Government Regulators Must Protect Citizens Without Impeding Innovation

To keep up with today’s rapidly changing technology environment, regulators must modernize their regulatory practices and increase efficiency, according to a new report.

by / June 30, 2015
The Drug Enforcement Administration (DEA) is the lead Federal agency in enforcing narcotics and controlled substances laws and regulations. Flickr/Coast Guard News

Though many argue that some government regulations are nonsensical, others believe that such regulations exist to protect us, to correct market failures and to make many aspects of our lives easier.

But according to a new report from GovLab, Deloitte Consulting's federal think tank and innovation center, the persistence and scale of technology-induced change in recent years have led many to doubt the value and practicality of government regulation.

So to remain relevant — to keep up with today’s rapidly changing technology environment — regulators must modernize their regulatory practices and increase efficiency, according to the report The Regulator of Tomorrow: Rulemaking and Enforcement in an Era of Exponential Change, which examines the challenges modern regulators face, mainly driven by technology advancements, shifts in consumer habits and the new sharing economy. 

“There’s always been a bit of a clash and tension between innovators and regulators,” said Rachel Brody, a human capital senior consultant with Deloitte’s federal government practice and one of the report’s lead authors. “We were interested in examining what a future regulator might look like. If we need this person to be even more agile and responsive and effective in the future, what will they need to be doing that’s different than today?”

The report examines the complex challenges faced by regulators today and provides practical ideas to help them achieve their goals in these rapidly changing times, emphasizing how regulators need to strike a balance between protecting citizens and fair markets without impeding innovation.

“Regulators and the regulations they create and enforce still play a critical role — but one that may need to evolve to remain relevant and effective,” according to the report, which also examines the opportunities this changing technology landscape provides to regulators — both in how they make rules and the way they enforce them.

“Technology for the regulator of tomorrow is also a key enabler,” said Nick Olson, technology strategy senior consultant with Deloitte's federal government practice and another lead author of the report. “There are opportunities on the rulemaking front in terms of helping to increase citizen engagement and also on the oversight front. We are now seeing vast quantities of data from all sorts of sources —we need to use that to help drive where regulators are focusing their resources, especially if they are resource-constrained.”

By aligning technology, strategies, process and talent, the regulator of tomorrow can transform today to adapt to the rapidly-changing environment, the report states. 

“Bridging the gap between innovators and regulators is key,” Brody said. “That means helping regulators be creative about how they are engaging with the innovative community, or taking the energy and creativity we see in places like Silicon Valley and applying it to our federal challenges.”

The report also explores several state and government examples of regulatory innovation.

“Regulators at the state and local levels are a lot closer to the issues and the citizens themselves, so they are in a good spot to understand some of the disruptions coming up, the concerns of the citizens and how to target and prioritize those issues,” said Olson. “Overall, there are a lot of interesting things happening at the city and state levels, and with the data coming from citizens.”

And overall, collaboration between regulators and innovators is the key opportunity they see, Brody added.

“Also, from a regulator’s perspective, they need to make sure they are getting the right people in the room as they are making policies and rules so they can get a diverse set of viewpoints and perspectives.”

The report found that at a high level, regulators are facing the following five trends:

  1. Technological change is occurring at an exponential pace.
  2. The emergence of new business models is evident by the rise of the sharing economy.
  3. Shrinking barriers to entry for suppliers and buyers is making it easier for aspiring entrepreneurs to bring new goods and services to market while, in parallel, previously niche products become accessible to a mass market.
  4. The “ignore until large” phenomenon, where regulators and startups avoid engaging with each other until startups get large enough to show up on a regulator’s radar, is evident — and “large” can happen quickly.
  5. There is a rise of business ecosystems, which means dynamic and co-evolving communities of diverse actors can create and capture new value through both collaboration and competition.

To read more, download the full report.

Justine Brown Contributing Writer