Every company wants to be innovative and cutting-edge, but some industries are so overloaded with regulations that diverging from the norm is seen as a risky undertaking. Forward-thinking individuals might shy away from heavily-regulated industries, and those who dare to enter them may be tempted to suppress their creativity and stick to established methods and processes.
But this hesitation is problematic. Healthcare, pharmaceuticals, aeronautics and other highly-regulated industries need out-of-the-box solutions just as much as any other industry, and to some extent, even more so. Many of them are critical to human well-being and desperately need creative ideas to overcome challenges and drive ongoing improvements.
3 Tips to Innovate in a Regulated Industry
- Prepare for the long haul.
- Work with regulators and take time to explain any new technology.
- Bake compliance into the business with at least one senior level employee with experience working with the relevant regulatory body.
For example, it takes a long time to bring new drugs to market, and the development process is extremely expensive. Clinical trials can take up to 44 months for Phase III trials and cost an average of $1 billion per approved drug. Similarly, new aircraft designs could significantly improve fuel efficiency, but manufacturers are deterred by lengthy certification processes.
While AI has undergone significant advancements over the last couple years, the field is also experiencing increasing regulation. These regulations may seem like a potential barrier, but they don’t have to stifle the creativity required to advance the technology.
As someone who has worked in highly regulated industries for two decades, I’ve seen that there’s always room for creative thinking and a real need to push the regulatory envelope, no matter how tight the regulations around you are. That said, it helps to know how to approach regulatory bodies and the best ways to gain their cooperation.
3 Ways to to Innovate in a Heavily Regulated Industry
1. Prepare for the Long Haul
When founding a startup it’s critically important to brace for setbacks and challenges, even more so in heavily regulated industries. Regulatory bodies are always nervous about loopholes that could be exploited, so they are hesitant to change legislation. That’s why there are so many hurdles around every permission. It is possible to get an innovation approved or drive an update to regulations, but it takes a long time and a lot of energy.
There are no shortcuts to approvals or regulatory changes, so entrepreneurs need enough runway and patience to be able to slog it out until they succeed. I’ve seen too many startups burn out because they didn’t ensure that they had enough funds to make it through all the regulatory red tape and simply weren’t prepared for all of the hurdles along the way.
2. Work With the Regulators, Not Against Them
It can be tempting to look for ways to get around regulations, but it’s generally counterproductive in the long run. Innovation brings new risks, which is why regulators like to say no to most proposals. The truth is that the less they understand any new tech, the more likely they are to turn it down. A startup that proactively acknowledges the real risks of their ideas and demonstrates exactly what they’re doing to mitigate them has a much higher chance of gaining approval.
Occasionally regulation is ahead of technological innovation but that’s extremely rare, as most artificial intelligence (AI) companies are discovering. Even Meta, which is far from being a startup, had to pause its AI rollout in the EU because of regulatory issues.
Most of the time, regulations lag behind the tech, leaving a company with two options: prove that the tech fits into an existing regulatory framework, or patiently educate regulators to see the value in altering the framework to permit it. The latter is more difficult, but often more rewarding, as it’s the only real path to true innovation.
It’s also important to note that it’s not just regulatory bodies that can be hesitant to adopt innovation. Customers are also often nervous about adopting new technology. Startups have to be able to reassure potential customers that they understand, respect and comply with all the regulations, otherwise, they might find that no one wants to take the risk on their solutions, no matter how effective they are.
3. Bake Compliance Into the Business
To this end, every startup needs at least one senior level position at the company, such as a C-level or co-founder, with strong experience with the relevant regulatory body. Compliance needs to be baked into every business from the outset, otherwise it’ll just come back to bite them.
Without understanding the intricacies of regulators, subtleties can be missed which can sink a startup. Just because something is technically possible does not mean it will be approved by regulators. Their role is to ensure that safety measures and rules are steadfastly followed. Many startups have burned through their funding with great technological solutions that don’t fit into the regulatory landscape.
Why Regulation Doesn’t Preclude Innovation
It’s undeniably more challenging to innovate in a heavily-regulated industry, but that’s no reason to give up.
Regulations, while often seen as barriers, actually serve a vital role in fostering safe innovation. They establish guardrails that ensure new technologies or products don’t jeopardize public safety or create unintended consequences.
For instance, in industries like healthcare and aerospace, regulatory frameworks are designed to prevent catastrophic failures and protect the public from unproven or dangerous innovations. Without these safeguards, the risks could far outweigh the rewards, leading to harmful outcomes. When approached strategically, regulations can actually support innovation by ensuring that it happens within a structure that promotes both safety and efficacy, giving consumers and regulators the confidence to embrace new advancements. In this way, regulations should be viewed not as enemies to innovation, but as necessary partners that help ensure its long-term success and public trust.
Knowing that it’s going to take time, working with the regulations and regulators and learning from those who came before you can equip you to innovate successfully even in the most highly-regulated areas. Entrepreneurs need to know that innovation is possible, even in highly-regulated industries. Don’t abandon innovation, but do brace yourself for the challenge.
