Does Governance stifle Innovation?
Rob Chalmers
Adelaide – Thursday, 5 June 2014
© Governance Institute of Australia
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Slide 7
Does Governance Stifle Innovation?
Yes (to a degree)
Governance of innovation
– Regulating use of technology
– Promoting technology development: “Stage gating”,
“Lean Startups”, crowdsourcing
Contextual understanding
Achieving Balance
Life on Mars…
Innovation: a threat to be “governed”?
Governance & Innovation:
harnessing the technology Genie?
Laissez Faire? Educate? Activism?
Regulation
•
•
Industry Self Regulation
Promoting the adoption of technologies
– by conferring legal benefits
– by removing regulatory impediment
•
•
•
Mandating the adoption of technologies
Restricting the use of technologies
Prohibiting the use or communication of technologies
Impact of Contracts, Insurance,
Tort, other laws
Technical methods of control
Precautionary principle vs lost opportunity cost
Poor regulation is hard to avoid
• underlying issues are often ill-understood and
continue to evolve with the technology
• “If the source, nature and scale of the problem are
not fully understood, then the proposed policy is
likely to be inadequate, inappropriate and/or
inefficient. A complete understanding of the nature
of the problem is essential for the proper
specification of objectives and selection of
appropriate alternatives”
(State Government of Victoria, Office of Regulation Reform)
Regulating Frankenstein:
Gene Technology Act 2000
Caught between Scylla and Charybdis:
•
•
providing an enabling framework
– “friends of the new economy”
reacting to issues of immediate public concern – “slaves to
the shock jock”
Act excluded “old”
gene tech: mutations
by irradiation/
chemical mutagenesis/
conventional breeding
AOK
“New” GMO tech
heavily regulated
Promoting Technology Development:
Innovation isn’t a sausage machine…
Research & Discovery
Commercial
pathway
& resourcing
Value adding
Disclosure
Proof-ofconcept
Evaluation
IP protection &
packaging
Exit
Adelaide Research &
Innovation Pty Ltd
Lean Startup & “A/B” testing
Eric Ries, “The Lean Startup: How Today’s
Entrepreneurs Use Continuous Innovation to Create
Radically Successful Businesses”
•
loop between build (code) measure (data) and learning (ideas)
–
–
–
•
•
Baseline: build a ‘minimum viable product’, and measure how
customers behave
Tune: experiment to improve
Pivot or persevere: when experiments reach diminishing
returns, that is the time to pivot
Startups: a human institution delivering products
and services under conditions of extreme uncertainty
Entrepreneurship is a “Bayseian sport”
Crowd Sourcing ideas & money
Eg Kickstarter - funding platform for creative projects:
films, games, and music to art, design, and
technology. Since launching in 2009, over $1 billion
pledged by more than 5 million people, funding
50,000+ creative projects.
Getting Innovation To Market
Selection of strategy, partners
Due diligence
ownership and rights, IP issues, records,
“freedom to operate”.
Funding and not least - Taxation
Legal
Structures, competition laws, franchising
controls, relevant law, choice of
law/jurisdiction, dispute resolution,
responsibility for meeting regulatory
controls and complying with applicable
laws; currency; franchising laws; risk,
liability, insurance, indemnity….
Understanding your context
Managing Risk Without Stifling Innovation
“Risk management has become a key function …
but all too frequently it makes an organization so
risk-averse that initiative and innovation become
paralyzed.
A central part of the problem is that risk managers,
mainly reporting to the chief executive officer, tend
to see their role as one that’s apart from other
employees—as some sort of überguardian of the
organization. This is a mistake.
The role of risk manager should be to help build a
culture that encourages all employees to take
risks—prudent risks, of course.”
Fred Crawford March 17, 2014 businessweek.com
Risk appetite
Risk management/mitigation
• to what extent is it code for risk aversion?
Are we leaving enough room for error?
(source: FTI Consulting Inc “Blueprint for innovation”)
Jurisprudence:
rules are inherently unreasonable
Adelaide Research &
Innovation Pty Ltd
Governors: technology
American engineer Willard Gibbs analyzed Watt’s governor
He observed that in practice it was beset with disadvantages
of sluggishness and a tendency to overcorrect for the
changes in speed it was supposed to control
Gibbs theorized that (thermodynamic) equilibrium for any work
producing system depends on the balance of 2 entities
(1) the heat energy supplied to the intermediate substance,
(2) the work energy performed by the intermediate substance
(steam)
Innovation in governance
Detailed proscriptive approaches
are doomed to failure
- from over and under inclusion
Meld Systems (Consistency) and People
(Flexibility)
Genuinely accept risk and failure
criticise its absence
Apply innovation methodology to the governance
process itself?
look outside your box
Innovation is reliant on trust
“Govern a great nation
as you would cook a
small fish. Do not
overdo it.”
Lao Zi
© Governance Institute of Australia