In policy and innovation systems characterized by fragmented institutional arrangements, communication between system participants can be problematic. Understanding the perspectives of system participants, and sources of agreement and disagreement between them, is critical for the development strategies for change requiring collective action. The policy systems analysis and mediation (PSAM) template has been developed as an analytical approach that facilitates a shared understanding between policy and innovation system participants and better enables collaborative strategies to be developed. The PSAM template was applied in the on-farm sector of the New Zealand dairy industry in 2002–2003 in the context of industry on-farm productivity policy. It enabled key institutional interplay issues to be isolated, areas of alignment and misalignment between system participants to be identified, and it highlighted opportunities for change. The PSAM template, in augmenting existing analytical techniques, has particular value in facilitating the development of strategies for change in functionally differentiated and organizationally fragmented policy and innovation systems.