There's a general rule in academic research: you know you're coming to the end of your literature review when you've already read all the references in the articles you're reading. The second line of defence is that this gets validated with an advisor who has been studying the field for decades.
We don't have that luxury in public administration, and particularly in public sector innovation. There's no such systematic record of experiential and practitioner knowledge. How do we know when we know enough about a skill, project, or field?
The four stages of competence
You may be familiar with the four stages of competence model for a given skill. The idea is that we start incompetent, but don't truly know it. We know so little about the skill that we can't even meaningfully assess our own ability: (1) unconscious incompetence. As we learn more, we realize how little we know, reaching (2) conscious incompetence. Eventually we become adept and know it, the level of (3) conscious competence. When we master something, we can do it on autopilot, without really thinking: (4) unconscious competence.
I wrote last week that, in general, people are probably unconsciously incompetent at facilitating online collaboration (see: The Promise of Online Collaboration). Which isn't trivial: if someone has a bad experience collaborating with a group, they'll disengage and not return (just as they would attending a poorly designed meeting or conference). So where we fit in this competence rubric for a given project is important. We're making decisions in the public trust. How do we know when we're prepared to do so? When to move forward rather than signal-checking with others or conducting additional research?
The dark side of experimentation
Experimenting is good. Experimenting without truly knowing what we're experimenting on is not: it leads people to skimp on the equivalent of the 'literature review' (what's been done before? Who can I talk to for advice?), skip setting markers to know if they're on the right track, and fail at critically assessing and sharing the knowledge gained (see: Standardizing Innovation).
It's tempting to use a baseline of zero: "Before we did X, nothing was happening, then we did X and something happened: ergo, success." Unconscious incompetence applies both to implementation and measurement. Falsely declaring success creates complacency (see: Pilot Projects and Problems). It slows the move towards competence. And it represents underdelivery.
Get meta about innovation
So what's the equivalent of academic rigour for public sector innovation? Could we work out useful heuristics to ask ourselves? Something like:
Who are the leaders in this field? What are they doing? Can I talk to them?
Could I give a hour-long presentation on this field tomorrow?
What will this project impact?Is the level of rigour in designing the project commensurate with its potential impacts? (Future prospects for the organization? Groups of stakeholders? How many people?)
I don't know what would work, but I'd love to hear ideas. Because every time we try something that hasn't been done before and succeed, the culture needle moves a tiny bit from risk-adverse to innovative. Every time we fail, it wiggles back. We owe it to ourselves, our colleagues, the next generation of driven public servants, and to Canadians to be thoughtful and purposeful. But, also to avoid the dark side of being unnecessarily rigorous - one project's reckless abandon could be another's costly analysis paralysis.
This is the get meta about innovation: how do we move from asking ourselves Is this a good idea? to How do I know this is a good idea?
Last week I appropriated Clay Christensen's Innovator's dilemma to the world of policy innovation in an attempt to see if the model/thinking holds (See: The Policy Innovator's Dilemma). At a high level I think it generally holds that the dilemma facing the policy innovator is whether or not they ought to pursue sustaining innovations or disruptive innovations. Innovation rhetoric aside, its a leadership decision about whether or not the organization is going to direct its scarce resources towards generating policy process improvements or new policy thinking. The rest of the application is interesting but I think at its core the above statement is the kernel most worth pursuing.
Risk-aversion causes incremental (sustaining) approaches to innovation
A friend of mine reflected (by email) on how it didn't seem like a true dilemma in a risk-averse public service culture. The idea he and I unpacked over email was that risk aversion eliminates disruption as an option, thereby negating the either-or element, resolving the dilemma and leaving public servants to focus solely on policy process improvements. In other words – and this is likely nothing new – risk aversion is the root of incremental approaches to policy innovation.
Who or what ultimately determines which innovation strategy to pursue?
