A theory of change explicitly articulates the cause-and-effect steps for how a project or organization can turn inputs into a desired impact on the world (i.e. it’s their theory of how they’ll make a change). They generally include the following sections:

• Inputs / activities: What the project or organization does to create change (e.g. “distribute bednets”)
• Outputs: The tangible effects generated by the inputs (e.g. “beneficiaries have access to malaria nets”)
• Intermediate outcomes: The outputs’ effects, including benefits for the beneficiary, (e.g. “malaria nets are used” and "reduced incidence of malaria")
• Impact: What we’re ultimately solving, and why the intermediate outcomes matter (e.g. “lives saved”)

Best practices when crafting a theory of change (i.e. for creators):

• Invest sufficiently in understanding the problem context (i.e. understanding the needs and incentives of the beneficiaries and other stakeholders, as well as barriers to change and the economic & political context)
• Map the causal pathway backwards from impact to activities
• Question every causal step (is it clear why A should cause B? how might it fail?)

Hallmarks of an excellent theory of change (i.e. for reviewers):

• A focused suite of activities
• The evidence and assumptions behind each step are explicitly named
• The relative confidence of each step is clear
• It is clear who the actor is in each step

Common mistakes to avoid in theories of change are:

• Not making fundamental impact the goal (e.g., stopping at ‘increased immunizations’ instead of ‘improved health’)
• Being insufficiently detailed: (a) making large leaps between each step, (b) combining multiple major outcomes into one step (e.g. ‘government introduces and enforces regulation’).
• Setting and forgetting (instead of regularly iterating on it)
• Not building your theory of change into a measurement plan

From: Nailing the basics – Theories of change — EA Forum (effectivealtruism.org)