Innovating Inside a Highly Regulated Organization
Original publication in the Innovation Leader Journal
Change is hard. And it is even harder inside a highly-regulated company. But it can be done. Consider these two entrepreneurial tales.
A few years ago, I worked as a mentor for a group of graduate students developing a startup. My mentees were ambitious and had a revolutionary machine learning concept that was poised to break several traditional, healthcare industry rules. As their mentor, and a corporate insider, I felt obliged to explain some of the rules of the game of selling into a large organization. But these renegades didn’t care much for convention. And they didn’t care to learn about the rules, because they intended to rewrite the script anyway. Twelve months later, the concept stalled: it was just still too foreign and hard to understand for most corporate insiders. And they were hesitant to set foot into untested waters. The team disbanded, and the startup became one more well-intentioned failure.
Compare that outcome with what happened to one corporate intrapreneur that I advised at Pfizer. He too had a revolutionary concept. He was trying to reinvent the way drug companies handled compounds that were trapped in drug development limbo — showing some potential, but not being moved aggressively toward the market. And he too loved to flout convention. But more importantly, he invested the time to thoughtfully examine the rules inside the industry and the company. He game-planned how he could creatively break the weakest of those rules and get internal advocacy. It would take several years of planning, testing, and iterating. But eventually, the seed of his idea grew into a funded venture that is now a spin-out business called Springworks Therapeutics.
Both teams of entrepreneurs had big ideas. Both were talented and passionate. But the second entrepreneur took the time to understand the bright lines inside the organization, and assess which ones he could most easily cross.
To be a successful change-maker in a highly-regulated industry, you need to be both a systematic rule interpreter and an audacious rule breaker. And if you are on the inside of a traditional, regulated industry and want to start shaking the status quo inside of your organization, here are three things you need to start doing.
1. Reframe the Problem
At the end of 2018, I asked more than 150 business leaders from highly-regulated companies the following question: “What prevents your team from developing novel products, services, and/or offerings?”
Not surprisingly, an overwhelming percentage of the respondents attributed their product development woes to legal, regulatory, and compliance constraints. If you have ever spent time working inside a highly-regulated company, you have no doubt overheard the grumblings of how hard it is to “get things done.” But the truth is that these constraints, while quite real, can also be an opportunity in disguise. It requires an intentional act of reframing. By embracing the constraint, you are forced to look for alternative sources of creativity and to challenge accepted norms. Several years ago, I worked with a treasury team that was charged with the responsibility of collecting outstanding debts from across the world. They were constrained by their internal resources and by country-specific collection requirements. Every idea they tried seemed to sputter.
The limitations were stifling, and the team felt they had few options. That is, until we reframed the problem and asked, “What if every employee qualified as a debt collector?” The reframed problem sounded absurd on the face of it; however, by exaggerating the problem, it enabled the team to reframe the problem. No longer did they dwell on the limitation of the local legal requirements; instead they started to think about how they could empower thousands of people to become their debt collectors. This spark led to a novel solution that utilized a crowdsourcing platform to spot and prioritize opportunities more efficiently. Rather than feeling that you are a victim of your circumstances, applying a reframing technique can change your perception of the problem.
2. Redefine Your Team
The team that you start with when you first hatch your idea will probably not be the team that shepherds the idea across the finish line. In the beginning, your team is composing a solution that is insulated from the corporate antibodies that routinely thwart novel ideas. Ideally, that starting team will have experience working in small, fast-moving teams and be comfortable with uncertainty and breaking rules. But as your solution advances from idea fragment into a minimum viable product (MVP), this is when you need to redefine the composition of your team. The team full of plucky entrepreneurs isn’t going to be what gets your idea across the finish line. Instead, your team structure needs to mature. The first order of business is to stack the team with subject matter experts that have deep expertise, and regulatory partners that can help you navigate the minefield of objections. By bringing together the experts and critics with your entrepreneurs, there will undoubtedly be some culture clashes. But from the tension will emerge a more bullet-proofed solution that can stand the test of the corporate antibodies.
The second order of business is recruiting an internal sponsor. The sponsor is someone who believes in the work you are doing and is willing to get on the bully pulpit and put their reputation on the line. The role of the sponsor is essential. They will run interference for the team. They will serve as the “idea networker” that can solicit support and provide sufficient air cover, so that your concept survives the early rounds of criticism.
3. Reimagine the Regulator Role
The role of a traditional regulatory and compliance team member is similar to the defense on a soccer team. The success of their role is invariably measured by what they have prevented, rather than the points they have scored. These professionals have a risk tolerance profile far different from that of the entrepreneurs inside your organization. And they are much more likely to celebrate the mitigation of unnecessary risk, rather than the launch of a speculative new offering. Therefore, creating change in a highly-regulated environment demands that you not only have a big idea, but your gatekeepers are invited to play both defense and offense for your team.
Several years ago, I faced this precise challenge with a life sciences marketing team trying to launch a novel concept. The team was deeply worried about the internal hurdles that we would have to clear in order to gain approval. We spent innumerable working sessions preparing for anticipated objections. In the end, the initial review session devolved into a confrontational meeting in which there was significant division, and a plan that didn’t get the green light. We were stuck. That is, until we decided to run a workshop in which we literally flipped the roles of the two teams. Yes, this does sound absurd. The legal and regulatory team members were invited to play the role of the marketing team and the marketers were invited to play the role of the regulators. The result was a landmark program which put out-of-reach medicines into the hands of customers. Critical to the success of the program was that our internal regulators shifted their approach and became advocates for the program. By inviting them to become problem solvers rather than critics, they were able to thoughtfully highlight real risks, and steer the team to more creative solutions. The truth is that very few people come to work excited to destroy someone else’s project or idea. Most people want to do their job competently. By rethinking how you engage with your regulators, you are significantly more likely to speed your solution’s path toward the market.
Innovation can thrive in heavily-regulated industries. I have personally witnessed it. And change is hard. But there is no better change than one which goes against the grain of an organization. It’s worth remembering that if innovation were easy to realize in a highly-regulated industry, then everybody would already be doing it. It is up to the real change-makers to develop new models of innovating, and inspire a sense of possibility among the everyday innovators in your organization.