This case demonstrates the integration of realist action research and co-design to address the complex social problem of long-term reliance on welfare benefits. Realist action research combines a realist philosophy of science and the questions that flow from it with an action research cycle. Realist approaches to evaluation and planning seek to explain for whom in what contexts and how impacts are generated or might be generated. Action research seeks to solve real world problems, trialling solutions until a ‘best fit’ solution is reached. The article describes the principles underpinning the methodology and the research cycles through which the project worked – situation analysis; prioritizing; co-design; trialling and further refining ideas for change. It demonstrates the development and testing of program theory for one service innovation. It also reflects on the experience and potential benefits of this approach.