Last week I co-hosted a small meeting of the new Committee on Transforming Finance (CTF) to advance thinking about how to bring about the transformation in finance globally that is needed to integrate social, environmental and economic concerns.  Participants, led by the indomitable matriarch guru Hazel Henderson of Ethical Markets, began with the conviction that the current modest tinkering around the edges will not prevent another financial crisis in the near future.  But what to do?

That question has been advanced by several efforts that start with the premise that some type of multi-stakeholder approach is needed to break out of the death-grip of traditional commercial finance, economists and public officials. In 2008-09 I led the Global Finance Initiative in  systemic analysis grounded in questions about how to develop the necessary change process. Conclusions included that two qualities are currently lacking:

1)    A sufficiently clear, detailed and comprehensive vision of how to transform global finance into a system that integrates social, economic, environmental and political concerns;

2)    A sufficiently strong global network of individuals and organizations that can give life to a transformational vision.

Last winter I also participated in an (unsuccessful) proposal to the EU for a five-year, €10 million change initiative proposed by more than 20 leading European universities.  Its design reflected the conviction of that a multi-stakeholder process supported by academics can deepen understanding of the issues, develop new theories, conduct action experiments to test new ideas, and create socially-embedded processes that will produce the vision and necessary political support to realize it.

WWF-UK and Institute of Chartered Accountants in England and Wales are stewarding the development of The Finance Innovation Lab another, on-going initiative to activate solutions for change in financial systems.  You can join their community meeting in London this Friday (September 10).

Creating a global finance commons

Last week we set our sights on drafting a statement of purpose and principles for the financial system.  You might think that has been done many times before, but no.  Everyone jumps to the details, and that’s where mind-bending haggling immediately takes over by experts tossing around many terms and concepts that paralyze meaningful conversation.  Known examples of statements were gathered, but found greatly lacking.

The CTF discussed that the financial system should be thought of as a global commons, and proposes as a vision:

a world where the financial system serves a flourishing and sustainable human, ecological and spiritual future.

To realize the vision, the CTF further proposes that the finance system incorporates the following commons principles:

• Stakeholder co-governance,
• Access for all participants,
• Acknowledgement of the intrinsic value of ecosystems and assigning rights to the environment,
• Decision-making at the most local level possible (subsidiarity),
• A commitment to environmental sustainability and social justice globally.

But what about next steps to realize the change we need?  Drawing from all the efforts I referred to earlier, I have drafted a Concept Note.  It draws from a system stakeholder analysis, including issue crawl mapping explained in a recent blog.  The strategy focuses on strengthening the critics who are pushing for a transformational vision, by weaving together their efforts for greater coherence[1] and power.  Actions are needed to develop both the parts (represented by distinct stakeholder groups) and the whole of the transformed global finance system.  This suggests the need for:

1)    Actions designed to address particular opportunities and priorities of specific stakeholder groups, which implies the importance of stakeholders being sufficiently well organized to identify priorities, define action plans and implement them.  For example, asset owners may identify as particularly important the need to educate trustees of funds about integrating environmental-social-governance concerns.

2)    Actions designed to create cross-stakeholder group ties and connective tissue to create synergies and scale.  This could, for example, be regional and/or global conversations to further define the purpose of the financial system and the principles that should guide its development.

Of course the transformation will take years to complete, but other multi-stakeholder global change strategies are showing huge change can be realized.  Look at Transparency International, the Global Water Partnership, the Forest Stewardship Council and the World Commission on Dams, for example.  Look at the scale of relatively peaceful change illustrated with the fall of the Berlin Wall, the end of apartheid in South Africa, the transformation from dictatorships to democracies in Brazil, the Philippines, and other countries.  Look at the rapid economic globalization!

If current networking and change knowledge is skillfully applied, transformation of the financial system is within reach.  However, to realize the required transformation when the next financial crisis strikes we must have a clear vision, robust principles, a good idea of how to apply them, and a powerful global network to ensure their implementation.

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[1] This does not mean coordination of all actions – that is impossible for the size of the issue;  rather, it refers to alignment of actions by stakeholders.