Jeff on the other hand left a comment (rebutted by Angela) that argued the dilemma was at the feet of Ministers. I found this too to be an interesting perspective. However, I don't think its as cut and dried. For example, if you parse the PM's Guide for Ministers and Ministers of State (2011) you will see (among many other things) that:
Government policy is established by Cabinet
The Cabinet decision-making process is a key mechanism for achieving overall coherence and coordination in government policy
A Minister may delegate to a Parliamentary Secretary specific duties for policy development initiatives. Overall responsibility and accountability remain with the Minister, who also remains responsible for the direction of public servants and departmental resources, and has authority to initiate departmental actions.
Public servants, reporting in a clear chain of command to the deputy minister, provide professional, nonpartisan policy advice to Ministers and conduct departmental operations through the exercise of legal authorities flowing from the Minister
Ministers who wish to support an item that is equivalent to a new government policy decision must seek Cabinet approval to do so
Deputy ministers are accountable for a wide range of responsibilities including policy advice, program delivery, internal departmental management and interdepartmental coordination. As deputy ministers, they do so in a manner that supports both the individual and collective responsibilities of their Minister. They are accountable on a day-to-day basis to their Minister, and a cooperative relationship between the two is critical. The advice that deputy ministers provide should be objective and must respect the law. If conflict occurs between the Minister’s instructions and the law, the law prevails.
The Prime Minister leads the process of setting the general direction of government policy. The Prime Minister is responsible for arranging and managing the processes that determine how decisions in government are made, and for reconciling differences among Ministers. The Prime Minister establishes the government’s position before Parliament by recommending to the Governor General the summoning and dissolution of Parliament, by preparing the Speech from the Throne outlining the broad policy agenda for each new parliamentary session and by determining whether proposed government legislation approved by the Cabinet is subsequently put before Parliament. The Prime Minister approves the Budget presented by the Minister of Finance.
The deputy minister, as the Minister’s principal source of public service support and policy advice, is expected to advise the Minister on all matters under the Minister’s responsibility and authority. While the deputy minister does not have direct authority over non-departmental bodies in the portfolio, he or she plays a key role in promoting appropriate policy coordination, and building coherence in the activities and reporting of the portfolio bodies. Deputies can provide advice to Ministers on the appropriate means to ensure integration in the undertakings of their portfolio, while respecting any accountability requirements and mandates set out by legislation.
In sum, plain English and chronology:
The PM sets the broader direction. Cabinet brings greater specificity to that policy direction and ensures coherence. Deputies serve as the principal source of policy advice to Ministers. Public servants provide professional and nonpartisan advice to their Deputies.
To me this looks like a fairly collaborative approach to policy making and while it may be technically true that ultimately the final decision-making powers lie at the Cabinet table there are a whole series of smaller decisions diffused across the system that significantly impact what actually makes it to that table in the first place. To me this would seem to indicate that decisions about which innovation strategies are similarly diffused across the policy making process. If this is true than a lack of disruptive policy options could be attributed to the fact that no one along the supply chain is raising them or that somewhere along the supply chain they are actively being suppressed. The former option jives with the above argument about risk aversion and seems likely. The latter however seems far less likely, in my experience the active suppression of policy ideas is more of a ghost story than a reality (queue the naysayers who've been told to stay in their box).
Which brings me to the rub
I said in the opening that essentially the policy innovator's dilemma comes down to a leadership decision about whether or not the organization is going to direct its scarce resources towards generating policy process improvements or new policy thinking. Where I think we've landed after today's discussion is that those leadership decisions aren't concentrated in the hands of the few but rather diffused across a complex system and risk-averse culture.
In many ways these are enduring themes that I've written about in the past and this is where I think innovation meets fearless advice and loyal implementation. Back in 2011 I wrote about fairly well read post On fearless advice and loyal implementation. At the time I was writing about the context of government culture writ large but I think it also applies to how we think about and approach innovation, here's an excerpt:
I think the problem is that we have collectively misinterpreted the significance and underestimated the opportunities we have to effect our work culture and sub-cultures, regardless of where we work or what we work on. We mistakenly think of fearless advice as something that only the people at the very top of the organization do; something that is reserved for private meetings between Deputies and their Ministers. In fact, I think that speaking truth to power (fearless advice and loyal implementation) more often means pushing against the small "p" office politics and the small "c" culture of the bureaucracy. In other words, fearless advice isn't reserved for ministerial briefings, but rather happens in the hallways, over cubicle walls, and in the lunch rooms among peers.
