Blog: Exploring the pentagonal map for system analysis in a finance context

In an executive course on sustainable finance, Professor Manuel Laranja used the pentagonal map to introduce participants to the systems perspective and to surface the need to change how the finance system funds sustainability projects. 

At the Lisbon Schools of Economics and Management ISEG, Professor Laranja is involved in facilitating an executive course on sustainable finance with a four-hour module on ‘innovation for sustainability’. This blog post reflects upon his experience using the pentagonal map in a finance context, the exercise he conducted, the benefits and pitfalls of the tool he perceived and the lessons he and his course participants learned along the way.

Introducing the pentagonal map for system analysis 

The pentagonal map is a systems analysis tool that has been designed to help groups (or individuals) understand the actors, materials (key technologies, products and infrastructures), and rules within a system. The aim of using this tool is to identify the system’s dominant regime – so those actors, materials and rules that stabilise the system and which in current times are often highly unsustainable. For example, in the finance system, the dominant regime is driven by a complex set of factors such as ‘risk appetite’ or ‘economic growth’, a set of strong regulations – including environmental and social governance (ESG) and principles for responsible investment (PRI), among others – and large actors, such as banks and other financial institutions.

Through using the pentagonal map, Professor Laranja wanted to help course participants (managers from various sectors, including banking and venture capital) to challenge their current mindsets, which were orientated towards micro views of product/service innovations. The tool was used to help them to see the grand challenges and difficulties associated with changing the way the finance system as a whole funds sustainability projects.

Five system dimensions

Rather than asking participants to dive into filling out the pentagonal map as a whole, Professor Laranja decided to first focus on introducing the five dimensions of the system:

• Science, technology and infrastructure
• Policy and governance
• Markets
• Investment and finance
• Society and culture

‘It is not easy for people who have not previously worked with these kinds of maps to rapidly dive into understanding the systems thinking approach, and how to fill in the layers of the map, clarifies Professor Laranja. ‘For this, more time would be needed’.

Course participants (20 people) were randomly split into small groups of four. Each group received a printed version of the pentagonal map. ‘First and foremost, I asked them to interpret their own innovation system, the finance system, according to the five dimensions. Then they had to think of one challenge that the system is facing and come up with some disruptive ideas to address this challenge.’, explains Professor Laranja.

Challenges and implications of using the tool

Participants found the exercise to be fun and a refreshing practical exercise in support of theoretical knowledge they had acquired before. However, while Professor Laranja is convinced of the added value of the tool and enjoyed facilitating the exercise, he also highlighted some important implications and challenges to bear in mind: 

‘The pentagonal map is a very powerful tool but it is rather difficult to use,’ he says. It assumes that you are familiar with the five system dimensions, which is difficult. It takes time for newcomers to actually understand the various concepts and there’s preparation time needed to grasp how it’s supposed to work.’ 

In preparation for the exercise, Professor Laranja tried filling in the pentagonal map himself to prepare for this facilitation role. He found this to be very helpful and would advise other facilitators to do the same to get a good understanding of the challenges that course participants might run into. 

To sum up, although this exercise focussed on a specific element of the tool, participants still gained from it. ‘It was worthwhile because it provided them with a first contact with systems thinking’, he concludes. ‘People from the finance industry are usually focussed on small incremental changes and day-to-day challenges. By the end of the class, they had a different sense of what the problem really is, and that it is not about the issues within their own company, but a wider systemic challenge.’

While he acknowledges the need for a more simplified version, he intends to integrate the pentagonal map tool into his course more frequently. 

About Manuel Laranja: Manuel Laranja is Professor of Management of Innovation, Entrepreneurship, Technology and Operations Strategy at the University of Lisbon. He originally studied at the Science Policy Research Unit (SPRU) at the University of Sussex which is where the Transformative Innovation Policy Consortium (TIPC) and the TIP Resource Lab originate from and thus, he never lost touch, or interest, in innovation policy studies. Earlier this year, he joined TIPC’s network of coaches and offered valuable contributions, testing and reviewing TIP tools.