System Change Portfolios for Circular Economy — From Design to Activation

Early Musings as we Engage in the Next Frontier of Our Work

by Alex Oprunenco, Brent Wellsch and Tommaso Balbo di Vinaldo

It is widely recognized that our world is facing unprecedented uncertainty driven by the compounded effects of novel and familiar crises. Dealing with those requires us shifting from technical “quick fixes” to approaches that acknowledge and embrace complexity.

This is a journey that we embarked on with several city administrations and partners in Asia with an ambition to achieve a “triple ring” of coherence for decision-making:

• policy coherence — ensuring proposed “interventions” are coherent with the challenge at hand and amongst themselves
• ecosystem and partnership coherence — it is co-owned and can be sustainably managed long-term by community actors and relevant stakeholders.
• resourcing coherence (more on this soon) — investments from various sources conform with an overall portfolio logic and are reinforcing rather than piecemeal.

Our “Sense and Frame; Engage and Position; and Transform” framework was a “learning capture”. Now as we move into portfolio activation we are discovering what a shift from projects to portfolio entails and how it can support better decision-making and resource alignment.

While we seek to affect change externally, we know we must evolve ourselves, as individuals and organizations. The following challenges in practice have surfaced as our system change portfolio for circular economy in Pasig City, Philippines is being activated:

• Managing a Cultural Shift
• Changing our Decision-Making Calculus;
• The Need for A Different Monitoring, Evaluation, and Learning Methods (MEL) to Support Decision-making in complexity

Portfolio Activation and Challenges in Practice

Managing a Cultural Shift

Harnessing and maintaining the mindset required to activate a system change portfolio, and then keeping it dynamic and alive is crucial. The portfolio is a vessel for system learning and discovery, but the temptation to become myopic or obsessed with a specific initiative or intervention in the portfolio (or even worse to assume you have figured out what works with certainty) is ever present.

However, it’s one thing to know that we need this mindset (or write about it in a blog 🙂) and it’s another thing to adopt it in practice. Drucker’s “culture eats strategy for breakfast” principle is very relevant here. This way of thinking and working is in many ways counter-cultural to how large bureaucratic organizations have traditionally operated.

Acknowledging this need to work with and not against current systemic realities, we have honed in on Meadow’s advice to dance with the systems we are engaging with through what we are calling a demonstration portfolio. The purpose of this demonstration portfolio is to allow us to walk before we run through an initial portfolio that consists of complementary and aligned interventions that can foster experimentation and learning about the challenge space itself.

In Pasig City we have developed a demonstration portfolio that will align initial interventions across three key thematic areas: nurturing new markets, participatory involvement of consumers and citizens, and building an entrepreneurial city government. Through the demonstration portfolio we hope to:

• Externally learn about what aspects of our portfolio works, what does not, what needs to be discarded, built in, and so on.
• Internally learn about what it takes (skill-sets, team make-up and competencies, processes, etc.) to successfully manage a system change portfolio.

It may seem simple, but we are hoping that the activation of a demonstration portfolio will help keep us humble and open to emergent learnings that will benefit our ambitions in the long-term. Our work in Pasig City is our first attempt in doing so and we will look to apply this experimental approach in two other contexts over the course of 2023.

Changing our Decision-Making Calculus: Again, referencing the Pasig City example, we are seeking to find the fine balance between striving for what is ideal while being open to the optimal possibility of right now. This kind of work runs the risk of the infamous “paralysis by analysis” where insecurity drives a need to constantly gather more data/evidence which becomes burdensome and can result in a limbo state of inaction.

In our work we have come up against this dynamic in a very real way. Reconciling pre-determined funding decisions for things like infrastructure upgrades to support improvements in waste management processes and practices is one example. Our real-world reality was that funding to support infrastructure upgrades had already been secured and questioning whether this was the right funding for the right infrastructure was not a possibility. As such, our focus here has been spent not disputing this reality but reasoning how to best support infrastructure upgrades as part of a larger portfolio logic and structure that ensure that these upgrades are complimented with other endeavors (e.g. skill-training) to ensure that this equipment is used for its intended purpose and is set-up for success.