Think of it in terms of the long tail:
The idea here being that new disruptive policy ideas can emerge from anywhere along the long tail, to which I suppose I still only have one remaining question: why aren't they?
I'll put the TL;DR up front for all you who keep score, but I'll elaborate on it afterwards:
The dilemma facing policy innovators is whether or not they ought to focus on delivering the status quo policy interventions faster, better and cheaper, or whether or not they ought to focus on breaking the status quo, re-purposing the pieces, and putting them to new uses.
Preamble
Today's post is basically an appropriation of Clay Christensen's Innovator's Dilemma to the world of public policy; but before I jump into the application of the model/thinking from the former world to the latter, I wanted to outline the dilemma in a bit more detail.
The Innovator's Dilemma: a Recap
NB: this recap is sourced heavily from the discussion guide in the book. If you are already familiar with the Innovator's dilemma you may wish to jump ahead to the next section; that said, what follows below serves as a great refresh.
If you are at all familiar with the literature on innovation you will likely know that Clay Christensen's The Innovator's Dilemma is one of the most — if not the most — important books in the field. If you haven't read the book (See: Monday Book Review: The Innovator's Dilemma by Clay Christensen) I've embedded a short interview above that Christensen did with Harvard Business Review that gives you a sense of how he sees the issue. In the book Christensen asks, 'Why do well-managed companies fail?' and concludes that they often fail because the very management practices that have allowed them to become industry leaders also make it extremely difficult for them to develop the disruptive technologies that ultimately erode the markets in which they are established. He argues that well-managed companies are excellent at developing the sustaining technologies that improve the performance of their products (measured by customers) because their management practices are naturally biased towards:
Listening to customers
Investing aggressively in technologies that give existing customers what they want
Seeking higher margins
Targeting larger markets rather than smaller ones
However, disruptive technology is distinctly different from sustaining technology. Disruptive technologies change the value proposition in a given market. When they first appear, they almost always offer lower performance than mainstream customers care about. They are typically cheaper, smaller, simpler, and frequently more convenient to use. Therefore, they open new markets. Typically disruptive technologies – with experience and sufficient investment – will always improve their products’ performance and eventually take over the older markets because deliver sufficient performance blending old attributes with new ones.
The Innovator’s Dilemma describes both the processes through which disruptive technologies supplant older technologies and the powerful forces within well-managed companies that make them unlikely to develop those technologies themselves. Christensen offers outlines four principles of disruptive technology to explain why the management practices that are the most productive for exploiting existing technologies are counterproductive when it comes to developing disruptive ones:
1. Companies Depend on Customers and Investors for Resources -In order to survive, companies must provide customers and investors with the products, services, and profits that they require. The highest performing companies, therefore, have well-developed systems for killing ideas that their customers don’t want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them. And by then, it is too late.
2. Small Markets Don’t Solve the Growth Needs of Large Companies-To maintain their share prices and create internal opportunities for their employees, successful companies need to grow. It isn't necessary that they increase their growth rates, but they must maintain them. And as they get larger, they need increasing amounts of new revenue just to maintain the same growth rate. Therefore, it becomes progressively more difficult for them to enter the newer, smaller markets that are destined to become the large markets of the future. To maintain their growth rates, they must focus on large markets.
3. Markets That Don’t Exist Can’t Be Analyzed - Sound market research and good planning followed by execution according to plan are the hallmarks of good management. But companies whose investment processes demand quantification of market size and financial returns before they can enter a market get paralyzed when faced with disruptive technologies because they demand data on markets that don’t yet exist.