We are swimming in a world of “change”.  But not all change is the same, and very often the wrong strategies and tools are applied to a change challenge.  The result?  Lots of frustration, wasted energy and disillusion about our capacity to realize change.  To improve change strategies, you’ll find helpful distinguishing between three different types:  incremental, reform and transformation.

Understanding the differences helps set reasonable goals, identify appropriate actions and ensure the presence of skills that are necessary to support it.  I spent some time clarifying the differences with Philip Thomas, co-author of a UNDP book on change, and Jouwert van Geene of the Centre for Development Innovation.  The product is the Table below.  Click on the Table to enlarge it.

Transformation Change

When Thomas Kuhn wrote his seminal 1962 book on paradigm shifts, The Structure of Scientific Revolutions, he was writing about the physical sciences. He describes how changes occur in explanations (theories) about how the world works and what is possible.  For him a paradigm consists of definitions of what an analysis should observe, the kinds of questions that should be asked, how the questioning should be developed, and how the results should be interpreted.  These questions and paradigm shifts are associated with transformational change, by far the most difficult type of change.

A wonderful example is with Sam Daley-Harris’ frustration over the way traditional organizations ignore and marginalize data that does not conform to what they believe is possible. “There’re these figures,” says Sam, Director of the Microcredit Campaign Summit, “,…Yunus Mohammed (Grameen Bank, Nobel Prize Winner), Ingrid Munro (Kenyan microcredit innovator)…and they (people in power) write off these people who break rules as ‘special cases’…they dismiss it or marginalize it.  If I walk into a USAID or World Bank office and said ‘Ingrid in Kenya is making microloans successfully to former thieves, prostitutes, gang members’…what would they do with that information?  Why didn’t they look at Grameen Bank 25, 15 years ago?  Why isn’t that happening in Kenya?  Because it breaks their pre-conceived conventional wisdoms of what is possible…it can’t be replicated, it’s a special case.”  Sam and the USAID/World Bank are looking with different paradigms.

Transformational change involves significant change in relationships and power structures.  Global Action Networks (GANs) typically arise out of questions requiring this type of change.  The Sustainable Food Lab (SFL), for example, began with questions about how to transform the agriculture and food system into a sustainable one.  This requires visioning strategies, and the SFL developed one of the most disciplined ones I’m aware of, by applying insights and approaches associated with Peter Senge who founded the Society for Organizational Learning, Otto Scharmer at the Presencing Institute, and Adam Kahane with Reos Partners.

Reform Change

This type of change is much more familiar. For example, often people refer to “reform of the finance industry”.  They mean that the formal rules that guide its operations should change. In fact, it is one reason many social change activists identify a successful change campaign with “advocacy” as a tool to change laws and policies.  Other tools associated with reform change strategies include negotiations and mediation.

Reform also follows successful transformation activities.  To move into this stage the SFL began prototyping with action experiments and pilots that reflected their vision for sustainable agriculture.  This experience aims to develop new procedures, formal relationships, and ways of behaving to reflect the values and beliefs of the vision.

For example, one SFL project is developing new business models to connect small-scale farmers and food companies “…that distribute risks and rewards more evenly across the supply chain, improve the flow of market information, and increase access to credit and technical assistance.”¹ These qualities of the business model arise from the vision and new insights about interdependence.  They challenge assumptions of the traditional business model of company plantations by identifying new relationships, rules and processes.

Incremental Change

The change challenge then passes into the domain of increasing application more broadly.  Incremental change is so common people often don’t think of it as “change”. This is change with widespread replication and adaptation of the models, and adoption of the reformed rules, processes, beliefs and values.  This might seem like the easy part, but history is littered with proven pilots that have never become influential.  On the global scale that GANs are working, scaling up change is an enormous and important challenge.

SFL’s strategy at this stage is product- and organization-focused, through the product-line.  For example, SFL participants Rainforest Alliance and Unilever are joining together to produce a Lipton tea bearing the Rainforest logo. Lipton markets about 12 percent of all tea sold worldwide.   Separately, Unilever committed to use exclusively palm oil certified by the Roundtable on Sustainable Palm Oil for its beauty products by 2015.

