Disruptive Innovation: Policy Playing Catch-Up With Business Models?

A ‘new economy’ has disrupted the traditional. Yet, policies and regulations remain geared for the ‘old economy’.

The following article is based on a panel discussion during the annual CFO Conclave held between 15 and 17 September. The panellists were (L to R) Rodney Ryder, Partner, Scriboard; Rajiv Kapahi, Senior Director-India Hub Finance, Operations & Distribution, Boston Scientific; and Sindushree Khullar, Ex-CEO, Niti Aayog.

The last few years have seen business models that have disrupted the traditional way of doing business and created a ‘new economy’ built on shared economy, asset-free living, digital convenience and more efficient action. While the disruption has been rapid, we still live in a world governed by policies and regulations geared for the ‘old economy’. Accom­panied by the volatility in politics, we now live in a world where the impact of adverse policies and rules can shut down a business or, even more criti­cally, never let it start. To cope with these changing dynamics, successful firms must pay attention to both their market and non-market environ­ments. This relationship that unfolds outside the market with government stakeholders, competitors, NGOs, and media is not governed by laws of demand and supply, but by a complex set of formal and informal rules. Fur­ther, these problems increasingly require the business, government and nonprofit sectors to work together to create lasting solutions. But this is only possible if leaders of our institutions understand the ‘power of three’ — able to engage and collaborate across all three sectors. Rajiv Kapahi, Senior Director – India Hub, Finance, Opera­tions & Distribution, Boston Scientific, says, “It is a place where there are no set rules, no set policies, no set guide­lines human mind can conceive. But at the same time, the way global econo­mies are evolving, the way businesses are evolving, the newer age expecta­tions are coming in…obviously we have to be with open mind and that’s what we are missing now.”
 
Rodney Ryder, Partner, Scriboard views these problems as a legacy of the old laws. “One must remember that the Indian Penal Code or Evidence Act were extremely well drafted and for this reason stood the test of time.”  The problem lies not in the substantive part of the law but its procedural implementation. “When a lawyer represents his clients, s/he has to quote all the existing precedence – right from the Privy Council of 100 years ago to the present day case. That makes the case file enormously bulky and puts pressure on the judge who has to read each one of these cases and distinguish them to deliver the judgement.” He cited an example of the legal system in the US, where there is a system of the re-statement of law. “Every now and then, the Supreme Court meets and says earlier precedents were good but they don’t have value today; so let’s consign them to the archives of history and they are no longer to be quoted in practice. It brings the precedence down to a manageable level,” he quips.
 
Even the telecom regulator TRAI asks telecom companies not to delete the data collected by them. These data are stored in data farmhouses or servers. 
 
“So, we are into an era where policies and regulations need to be streamlined,” said Ryder, adding: “We can’t have an Act of 1885 co-existing with TRAI regulations without any boundaries. We can’t have circulars issued in the 90s by the department of telecom, prescribing inscription of 40 bits, which is totally out of sync when governing bodies like RBI and others are talking about 120 bits plus. We can’t have policies which contradict each other.”
 
Sindhushree Khullar, Ex-CEO, Niti Aayog, said the government is tasked with public interest, which is looked at differently by the business commu­nity, common people, people who are included in the mainstream and those marginalised and excluded. “So, from the point of view of being the arbiter or, in some sense, making a level playing field, it is always very difficult for policy to be in tune with what is emerging in the future.” Her take was: “We are catching up with the rest of the world very fast.”
 
“There are issues in this country where people think that innovations will come as solutions to the prob­lems of hundreds – who are running startups or those who have come to on that platform. However, there is no encouragement for risk or failure by the government,” Khullar said.
 
Kapahi believes policies need to be progressive and open minded, so that if new things are coming in, they are put up in a framework that is possible to be understood. “The bureaucrats are intelligent, but it’s habitual to work in a silo mindset,” he said and added, “If we don’t do that policies will always come chasing in. We need to create a framework, which could bring in pos­sible outcomes.”
 
Khullar said that the government should be in all spheres where emerg­ing businesses are operating, but with the consideration that those excluded and marginalised are not left out. “I think it’s impossible to lose sight of it when you are sitting at a public policy platform. With access comes the abil­ity to buy and sell. So, where should policy go? Will it always play catch up? The single answer is, it will always play catch up.” 
 
She expressed happiness that the regulators have evolved a good consul­tation process, wherein everybody’s views are taken into account before drafting the bill. 
 
However, it’s difficult to change the laws and once they change, it’s most difficult to enforce them, she opined.
 
 “The problem really lies not in the laws or regulations but in the process. The newer regulations have a better and more consultative process, and Grievance Redress Mechanisms are being set up. So, the government entity performs and probably does it well,” Khullar said.
 
She was frank to admit that the government has no transparent framework where a civil servant could engage with the private sector.
 
Khullar, though, called for minimum interference by the government in the businesses of private firms. 
 
“These operating businesses if they are operating in similar environment, they are trying to play fair or trying to arbitrage some kind of loopholes. They all are fighting for each other’s market and it’s unwise for the government to step in,” she quipped. 

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