4. Technology Supply May Not Equal Market Demand - Although disruptive technologies can initially be used only in small markets, they eventually become competitive in mainstream markets. This is because the pace of technological progress often exceeds the rate of improvement that mainstream customers want or can absorb. As a result, the products that are currently in the mainstream eventually will overshoot the performance that mainstream markets demand, while the disruptive technologies that underperform relative to customer expectations in the mainstream market today may become directly competitive tomorrow. Once two or more products are offering adequate performance, customers will find other criteria for choosing. These criteria tend to move toward reliability, convenience, and price, all of which are areas in which the newer technologies often have advantages.
Christensen argues that managers frequently make the mistake of trying to fight or overcome the principles above rather than harnessing them. According to Christensen, applying the traditional management practices that lead to success with sustaining technologies always leads to failure with disruptive technologies. Specifically, he advises managers faced with disruptive technologies to:
Give responsibility for disruptive technologies to organizations whose customers need them so that resources will flow to them;
Set up a separate organization small enough to get excited by small gains;
Plan for failure. Don’t bet all your resources on being right the first time. Think of your initial efforts at commercializing a disruptive technology as learning opportunities. Make revisions as you gather data; and
Don't count on breakthroughs. Move ahead early and find the market for the current attributes of the technology. You will find it outside the current mainstream market. You will also find that the attributes that make disruptive technologies unattractive to mainstream markets are the attributes on which the new markets will be built.
The Policy Innovator's Dilemma: an Introduction
NB: There's a lot of overlap between this section and the section above; I literally cut and paste it and then re-wrote it so as to apply the Innovator's Dilemma to the policy domain. I've couched my terms in probabilities given that this is a thought experiment.
The question here may be different – in this case its 'Why do well-managed bureaucracies fail?' – but the resulting logic likely still applies: the very management practices that create the stability of bureaucracy also make it extremely difficult to develop the disruptive policy innovations that would ultimately erode the policy domains in which they are firmly established. Well-managed bureaucracies are probably good at developing the sustaining innovations that improve the performance of their policies or related services (measured by constituents) because their management practices are biased towards:
Listening to constituents
Investing aggressively in policies that give existing client-segments what they want
Seeking lower costs
Pursuing increasingly complex policy options rather than simple ones
Like technology, disruptive policy innovation is likely distinctly different from sustaining policy innovation. Disruptive policy innovations ought to change the value proposition in a given policy domain. When they first appear, they should almost always offer lower performance than mainstream constituents care about. Typically we could expect them to be cheaper, smaller, simpler, and frequently more convenient to use. They are likely to create new conditions within the policy domain. We can expect them to – with experience and sufficient investment – continue to improve their performance over time and eventually spill over in other, more established policy domains by blending old attributes with new ones.
The Policy Innovator’s Dilemma then describes both the processes through which disruptive policy innovations supplant older policy approaches and the powerful forces within bureaucracies that make them unlikely to develop those policies themselves. If all the above is true, then the four principles of disruptive policy innovation might look something like this:
1. Bureaucracies Depend on Constituents and Stakeholders for Resources -In order to survive, bureaucracies must provide constituents and stakeholders with the policies, services, and outcomes that they require. The highest performing government departments, therefore, have well-developed systems for killing ideas that their traditional constituents don’t want. As a result, these companies find it very difficult to invest adequate resources in disruptive policy innovations – lower-impact opportunities that their constituents don’t want – until their constituents want them. And by then, it is too late.
2. Simple Policy Options Don’t Solve the Needs of Complex Bureaucracies -To maintain their influence and create opportunities for their employees, successful bureaucracies need to grow. It isn't necessary that they increase their growth rates, but they must maintain them. And as bureaucracies get larger, they need increasing complexity to justify their growth rates. Therefore, it becomes progressively more difficult for them to enter the newer, smaller policy domains that are destined to become the large policy domains of the future. To maintain their growth rates, they must focus on policy domains that are 'du jour' not those that are of 'l'avenir'.
3. Policy Options That Don’t Exist Can’t Be Analyzed - Sound policy research, good planning and execution according to plan are the hallmarks of good public management. But governments whose investment processes demand the strict quantification of a given policy intervention and its projected impact before it can be tested are paralyzed when faced with disruptive policy innovations because they demand data on policy interventions that don’t yet exist.