Join us for a discussion on this blogpost at the Change Alliance community.

Join us for a webinar on these change strategies, June 16 at 10:00 EDT, 14:00 UK, 15:00 CET. This is a joint NetworkingAction – Centre for Development Innovation – D3 Associates – Change Alliance webinar. Click here for more information.

1. SFL. (2010). “Projects.”   Retrieved March 22, 2010, from http://www.sustainablefoodlab.org/initiatives/.

The world’s premier alliance of multi-stakeholder change networks is reviewing standards that operationalize their change strategy. The ISEAL Alliance is the global association for social and environmental standards.  Members include the Forest Stewardship Council (FSC), the Marine Stewardship Council (MSC), Social Accountability International (SAI), the Fair Labelling Organization (FLO: fair trade) and the International Federation of Organic Agriculture Movements (IFOAM).

You know ISEAL organizations by their labels:  Fair Trade’s on coffee, MSC’s on seafood,  FSC’s label on paper and wood products. ISEAL’s Impact Code helps define what to measure and how to measure in order to be awarded the labels. Highly relevant is the work of 2009 economics Nobel Prize winner Elinor Ostrom.

The Change Strategy

The change issues are sustainability and economic justice.  A basic Code element of the change strategy is multi-stakeholder engagement.  This produces a “whole systems” perspective about how companies’ actions impact social, environmental and economic outcomes. This is a big change from the traditional exclusive corporate focus on its own financial welfare.

Currently the standard does a good job of defining who stakeholders are.  However, how they must be engaged is defined under the very general concept of “consultation” that raises questions.

For MSC and FSC, certifiers who meet certain standards are hired by a “client” (usually a forestry or fishery company) to determine whether certification standards are being met.    Typically certifiers interview stakeholders individually and there is not necessarily a collective meeting of stakeholders.  Nor is there any requirement that a multi-stakeholder group be developed to manage the fishery/forest or ensure the certification standards are being met between the certification renewals.

This is distinctly different from the strategy of the Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund) and the Extractive Industries Transparency Initiative (EITI).  The former only accepts funding applications from multi-stakeholder groups;  the latter, a spin-off of Transparency International, requires that applications for “validation” of transparency standards come from multi-stakeholder bodies.

“EITI offers a platform for dialogue to discuss transparency issues,” Tim Bittiger, EITI Regional Director explained to me.

The Nobel Prize

Ostrom won the Nobel Prize for her analysis of economic governance. The media release announced her win this way:

“(Ostrom) has challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities, or privatized. … She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes.” (Royal Swedish Academy of Sciences 2009)

She spent decades studying successful resource management at the local level by multi-stakeholder groups.  Most of ISEAL’s members are multi-stakeholder networks at the global level, which reflects their theory of change.  This would lead you to expect that they would find this a compelling arrangement locally, as well.

Empowerment

Paddy Doherty who is managing the Impacts Code review process, says that ISEAL members talk about the importance of “empowering” stakeholders.  This suggests the importance of creating new governance arrangements locally where differences can be worked out, and collective planning and heightened standards can be advanced.

As might be expected, there is already experience with cross-stakeholder groups locally.  FLO deals with cooperatives that cross the traditional labor-management divides.  MSC Project Manager Amanda Stern-Pirlot comments that: “If a fishery has certification conditions (i.e. has to make improvements over the course of their certification) often the cooperation of others is needed to fulfill these conditions, particularly when improvements to management systems are needed. In lots of situations, having a good collaborative relationship with stakeholders outside the client group is essential.”

Multi-stakeholder Platform Issues

The idea of forming multi-stakeholder groups for certification raises skills issues. Typically certifiers have traditional auditing expertise (eg.: from Arthur Anderson) and would not be equipped to handle some of the dynamics and associated goals.  Making multi-stakeholder platform development would require a very different set of competencies.