As this simple example shows we are trying to become comfortable with a decision-making process that is:

• Experimental and action biased;
• Pragmatic in balancing what is ideal to do versus what we can do right now;
• Premised on learning

So what does it mean for resource allocation?

While in the very early stages, we have started to explore how portfolios may affect decision-making processes related to financial resource allocation. At this point we have reasoned that a portfolio approach has the capacity to direct this effort in two ways:

• Directionality — we have observed/experienced many circumstances where financial resource allocation decisions are informed by a deficit mindset, and yet in the end some available funding goes unspent or is not spent effectively (e.g. many cities in the Philippines underspent available budgets). A portfolio approach can help this drawback by providing direction and decision-making roadmap for how available public resources should be allocated. For example, the Pasig City portfolio has influenced how city administration thinks about an SME incentive program by providing a logic for how this investment can have an impact beyond the program itself (see our city government pivot);
• Alignment — a portfolio’s narrative and content not only gives a different “north star” for the money, it creates a playing field for alignment, where different types of instruments can combine for system-level impact in an articulated and logical way (from citizen and conversion grants to infrastructure co-investment and grant-equity funds). This alignment brings clarity to what private, public, donors, and venture funds can achieve when channeled in unison and at what stage–opposite to what we may usually observe now when public and private funders pursue their own institutional agendas.

A Different Monitoring, Evaluation, and Learning Methods (MEL) to support decision-making in complexity

If our intent in developing and implementing portfolios to support decision-making and resource allocation to deal with novel complex challenging holds then our bet is that learning has to play a much more strategic role than it does now, i.e. not an “add-on” or a shortcut to reporting on results.

Indeed, as this work is highly contextual, adaptive and relational, continuous learning is the only way you can engage with the system and observe your portfolio does no harm.

In our process we are seeking to embed learning into the core of our monitoring and evaluation (M&E) efforts. In doing so, we are co-opting what can be a very linear and stagnant methodological field to be dynamic and reflective. Many M&E methods are biased towards linear approaches and have long been criticized for their methodological stagnation — a large majority of organizations still use traditional M&E methodologies that, even if they are solid and well developed, fail often to capture the complexity they are trying to measure.

However, system change is indeed not linear and the non-linear reality of this work inclines us to put more emphasis on measuring the contribution of our effort, rather than attribution. By the same token, measuring systems requires teams to firstly define and ‘see’ the system by identifying the dynamic attributes of the system: it is not possible to assess whether or how systemic change has occurred. M&E methods need to be adapted and revised when considering and measuring ‘system change’.

Two ways we are initially attempting to do so are, as follows:

1. Mixing agile with M&E qualitative approaches with a strong focus on learning.

In an attempt of being pragmatic and able to measure impact, we have developed some minimum guidelines for what is required from a M&E perspective to launch the demonstration portfolio in Pasig City. We reasoned we need to:

• Clearly define the outcomes desired within the demonstration portfolio along with progress indicators unique to specific interventions and the portfolio (methodology inspired by outcome mapping);
• Establish a narrative for change but also a concrete plan of action of how the team wants to impact change with a set of clearly established responsibilities;
• Integrate learning mechanisms into all activities through a 3 step process that embraces elements of SCRUM methodology (check-in, review and retrospective) — see the diagram below

2. Adding the system perspective and integrating it into the framework/templates

As the core objective is to manage and implement a portfolio of interventions and to learn from it, we are adding a system perspective into each M&E activity we are developing. For instance, when doing weekly check-ins, we are suggesting that the portfolio management teams pay attention (‘intentional learning’) not only to the activities they have implemented and the challenges they are facing but also to the emerging interconnections between interventions and the ‘unexpected’ effects that those interventions are having on the system as we have defined (see the template below.) We have worked diligently to pre-define what these interconnections might be but need to be alive to what will actually happen through practical application.

Again, these are some initial challenges we have surfaced and will keep track of as we progress. We look forward to working out loud and sharing updated findings on these, as well as other phenomena as it emerges. Stay tuned 😊

We are extremely privileged to work with Alyanna, Francis “Kapi”, Gwen, Folay, and Rex (UNDP Philippines) on this learning journey.