4. The Supply of Policy Innovation May Not Equal Demand - Although disruptive policy innovation can initially be used only in small policy domains, it eventually becomes competitive in mainstream policy domains. This is because the pace of progress often exceeds the rate of improvement that traditional constituents want or can absorb. As a result, the policies that are currently in the mainstream eventually overshoot the performance that mainstream constituents demand, while the disruptive policy innovations that underperform relative to mainstream constituent expectations may become directly competitive tomorrow. Once two or more policy interventions offer adequate performance, constituents will find other criteria for choosing. These criteria tend to move toward reliability, convenience, and transaction cost, all of which are areas in which the newer policy option has advantages.
It follows then that bureaucrats are likely to frequently make the mistake of trying to fight or overcome the principles above rather than harnessing them and apply traditional management practices that lead create the conditions that foster sustaining policy innovations but lead to failure with respect to disruptive policy innovations. Given all of the above, what advice could be given to decision makers within the policy context? Perhaps:
Give responsibility for disruptive policy innovations to organizations whose constituents need them so that resources will flow to them;
Set up separate organizations small enough to get excited by small gains;
Plan for failure. Don’t bet all your resources on being right the first time. Think of your initial efforts at testing a disruptive policy option as a learning opportunity. Make revisions as you gather data; and
Don't count on breakthroughs. Move ahead early and find the policy domain for the current attributes of the innovation. You will find it outside the current mainstream policy environment. You will also find that the attributes that make disruptive policy innovations unattractive to mainstream markets are the attributes on which the new markets will be built.
Policy Innovator's Dilemma: Origins
When I first started thinking about whether or not I could apply Christensen's thinking to the world of policy I re-wrote two critical paragraphs from Christensen's book (found on p.98); here's the original text:
“The reason [why great companies failed] is that good management itself was the root cause. Managers played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies: listening to customers; tracking competitors actions carefully; and investing resources to design and build higher-performance, higher-quality products that will yield greater profit. These are the reasons why great firms stumbled or failed when confronted with disruptive technology change.
Successful companies want their resources to be focused on activities that address customers’ needs, that promise higher profits, that are technologically feasible, and that help them play in substantial markets. Yet, to expect the processes that accomplish those things also to do something like nurturing disruptive technologies – to focus resources on proposals that customers reject, that offer lower profit, that underperform existing technologies and can only be sold in insignificant markets– is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.”
Here's my comparative re-write (click to enlarge):
And finally, here's a clean, text-based version:
“The reason [governments failed] is that bureaucracy itself was the root cause. Bureaucrats played the game the way it’s supposed to be played. The very decision-making and resource allocation processes that are key to the success of established hierarchies are the very processes that reject disruptive ideas: listening to constituents; tracking outputs carefully; and investing resources to design and build higher-performance, higher-quality delivery mechanisms that will yield greater results. These are the reasons why governments stumbled or failed when confronted with disruptive technology change.
Successful governments want their resources to be focused on activities that address constituents’ needs, that promise greater outputs, that are feasible, and that help them play a substantial role. Yet, to expect the processes that accomplish those things also to do something like nurturing disruptive ideas – to focus resources on proposals that constituents reject, that offer less output, that underperform existing delivery vehicles and can only be administered to insignificant markets– is akin to flapping one’s arms with wings strapped to them in an attempt to fly. Such expectations involve fighting some fundamental tendencies about the way successful organizations work and about how their performance is evaluated.”