Doherty raises the valid point that the Global Fund and EITI are dealing with different situations:  handing out large amounts of money in the one case, and working with large corporations and governments in the other.  However, maybe this simply suggests a modified strategy to foster formation of a multi-stakeholder group.  It could be made a condition of renewal of certification, for example, so the initial certification ushers is contingent upon a plan and commitment to develop a local platform.

The big product and attraction to multi-stakeholder platforms is their ability to coordinate their very distinct resources and capabilities, and challenge each other’s parochial perspectives, to produce very wonderful innovation…to do what none of them could imagine doing on their own.  This is the type of change that is required to realize the objectives of ISEAL Alliance members.  This has been well-documented, including in my last book Societal Learning and Change:  How governments, business and civil society are creating solutions to complex multi-stakeholder problems.

Until 30 April 2010 you are invited to contribute your ideas for improvement, discuss key issues, and propose changes to the code.

Networks aiming for large systems change go through development stages as they grow and move from initiation to realizing their potential.  But throughout these stages, there are three particular dynamics important to nurture across these stages.

First Network Dynamic:  Community Development

These days the terms network weaving and boundary spanning are often presented as new concepts.  But for anyone like myself who has a pre-internet history in systems change, the term community development gets at the essence of what network development is about.  Some people might resist community development because they think of it as “geographic”, but this was never a necessary quality.  Global Action Networks are community organizers – it’s just that their community is global.

I like “community development” because it’s grounded in a very rich history of strategies and activities that are very adaptable to network development.  Moreover, framing a network as a “community” emphasizes its human rather than technical qualities that are the essence of healthy networks.

Community development starts with understanding who is in the community.  At the beginning, this is often more complicated that it might seem.  For the Global Finance Initiative we spent significant time analyzing this with mapping processes to identify key stakeholder groups and organizations/networks within each of those stakeholder groups.

As a network develops it brings out participants’ common interests and builds a common sense of purpose that are essential to successful networks.  One key outcome is enhanced understanding of inter-dependence. A second key outcome is enhanced coherence. This is a really important systems thinking concept that describes the process of creating alignment among the stakeholders towards a common vision.  By increasing stakeholders’ contact with one another, they understand and begin integrating diverse perspectives and developing shared activities.

Second Network Dynamic:  Deep Change

Colleague Otto Scharmer of Massachusetts Institute of Technology developed the Deep Change figure to describe transformational change processes.  This followed interviewing over 150 thought leaders on innovation and leadership. Social change networks are about realizing this type of profound change with their diverse participants.

The process is sometimes referred to as the “U process” because of the shape of the figure.  It begins with “co-sensing” to develop a collective understanding of “the current situation” with respect to an issue that appears “stuck”, complicated, and of high complexity.   Scenario development and other processes help people realize particular patterns that can make sense of diverse perspectives.  For large systems, this initially might take a year or two.

This moves people into co-inspiring, what Otto also refers to as “presencing”.  It is so central for him that he has established the Presencing Institute and some of the great open source online resources like the U toolbook. Presencing requires a process such as a retreat where people can get in touch with what might be and what is possible to “emerge” from “what is”.  This might take six months to a year.

The next stage is the “co-creating” which is my particular focus with networks as vehicles for this:  development of the strategies, relationships, resources, skills, structures, processes, and cultures to support responses to the network issue.  This involves fundamental realignment of power relationships that are deeply challenging to traditional organizations and individuals.  For global impact, this takes a couple of decades or more.

This approach guided the development of the change network called the Sustainable Food Lab.  This change process involves significant “shifts” in power and relationships amongst individuals, organizations and with society as a whole.  It is a process that I describe as “societal learning and change”.

Third Dynamic:  Experiential Learning

Experiential learning processes are the third dynamic present throughout change networks’ development.  Sometimes people refer to Scharmer’s dynamic as one of “learning from the future”, which means going through a process of deep reflection upon the current state, possibilities to address some issue and how to realize those possibilities.  Traditional learning is about learning from experience and the past.  This is often referred to as the “experiential” or “Kolb” learning cycle.  It draws from work of John Dewey, Kurt Lewin and others that David Kolb summarized.

