Five things corporates can learn about regulation when working with startups

11 October 2016 By Anna Ehrnrooth

If you’re a corporate, you are probably thinking: this doesn’t apply to us.  Our legal department will take care of any problems, and we will focus on what really matters: design, customer acquisition, marketing and sales, the experience, you name it. Let the lawyers worry – we’ll have all the fun.

You may also think that regulatory problems only apply to startups: if you don’t meet compliance rules, even if you have the best product/service, you can’t sell it; you might have a fantastic project, but it’s dead if you haven’t applied the required quality and process standards.  You may have the most amazing database with invaluable health data about your customers, but you forgot to ask them for their consent to use it. What happens? You are out of luck!  Because you just lost your fantastic potential future success.

Although both scenarios may be true, it doesn’t mean you are off the hook.  Because when we are talking about innovative technology and products, legislation always lags behind and regulators are constantly trying to get ahead. This means that the rules change all the time. What is true today may not be right tomorrow. And what is expected tomorrow, may be yesterday’s news next week.  We’re all in a balancing act of meeting todays expectations, and guessing what are tomorrow’s- This may be a start-up problem, but it is also your problem.

So what can you do?

Here are some tips from working with startups at Vertical.

Don’t ignore regulation – explore it

Regulation is no different from any other subject you need to figure out in relation to new products or services. If you as a corporate are involved with startups either financially, in an advisory role or contractually – their problem also becomes your problem. You may have the resources to do the research, hire the lobbyist and applying all the other costly fixes. While startups may not have all that, they are resourceful when it comes to finding an innovative solution to any problem or challenge standing in the way of their success.

If you didn’t have the money, but an awesome, innovative, even disruptive product or service you really believe in, how would you tackle regulatory changes?  Would you just live with it the best you can, which is what most companies do – plus they complain about it but do nothing.  Or would you just stubbornly oppose it, like the Unions do – ending up with thin compromises no-one wants.  Or would you adopt a more flexible attitude, exploring all avenues to find opportunities, positive consequences and advantages, seeing change as something positive, something that benefits you in the long run.

Regulation provides opportunity – not just risk

Most businesses, large and small, dread anything related to regulation. Potential new regulation, especially when the source is at EU level, is unpredictable, usually means higher costs, involve lengthy preparatory processes and is so complicated no-one knows what the end product will be.

But does it have to be like that?  The thing with start-ups is that they usually see opportunities instead of risks. They see solutions instead of problems. Can you turn your situation around, see what opportunities regulation presents.  Did you tackle new requirements so well that you could help others do the same, turn your process into a revenue source? Did you improve your own processes and become more productive, more cost efficient? Or could new requirements – even when they are voluntary – open up new markets, new customer segments, add value?  It’s all up to you to identify the opportunities, not just the risks.

Active vs. reactive regulation strategies

Have you tried looking at regulation as a strategic business issue? Or is it always a purely legal, static problem, or a big black cloud you are trying to avoid. Would a business perspective change the way you approach regulatory changes and challenges?

Legal problems are legal problems and they need to be solved as they crop up.  But getting back to the fact that new laws and requirements are created constantly and they affect your environment, your competitors, your other stakeholders and even your business directly; if you add regulation, and in particular changing regulation, in your strategy process, would it be easier to tackle?

Since start-ups are flexible and agile almost by definition, they are quicker to adapt to new situations.  It might be a bit more difficult for corporations to make really quick turns, and their natural inclination is usually to fight back, to try to stop the proposed changes or to try to remain in the natural habitat as long as possible.  What if you look at the situation from a strategy point-of-view and pro-act instead of re-act?

If you are bold you will be the one to promote new regulation – regulation that serves you and your goals. That’s what can happen with really disruptive products.  But to succeed you will have to define what you really want.

Build competitive advantage

So why not try turning your pro-active regulatory strategy into a competitive advantage? First, make sure you find out everything possible about new regulations – before everybody else.  Have your objectives, your alternatives and your strategy in place before your competitors.  Implement the best prepared, most effective actions as part of your normal business. Avoid scrambling to meet deadlines or making implementation into a separate dinosaur project. Be ready for roll-out before the requirements enter into force, before anyone else has even thought about it.  That’s what start-ups do – they pre-empt expectations.

Choose your battles

Sometimes there’s that once in a lifetime product which goes beyond what regulation –or anyone else for that matter – could imagine.  With it you lead and everybody else follows, and nothing is going to stop you – not even regulators in their constant determination make everybody’s life harder.  If you stop for a second to think about the consequences, you’re lost.  So, choose your battles. If you are convinced you will change the world – just go for it, and be ready to deal with the consequences. That, too, can be called a strategy – as long as it’s a conscious choice.

Conclusion – you don’t lose, you learn

Working with startups is a win-win situation. Make sure it applies also when dealing with regulation, as part of your business success.  You may both struggle, but both of you will also learn.  Share that lesson, and turn it into success.  And most importantly: Have fun doing it at Vertical.


This is a guest writer blog written by our mentor Anna Ehrnrooth. Read the original blog post here.

Are you a Vertical mentor and would also to share your expertise in our blog? Contact ana@vertical.vc

Anna_Ehrnrooth_mentor

Anna Ehrnrooth

Mentor

CEOSpecial Expertise in EU Regulatory Impacts

Anna Ehrnrooth has extensive experience of European legislative procedures both in Helsinki and in Brussels working through two Finnish EU presidencies. Anna has a deep understanding of evaluating regulatory impacts and influencing legislative procedures from the point of view of business and a solid base in international relations & diplomacy.

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