Policy Innovator's Dilemma: In Plain English
Again, paraphrasing Christensen (this time from the video embedded above):
The policy innovator's dilemma is that in every department or agency every day, every year, people are going into senior management's office, knocking on the door saying "I've got a new policy idea" and some of those entail improving existing policy interventions that governments could deliver better to their existing constituent base. A disruptive policy innovation generally has to cause you to go after new policy areas, people who aren't your constituents and the policy intervention you want to bring to them is something that is so simple to administer that your current constituents can't use it (or worse are offended by it because they've built infrastructure around the old policy regime, think regulatory capture). And so the choice that the policy innovator has to make is whether or not the department or agency should improve existing policy interventions that can be better administered to the existing constituent base or should the department or agency make less refined and/or technocratic policy interventions that could radically change the shape of the policy domain, potentially alienate their existing constituent base and erode their current relationships. Given the choice, what should departments and agencies do?
And that my friends, really is the policy innovator's dilemma.
Earlier this week Adobe's employee innovation program Kickbox got a lot of attention online when the company announced they were open sourcing the entire thing. Given that this just hit the ecosystem this month I'm still poking around on the site. That said, I'm impressed by the overview and dig that they have a separate section for senior folks looking to deploy Kickbox in their organizations and another featuring the core contents of the program (in fact, it reminds me a lot of the approach to public sector mutuals in the UK).
Kickbox tl;dr
Kickbox is a two-day innovation workshop built around a starter-kit for would-be innovators. The workshop is designed to remove typical barriers to innovation: money, a process, innovation tools, and energy (caffeine and sugar); short (PR) video below:
Kickbox explained
For a more complete overview of the Kickbox program (which has been operating for the last 18 months) I suggest watching Mark Randall's presentation at the Lean Startup Conference embedded below.
Deflecting your early skepticism
Yes, you are right, Kickbox is likely as much about good PR for Adobe as it is about innovation. However, the fact that they open sourced it in its entirety should be taken as evidence that it has paid dividends for the company, that Adobe thinks its content can stand up to scrutiny on the web, and that it will attract talent that shares its values and commitments. I, for one, plan on having a closer look in the weeks ahead.
Why Governments Won't Use Kickbox
Because it would never work here.
Because our accountability culture makes it easier to approve $24,500 on a sole source contract than to approve 25 individual spends of $1,000.
Because not every $1,000 expenditure could be directly tied to a demonstrable 'innovation'.
Because every failed attempt will be met by the ruthless faux outrage that dominates our public discourse.
Because the relative safety of the status quo is easier for people to bear than the uncertainty of experimentation and failure.
Because backing such an experimental approach in spite of the lack of incentives to do so would require courage and constitute a heroic act.
Because once we've committed to a particular course of action, pursuing multiple and possibly competing strategies would likely be considered by many poor form rather than healthy experimentation, or more plainly A/B testing. Why not A/B Test Innovation Labs and Kickbox?
Kickbox is built around the idea that innovation can happen anywhere — that if you lower barriers to participation and equip people with the right tools and resources, they can ideate quickly, lever their networks, and experiment at extremely low costs. As a result, Kickbox is a 'fail fast' approach to innovation and focuses more on building the innovative capacity of people (e.g. how they approach problems and the networks they have to solve them) rather than delivering a particular innovation or series of innovations. In short, it moves the organization as a whole towards thinking about problems and how to solve them differently today (and tomorrow) than it did yesterday.
Labs are fundamentally different. They centralize rather than diffuse the innovation function, create new institutional costs, situate those costs firmly within a subsection of the hierarchy, and reinforce the status quo of situational power structures where access and information are the ultimate sources of influence. As a result, labs are vulnerable to the same bureaucratic pressures that slow innovative forces in the rest of the organization. They are inherently exclusive (not everyone can work in the lab — that would after all undermine its very essence), which means that they are more focused on building and diffusing innovation rather than building widespread capacity for innovation.
Caveat #1: Yes, I'm an innovation lab skeptic and I understand that I'm swimming against the current on this one; and while I've written about them numerous times (See: On Dragon's Dens, Hackathons and Innovation Labs and/or The Future of Policy Work) I also know a lot of smart people who have been assigned to them. These are capable and committed people, many of whom I would consider friends, and all of whom I wish success because we need all the success we can get on this front.