This is the essence of creating a learning network as processes and a culture that encourage reflection upon what has been done, and integration into future actions.  This should not be thought of as a great chore or require some huge effort.  Rather, it is something that is integrated into the daily, weekly, monthly and annual rhythms of a network.  I like the term “action learning” to emphasize that there are not huge gaps between the steps in the cycle, but that they should happen as decisions are being made.

The health of these three dynamics is developed through a variety of activities.  Assessing their health should be part of assessing the health of a change network itself.

Networks often become “stuck” far short of their aspirations and potential. What processes can support a network itself to change, renew and revitalize?

The question is critical for networks that want to grow to their full potential.  The question was addressed last Wednesday in a webinar with The Access Initiative and last October in another webinar discussing the Global Knowledge Partnership.  And the question was the focus of a meeting that I led at Harvard Business School last February with a particular focus upon IUCN and the Forest Stewardship Council.

One useful framework to address this change challenge is “development stages”.  The diagram below describes the stages that my work suggests for global, multi-stakeholder networks…and is likely relevant to other network types as well.

(click on image to increase its size)

Stage 1. These networks typically begin as separate initiatives working on a similar problem.  They then decide to combine forces…often around a particular project, but sometimes to address the challenge in general.

Stage 2. As their collective activity grows, they create some common resources and establish a central coordinating function…often called a “Secretariat”.  With continued growth, some sub-parts of the network start to interact relatively independently to address particular issues;  often this takes the form of geographic sub-divisions or ones around a particular industry or specialized set of challenges.

Stage 3. As these sub-divisions become more numerous, dominant network interactions shift from the Secretariat, and the Secretariat itself becomes simply another node in the network with some particular functions such as interacting with global-level organizations and ensuring robust network communications platforms.

Stage 4. At a final stage, these multi-stakeholder networks themselves start to interact more often with other multi-stakeholder networks.

In the webinar, TAI’s Director Lalanath De Silva said TAI is really at Stage 2.5. It still possesses a founding Secretariat that he heads, but the network’s regional groupings are increasingly important.  TAI took a proactive approach to move into Stage 3.  However, this is a classic moment when many networks get “stuck” because people are “comfortable” with the status quo, and shifting to stage 3 involves to the Secretariat and Board “letting go” of their traditional control and the rest of the network “letting go” of traditional dependence upon the Secretariat.

To support TAI’s shift, Minu Hemmati and Bettye Pruitt of the Generative Change Community supported the Core Team in a strategic Re-envisioning process. Philip Thomas and I participated in the project team in an advisory role. The process included interviews and workshops with the Core Team (Board) and others in the network.

TAI’s change process has three Phases. The Re-envisioning was conceived as taking shape over three distinct Phases.  Phase 1 identified key issues through selected interviews and meetings with network partners, CT members and secretariat staff.   Phase 2 developed responses to the issues through interviews and meetings with a wider group of network partners, CT members and Secretariat staff.

The consultants used two “thinking tools” to support the CT in considering TAI’s strategy. One is a framework developed by Philip Thomas for the Generative Change Community.  This framework – Four Dimensions of Sustainable Change – helped structure conversations in the CT about the assumptions guiding TAI’s change strategy, the different kinds of impact TAI is seeking and seeing as the result of its work and the changes that might be necessary to make it more effective.

The other thinking tool was scenarios, described in last week’s blog.  Both tools were part of a report.  Phase 3 is in development.  It will transform the Phase 2 ideas into concrete proposals for network governance reforms while evaluating TAI’s impact.

The Global Knowledge Partnership change processes was very different and crisis-driven.  The GKP was founded in 1997 to promote the application of information and communication technologies in development (ICT4D).  The change process was stimulated by a shift in the priorities of funders who were also on the GKP Board.  They received an evaluation of the GKP in September 2008 that was very favorable, but at the same meeting announced that they were not going to be providing on-going support.

A Task Force of people with knowledge about the GKP and change expertise was established with leadership of Michael Roberts of Groupsia International.  I was engaged by the Task Force to produce a report and participate in meetings to provide knowledge about options based upon other networks’ development processes.  Mike Jensen was engaged to bring in knowledge about the trends in ICT4D and donors interests.

