How can technology balance innovation with regulation?
Innovation is essential to business survival
It is a universal truth that businesses need to innovate to survive. No matter the industry, no matter how much market share your business holds, failure to innovate will inevitably mean you are left behind while others improve the competitiveness of their products and business models. We’ve seen this repeatedly in the retail and media sector in recent years, where being slow to embrace innovation and offer products through digital channels, in line with customer expectations, has led to many big brands going out of business, while newer, digital-first businesses have prospered.
Digital technologies, from eCommerce to Artificial Intelligence (AI) and Machine Learning (ML) have already proved essential to business innovation, streamlining sales and delivery processes, augmenting interactions with customers at the same time as enhancing customer insight and revenue opportunities, and improving operational efficiency so that business can boost their bottom line.
However, businesses still hesitate to innovate; leadership may be unwilling to change business models or try new technology because either they think that the current model is best, or fear of what change may bring. Innovation can certainly be a risk, but to choose not to include new technology within your business model, whether providing online access to services for customers, upgrading internal operations with cloud solutions or implementing AI / ML to streamline back-office functions, would be extremely short-sighted today. To maximise the benefits of innovation, businesses need to consider how technological innovation can truly add value to their customers.
Is regulation a help or a hindrance?
Perhaps the most significant issue concerning tech leaders is the difficulty in reconciling innovation with regulation. Many companies are still getting to grips with the General Data Protection Regulation (GDPR), and this is merely the tip of the iceberg; in heavily regulated sectors such as Finance, regulations are continually being updated to keep up with technology as markets become increasingly globalised and automated.
Regulation is often seen as a hindrance to innovation – there has been a tendency for regulatory structures to be slow to adapt to changing social and economic circumstances, while regulatory agencies can be highly risk-averse, often because they struggle to comprehend the impact of technologies.
Technological developments such as AI and the Internet of Things, where machines are teaching themselves to learn and anticipate consumer needs, present regulatory bodies with an unprecedented challenge. There are still major questions around who owns the data that companies hold, who is responsible for storing and protecting it, and when it is acceptable to share this data with third parties. The sheer rate of technological change requires continual modification of such regulations, as well as finding new ways to enforce them effectively.
AI and ML technologies can, in fact, help businesses to comply with regulations, automatically applying best practice processes to standard operations and quickly identifying anomalous interactions or potential security breaches. At the same time, consumers have become more aware of the way that their personal data is being used by companies and are demanding greater control over their privacy and the way they are targeted. Tech businesses should take this as an opportunity to innovate business models with a “privacy by design” approach that reinforces their credibility with regulators and customers alike.
Innovation doesn’t always mean disruption
“Innovation” is a hugely overused word in the digital technology-led business sector. It is often conflated with “disruptive”, meaning that a company’s business model completely changes the way that customers use their products. It is often used to create hype around a product launch, but truly “disruptive” innovation is rare, and many “innovative” products have failed to gain any traction, often for the simple reason that no one needs them.
If you think of the true “disruptive” innovators, they often take a new approach to an existing concept. For example, Apple did not invent the first smartphone or mobile ‘app’; however, they did invent the slick, intuitive and visually appealing large screen user interface of the smartphone as we know it, that made the iPhone a global phenomenon. What Apple’s product designers had understood is that while mobile apps already provided an opportunity to instantly customise and add new functionality to the phone, the technology needed to be user-friendly and accessible to reach a mass market.
Successful businesses understand that innovation for innovation’s sake is never the answer – new technology must meet a real customer need and support wider business strategies. True innovation means developing products or services step by step through careful research and consultation with customers, to anticipate their future needs as well as delivering what they demand today.
At today’s Executive Lunch Roundtable, we look at the theme “Innovation Against All Odds”, if you’re interested in joining one of our future Roundtables then let us know via our contact form.
