Why the financial system needs an innovation lab
It was 15 July 2008 – there was tension in the air, as a conversation started in the Royal Festival Hall, London, UK, between four likeminded people: “The challenges we face today are so complex – there has just got to be another way that tackles the roots of these problems.”
The Living Planet Report had just been published – the trend of 30% extinction of all species on planet earth continued. Little did we know that two months later the Lehman Brothers crisis would help to spark the global financial crisis.
It was then that four of us, who worked for WWF-UK and ICAEW, embarked on setting up The Finance Innovation Lab, which is now on its way to becoming an independent organisation in order to scale its work. Work that aims to empower positive disruptors in the financial system, connect people who are changing the system, develop them as leaders and help them scale their work.
We set up The Finance Innovation Lab for five very important reasons, which are still hugely relevant to the financial system today, and which guide our work:
- Dealing with the complexity requires a systems approach to change
For too long, the financial system and its actors have been working as isolated components in a big machine. However, the financial system is an interconnected human system that is formed by dynamics, patterns and relationships. Only when we see the system as whole, and all of its complexity, can we then focus on high potential ‘acupuncture’ points that will accelerate change. In The Finance Innovation Lab we have paid attention to leverage points such as P2P Banking and cultivating new business models in finance.
- Shifting purpose, values and culture takes time
Not many people would disagree that the current financial system is self-serving, rather than serving the common good. It has been shaped by values such as competition, individualism and hedonism. For the system to serve the whole, we need to strengthen cultures that are underpinned by values of democracy, responsibility and fairness. Inspiring new values and cultures does not happen overnight. It will take decades. We have built a sustainable infrastructure for the Lab in order to cultivate and accelerate change in values and culture. A key part of our sustainable infrastructure is building deep long-term, collaborative partnerships with people and organisations. This is embedded in our culture and comes through in the way that we work. Over the last six years, in co-operation with many of these partners including business coaches, Shirlaws, Tim Jackson of the University of Surrey, Nesta and the New Economy Organisers Network (NEON), we have successfully run a number of incubators such as UnLtd Futures and Campaign Lab — which is now in its third year.
- Demonstrating ‘the new’ needs safe space for experimentation
New business models in finance and their entrepreneurs have many forces against them when they start up – they often lack resources, leadership skills, community support or the influence to shape the wider market conditions. Innovation labs are needed in order to create safe spaces to try things out, to grow and to build the fitness needed to survive in a system that does not currently support ‘the new’. Check out The Finance Foundry, an incubator for new alternative business models in finance. It will be launched in the summer of 2015.
- Changing power dynamics requires collaborative communities
The UK finance sector is the biggest UK lobbyist in the EU. This is a powerful force that is holding the existing system in place. It is preventing more radical and deep rooted change to emerge. We need a new enabling power that serves society and environment. And this takes the convening, alignment, strategy and the infrastructure of an innovation lab in order to build trusting and collaborative communities who are able to enable a new form of democratic power. To this end, The Lab is convener of the Transforming Finance Network, a network of civil society organisations dedicated to changing the financial system. In January a coalition of civil society groups, led by The Lab, set out five fundamental recommendations for transforming finance.
- Inspiring new narratives through collective intelligence and insight
There’s lots of noise in attempts to change the financial system – but no vision of the future. Common narratives are much more powerful than hundreds of competing voices and are more likely to inspire and influence a new landscape. An innovation lab helps to cultivate collective insights and intelligence through action learning processes. Through our incubator programme, Campaign Lab, we work with social, environmental and economic justice campaigners to help them understand the systemic political and economic root causes that they need to tackle so that they can create meaningful change. Taking the narrative of change to the door of policy makers is a core element of The Lab’s work. A recent submission, to the Competition and Markets Authority in conjunction 20 civil society and alternative finance organisations called on the government to pay particular attention to fostering greater diversity of business models within the financial system.
These five objectives underpin all our work to create a financial system that is democratic, responsible and fair. This is a critical time when more radical and disruptive social change is urgently needed and consequently investment in ‘systems change infrastructure’ is essential. The recent funding award to The Finance Innovation Lab, from Friends Provident Foundation and Joseph Rowntree Charitable Trust (JRCT) of a combined total of over £250,000 was given specifically for the purpose of establishing systems change infrastructure.
The funding will provide the financial flexibility that The Lab needs as it transitions to independence, to invest in the core costs needed to support our work in building collaboration in civil society, to grow communities, capacity and solutions for transformational change. For people and for planet.