Caveat #2: I had a conversation recently where I came to the conclusion that innovation labs may in fact just be our response to policy shops turning into issues management shops and that innovation labs are really just our way of re-introducing that function back into our organizations. It's not well thought out, but worth thinking about later when we are done celebrating their launch and evaluating their results.
Caveat #3: One of my biggest fears on the lab front is how likely I think it is that their walls become analogous to the organizational boundaries they were established to help circumvent — that their exclusivity and prestige actually increase the barriers to innovation rather than drop them. One of my earliest lessons in collaboration came from Clay Shirky's Institutions vs Collaboration (circa 2005) which convinced me that there is always more cognitive surplus and capacity outside an organization than within it. If labs are to be successful, those who work in them need to have a very specific skill set, a mandate to reach out to anyone with expertise, and the humility to consistently put themselves second.
My point isn't that one is right and one is wrong but rather we don't know what will work, why and under what circumstances; so why not A/B test these two different types of approaches?
Why maybe they should
Demonstrable results. Short lead times. Low cost (watch the video).
It's a free methodology for experimentation (look, its right here).
While much of the enabling technology underpinning the sharing economy may be new, it’s somewhat of a step backwards in terms of economics in that it is a return to peer-to-peer exchange enabled by the Internet. At its core the sharing economy is about unlocking the value in idle products and services by more directly connecting supply to demand, making it disruption innovationpar excellence in that it offers consumers 'less with less' (e.g. why own a car when you can share one?).
The fact that collaborative consumption is often referred to as a 'movement' is noteworthy
Proponents frequently invoke the narrative of individual empowerment and a return to a more humane economy built on trust and personal relationships, more of this from Botsman:
"When we get it right, reputation capital could create a massive positive disruption in who has power, trust and influence" - Rachel Botsman, The currency of the new economy is trust (embedded above)
But can trust can effectively replace regulatory oversight? To be honest, I'm not sure — these are emerging and disruptive markets. People’s adoption of services like Uber and Airbnb seem to be indicative that the general public thinks it can, or at least that they are willing to make certain trade-offs that perhaps they weren't willing to make prior to the Internet. That said, both Airbnb and Uber have faced significant regulatory pressures (See: Hotels girding for a fight against Airbnb & Lessons From Uber: Why Innovation And Regulation Don't Mix).
But they aren't alone, disruption generally seems to attract regulatory interest
Broadly speaking, regulation has been used to correct market failures and/or create a series of concessions deemed to be in the public interest. By its very nature regulation distorts markets and in so doing inadvertently creates favourable conditions for incumbents and creates barriers to entry. Regulation can easily be adjusted to reflect sustaining innovations but struggle when asked to balance the potential benefits of disruptive innovation and the public interest. This likely happens for a number of reasons:
Governments may lack expertise in the science of innovation and fail to distinguish the difference between disruptive and sustaining innovations. Even if they do distinguish them from one another, they decide to treat them as the same regardless, often in the interest of ‘fairness’ or (even more ironically) 'not picking winners'.
Governments are faced with information asymmetry; they have a rich history and reams of data to support their existing regulatory regimes but nothing comparable for new entrants, so there is a propensity to inflate the risk and use exceptions to prove the rule.
Government interests are likely to be better served by incumbents (at least in the short term) than by disruptive new entrants. Incumbents provide steady employment, generate higher tax revenues and have already made concessions for the public good. Disruptive firms often employee fewer people, generate fewer tax revenues (or create economies that avoid taxation altogether) and view regulation as a barrier.
Governments have to contend with the concerted efforts of the incumbent lobby while new entrants who don’t have the resources to lobby are forced to try to amplify public support of their businesses.
What's the remedy?
I get the sense that governments are facing something akin to what Douglas Rushkoff refers to as ‘present shock’ in that in these particular instances governments are unable to learn from the past or see into the future in a meaningful way because they are caught up by the immediacy of their surroundings (points 1-4 above).
If this is in fact the case, then governments may consider accepting short term trade-offs in unregulated markets and investing in the long game whenever they notice that disruptive entrants are offering consumers 'less for less'. Given the circumstances, what other options do they have?
