Why? Innovations, whether they are services or products, enter the world with no regulatory constraints. After a brief experience with these innovations, communities decide that they need to have some rules and regulations.
Drones are perceived to create a safety risk for traditional air traffic; recent United States legislative directions include a plan to register every drone owner and operator.
Uber and Lyft are perceived as a competitive threat to taxi drivers and licensing services, and some communities have banned them.
HomeAway and Airbnb, which allow home owners to rent out their homes or rooms to short-term vacationers or visitors, are perceived to pose a threat to neighborhoods. Some communities, including San Francisco and Austin, are considering banning short-term home rentals. Philadelphia passed regulations to allow short-term rentals, tax them, and make zoning adjustments to make them illegal in most residential neighborhoods.
Consider these innovations:
- Prior to the introduction of automobiles, no one needed drivers’ licenses! Or property damage insurance related to automobiles.
- Prior to the advent of online shopping, communities had not considered the loss of sales tax revenue for items purchased online.
- Prior to the creation of digital media, communities had not adequately probed the boundaries of copyright law.
The normal order is for innovations to come first, followed by rules and regulations-POLICY.
Project managers routinely evaluate risks in areas including:
- Social or global economic conditions
- Technology changes
- Organizational changes
- Resource adequacy
- Requirements changes
- Regulatory changes
- Market conditions
I call this the STORRRM of Uncertainty (Martinich, 2015). Regulatory risks, however, often fall off the project manager’s radar in the excitement of delivering a new product or service.
How should innovators address these regulatory risks? The answer is to educate policy-makers and their constituents. IEEE-USA provides an excellent guide that you as an engineer can use to influence public policy. Innovators can help by writing a white paper discussing the pros and cons of new technology, and thinking clearly about its impact and possible resistance to its adoption. What sorts of regulations might the innovative product or service need?
In 2012, I served as an IEEE-USA Congressional Fellow for Science and Technology Policy in the office of Congressman Steve Israel. Many people met with the staff to educate us about the impact of policy on their business. How many people in his district used a given product? How many jobs were affected? Was there an environmental impact? The best of these informational meetings included a breakdown of the various impacts by Congressional District and by State.
I also attended many Congressional Briefings at which scientists and innovators explained their work and its impact on society. Legislative staffers attend these briefings to learn about technology so that they can prepare legislation.
Here are a few suggestions for innovators who may be planning to launch a new product or service:
- Construct a plan of action for educating policy-makers and the public. Include multiple forms of communication (in person, email, and social media). And include multiple levels of policy-makers (community, state, federal).
- Draft a persuasive document that describes the nature of the innovation and how it can be used for the benefit of society. Rather than omitting the potential downsides, address them!
- Tailor the persuasive document with the specific impacts for a particular audience.
Let’s consider an example. How many people in a given district use the services of HomeAway? Some are renting out their homes (the owners); some are visiting the district and renting the home (the traveler). What is the economic impact to the district in terms of sales, visitors, taxes, auto rentals, dining out? How many people are deriving additional income from property that would otherwise remain empty? How much additional revenue is pumped into the Congressional District?
Now let’s look at this from a different angle. Consider the service as a mechanism to address capacity issues. When manufacturing companies need to increase capacity in order to meet demands, they hire temporary workers. The same thing applies in the hospitality industry. Local events create a strain on the capacity of hotels to serve the needs of the community. Should the hospitality industry build additional hotels, which might be empty during non-peak demand? Services such as HomeAway and Airbnb provide flexibility for the local communities to absorb peak capacity demands.
Other services, including Uber and Lyft, could use similar a similar approach citing capacity and flexibility.
Other innovations create other fears and concerns. One fear related to Plug-In Hybrid Electric Vehicles was that their charging patterns might require additional electrical generation capacity. Here, educating policy-makers includes creative approaches to policies, such as reduced-price charging during off-peak hours that can mitigate the risk of having to build generation capacity (Lemoine, Kammen and Farrell, 2008).
Finally, in addition to educating policy-makers, innovators need to stay educated themselves. How will policies under consideration affect the success of your business? What is the implication for the manufacturing and distribution of your product with respect to trade policy (Teece, 1986)? Trade policies matter.
It’s a two-way street. Stay educated with respect to policy plans. And educate the policy-makers with respect to your industry.
Lemoine, D. M., D. M. Kammen and A. E. Farrell. 2008. “An innovation and policy agenda for commercially competitive plug-in hybrid electric vehicles,” Environmental Research Letters, Vol. 3, No. 1.
Martinich, Leslie P. 2015. “Excellent Execution in New Product Development: Reducing Uncertainty,” IEEE Engineering Management Review, March 2015, 17-19.
Teece, David J. 1986. “Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy,” Research Policy. Vol 15, No. 7, 285-205.
Leslie Martinich is an IEEE Senior Member and Principal Consultant at Competitive Focus. In 2012 she served as an IEEE-USA Congressional Fellow, assigned to the office of U.S. Representative Steve Israel (N.Y.).