Over four months with GKP members there were interviews, a joint Board-Regional Coordinator-Consultants meeting, and a final Board-Consultants meeting.  Over the following month the Board announced that it would resign, two scenarios were presented for a virtual vote by members (both with a very reduced Secretariat), and new elections were held with robust participation.  The new Board held its own planning process, and although the vision remained unchanged there were significant mission changes.

One common theme through these change processes is to ensure structure reflects strategy.  A network’s successes and setbacks should produce evolving strategies that need incorporation into the structure.

Do these development stages reflect your experience? Have you transition stories?

Scenario development is a leading tool for moving large, seemingly intractable issues…and particularly useful for large change networks.  I have revisited the progress of the methodology over the last couple of months with the guidance of Rafael Ramirez at the Institute for Science, Innovation and Society (InSIS) of the University of Oxford’s Saïd Business School.

Rafael is lead editor of a new version of the business bible on scenario development – Business Planning for Turbulent Times.  The concept of “turbulence” is one highly relevant to Global Action Networks…indeed, it may be said that they are structures to manage turbulence:  when “the shared ‘common good’ is in motion.”  That is to say when there are profound shifts in organizations’ operating environments that are associated with changing technologies and power relationships as are occurring with globalization and unprecedented pressures upon the natural environment.

Shell’s 1970’s scenario planning for the companies’ business planning is usually cited as the first large-scale use of scenario development.  The process produces plausible futures – stories about futures how they can be realized.  Ramirez emphasizes the importance of futures that are both possible and uncomfortable, in order for people to move past stuck positions and think creatively.

If you have marveled at the peaceful transition to post-apartheid South Africa, you should know that scenario development had an important role. Over 1991-92 Adam Kahane, at the time with Shell, led development of the Mont Fleur scenarios with a group of 22 diverse South Africans at the Mount Fleur conference center outside of Cape Town.  The four scenarios developed were named with bird themes to give them life:

1. Ostrich — in which a negotiated settlement to the crisis in South Africa is not achieved, and the government continues to be non-representative.
2. Lame Duck — in which a settlement is achieved but the transition to a new dispensation is slow and indecisive.
3. Icarus — in which transition is rapid but the new government unwisely pursues unsustainable, populist economic policies.
4. Flight of the Flamingos — in which the government’s policies are sustainable and country takes a path of inclusive growth and democracy.”

The scenarios were distributed through national newspapers and presented to 50 groups.  This produced conversations that contributed to building a common vocabulary and mutual understanding about choices and how to realize the Flight of the Flamingos.

This success also contributed to founding in 1996 The Millennium Project, a think tank that applies scenario development and other tools to produce its annual State of the Future reports.

And after leaving Shell, Kahane led numerous large system applications of scenario development-inspired approaches to “stuck” problems as he wrote in Solving Tough Problems.  That includes development of the Global Action Network called The Sustainable Food Lab.  Recently Kahane helped found Reos Partners, which is working with WWF-UK in The Finance Lab on an innovative project to transform finance that also engaged ISIS.

Scenarios focus upon a question that can be exploratory – “What do you think the future might be?” or normative – “What kind of future would you like to see?”  In a recent article Wilkinson and Edinow (also at InSIS)  define three types of approaches to scenarios that are related to three types of change challenges.  From simplest to most complex, these are:

• Problem-focused: setting out to create accurate maps of the future that will enable others to reach a destination as reliably and efficiently as possible…an approach used by the Intergovernmental Panel on Climate Change.
• Actor-focused: setting out on a journey and inviting the whole crew to help draw a map of the route that they need to take…an approach used by the World Business Council on Sustainable Development on the issue of water.
• Reflexive interventionist/multi-agent-based (RIMA): setting out on a journey in which environmental scenarios help to shape not only the route, but also the ship, its crew and the ocean itself.  Knowledge is multiple, temporary and dependent upon context.

The RIMA approach is the cutting edge to ‘wicked problems that involve sustaining collaborative action in the public interest/common good.

What are your views on, and experience with, scenario development?