Build a Theory of Change for your business in 7 steps

Many companies keen to make a positive impact in their communities struggle to make that happen in meaningful and scalable ways because they lack direction. It’s easy to get overwhelmed with so much to do, and so much information available on how to do it. Particularly when you’re new to the social impact space. However, the Theory of Change (ToC) is not a complex method to implement. In fact, you can build your own in 7 simple steps.

This guide will help you build a Theory of Change for your business using one of the most comprehensive and flexible DIY tools, created by Nesta. Besides, we will explore key concepts you need to know before you embark on the social impact journey, the main characteristics of a successful ToC, key approaches to it and how to make the most of your Theory of Change.


Theory of Change (ToC) is a method that illustrates the pathway through which social change can be achieved.

Theories of Change can be extremely detailed or fairly simple. In both cases, ToCs have 3 major characteristics:

  1. Results: A Theory of Change defines the result that an organisation is trying to achieve.
  2. Outcomes: It defines a set of outcomes that an organisation has control over and believes will help to achieve the desired result.
  3. Activities: A Theories of Change must outline multiple activities to address a single intended result.

Therefore, a Theory of Change can help you outline information regarding how a set of activities should lead to your intended results. Some organisations call them ‘assumptions’. While other organisations call them ‘Intermediary outcomes’. For the purpose of this guide, we’ll call them assumptions.



Simple ToCs often take the form of a linear pathway. The desired results defined on the left-hand side and activities on the right-hand side. The assumptions of how activities will lead to results are places in the middle, as shown in the example below.

This is the Theory of Change for an alternative livelihoods project in West and Central Africa.


In reality, the activities and assumptions in a Theory of Change are often not linear. You can see a more realistic Theory of Change, in this example from Tanzanian organisation Twaweza.

A few things stand out about this ToC.

First, there are multiple results such as “Knowledge of what works” and “Healthy, educated and confident people”. These results reinforce each other.

Second, activities may lead to many different assumptions. You can see this from the different arrows that are going from a single activity to multiple assumptions or outcomes.

While real pathways to change are complex, a Theory of Change should be simple. For example, a graphic showing the “why” and the  “if-this-then-that” logic of your initiative, progressing to ultimate solutions. 


In preparation for a successful ToC design process, you can do a simple exercise using the principles of Design Thinking to analyse the problem your ToC will be solving. Note that even if you already have an established solution and are integrating a ToC into your project, you could still do this exercise.

Make sure you address the following 3 aspects while you analyse the problem:

  1. Define in one sentence what the overall problem is.
  2. Define the general causes. Look into the obvious causes and start exploring intermediate, less obvious causes.
  3. Define the root causes. Look into the source of the problem and questions all aspects of it.

Once you’ve gotten down to the root causes of the problem, you can move on to the next stage and start mapping out your Theory of Change. 


The most complete and flexible template that entrepreneurs can use to their guide social impact efforts is the DIY Theory of Change template created by Nesta, a globally recognised organisation leading the social innovation field.

We recommend you go through these steps at least twice. First, read through all 7 steps focusing on the overall scope of the process. Second, after downloading and printing the template, read through each field in the template to get familiar with it. Make sure you’re clear on what each question encompasses. Third, implement the steps below by filling in the fields accordingly.

You can download the template here.


What is the long-term change you see as your goal? in other words, What is it that you want to accomplish through your initiative? Your answers should address the root cause of the problem, which you have previously identified using the design thinking exercise.


At the other end of the worksheet, write down the problem you’re trying to solve.

You will find it useful to take note of the assumptions you make while filling in the worksheet.


Continue by working outwards from the defining problem. Identify the people that are most affected by the issue and who you hope will help with your work. This will help you identify the stakeholders that you need to influence to achieve your long-term goal.


Identify your point of entry to reaching those you want to help. 


Considering what the ultimate goal of your intervention is, write down the practical steps that you can take to make change happen.


Next, ask yourself, what would the immediate result be? Think of outputs that would help you see if your idea is working and show other people that what you’re doing is starting to make a difference. 


Lastly, list the key outcomes that your activity would lead to. These are the preconditions you need to realise your goal.


  1. Ask for feedback

When you’re creating your initial model, make sure you ask for feedback. External opinions will help you identify assumptions that are unrealistic among other weaknesses.

2. Define a plan to Measure and Evaluate the impact of your Theory of Change 

Remember that you might not get it right the first time. Only by evaluating constantly, will you get to an optimal strategy to make an impact.

Check out our Complete Guide Impact Measurement for Businesses.

3. Finally, you can use the information that you gather from your monitoring and evaluation in two ways:

  • First, you can build it into future work. Even though you’re monitoring and evaluating a particular theory of change. Some of the results may help you in future projects.
  • Second, you can use this information to revise your theory of change.


When we think about business leaders, we often think of people that are driven by transformative ideas supported by everyday action. However, the key to everlasting, effective leadership in businesses is Shared leadership.

Shared leadership requires that you disperse information and action across your business rather than just holding it in one person. Businesses of all sizes and sectors have tools that help them keep everyone in the right direction when it comes to marketing, finances and culture. The most common among for-profit and nonprofit structures are mission and vision statements.

But there’s one tool that can help impact-driven businesses better understand their mission and plan strategically to achieve it: the Theory of Change. This method is often used by Nonprofits and Foundations. However, businesses can also use it to guide their impact strategies and goals along the way. The basic structure and process are the same for nonprofit and for-profit organisations.


  • The ToC is a helpful tool to create milestones and targets whilst showing a logical process of how activities lead to impact. 
  • Often we do things without being clear about the impact we want to have and the assumptions that underpin the activities we’re doing. If we’re not careful we can get busy doing things that don’t actually create the change that we want to see. Remember that the best Theory of Change is a living document. Don’t let it sit on a shelf and collect dust. 
  • The ToC method will help you map out the logical sequence of your initiative. From its inputs to its outcomes. All in one single page. You’ll be able to see all the possible steps you can take to bring your idea to life. Using this method will also help you map out all the assumptions that you need to test along the way.
  • Finally, a Theory of Change can be extremely helpful in guiding your company’s impact efforts if you make the effort to use it. So if you have an idea for change, why not try to map out your way to impact?