SILP). One of the experiments they run collaboratively is to explore participatory grantmaking. In it, ‘community grantmakers’ are involved in choosing projects to be funded within a call issued by the SILP Experimentation Fund. The expectation is that the selection of projects will be grounded in a good understanding of a local context and its priorities. While a conceptual basis for this kind of collaborative experiments appears to be developed better (having a longer history) than the one for systemic funds, the practice still has a way to go, promising more insights and learnings in the future.

Closing remarks

This article focuses on organizational perspectives in connection to the ongoing experimentation with system and portfolio-based approaches in the development sector. The conversations conducted in the course of this study, suggest the importance of understanding the interplay between the changes in organizations and the prospects of institutionalization of the novel approach on the level of the entire sector. Challenges encountered by the organizations are often connected to the factors on individual and organizational levels. While mechanisms that support learning and empower organizations to continue experimentation are mostly cross-organizational and collaborative (e.g. the collaborative experiments and spaces for learning and networking described above). It will be important to explore this interplay further, shedding light on actor roles and systemic mechanisms necessary for the institutionalization of portfolio-based approaches in the sector.

When doing so, it would be important to engage with more actors from the ‘Global South’. This study engaged mostly with the organizations that are based in the ‘Global North’. This may have led to overlooking interesting experiments and developments relevant to the adoption of system and portfolio-based approaches. However, this might also suggest that actors from the ‘Global South’ are underrepresented in the existing spaces for learning and exchange of insights about the portfolio-based approaches. One recent exception is the M&E Sandbox webinar with a focus on the experiences from Africa. The created in this study map of the development sector actor ecosystem need to be expanded by adding more actors from different part of the world and exploring deeper existing and emerging interconnections, including South-South linkages.

Spaces for learning across experiments can also be further mapped. Also, more possibilities for mutual learning can be created both within and beyond the ‘traditional’ development sector boundaries. For example, in Sweden the Viable Cities programme together with the national innovation agency Vinnova pilot portfolio-based system demonstrators. And in the European Union, 112 ‘Mission Cities’ explore approaches to govern urban transitions with the support of the NetZero Cities consortium, just like the M4EG program supports cities of the Eastern Partnership on a very similar journey. Mutual learning across those initiatives is already happening but can be expanded and unfold more evenly, as there is no one context better than another but rather experimentation in a diversity of contexts creates a real value and opens up possibilities to draw empirically-grounded generalisable insights. Furthermore, learnings from the collaborative experiments can be leveraged to trigger wider adoption of novel approaches in the development sector, and identify other dimensions of changes needed.

Acknowledgements

This study was possible thanks to the openness and willingness of the representatives of the development sector organizations to share their views and insights about the system and portfolio-based approaches. The study was supported by the Strategic Innovation Unit of UNDP.