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Cartoon: CEO learns her hovercrafts will be made illegal

When Legislative Change Threatens Your Business

By Jeffrey Baumgartner

A major concern of many CEOs today is that legislation change may obligate them to make big changes to their businesses, their products and their marketing. This is a greater concern in some industries than others. In  finance, where new legislation can suddenly render some products illegal, and pharmaceuticals, where legislation can require substantial change in process, are two examples where decision makers need to pay close attention to law. But, legal change can affect other industries as well. For example, around the turn of the century, it seemed likely that Microsoft would be broken up into two or more companies because it had effectively become a monopoly in operating systems and office software. That never happened and a changing market has long since diluted Microsoft's monopoly.

Legislation change may be indirect. Concern about climate change has led to laws designed to reduce pollution and encourage environmental sustainability. Here in Europe, where cars tend to be taxed according to their CO2 emissions, such laws can have a profound effect on research and development innovation. The recent scandal at Volkswagen has highlighted the fact that current legislation in the EU, favouring cars with small diesel engines, may be reducing CO2, but is allowing high levels of nitrogen oxide (NOx) into the atmosphere. There is now a fear in the industry that legislation will change to discourage diesel engine cars in favour of petrol (gasoline) engine cars as well as electric, hybrid and fuel cell cars. This will require that the car industry changes much of their research and development focus. Not surprisingly, the motor industry is against such change.

Some Change Affects All Sectors

Of course, some change affects all sectors. Labour law, in particular, can require that you change how hard you work your employees, how much time off they must be given in different circumstances, their wages and many other issues. Tax laws can have a drastic effect on your bottom line. A new government perceived as less business friendly can reduce the value of your currency which can have a substantial effect if you are importing or exporting products.

Easing the Law Can Also Be Challenging

Many industries are protected by laws in one form or another. Licensing laws often affect food industries, taxi companies and others. State industries are often monopolies. When these laws are dropped or radically changed, it generally allows a higher level of competition than in the past. For instance, in many countries, telecommunications companies were state run monopolies or private companies with effective monopolies. Without competition, these companies did not need to worry about things like fair pricing, innovation or even treating their customers respectfully. When laws changed, innovative new companies flooded the market with more dynamic products often costing less than the incumbents' products.

Don't Stay Up All Night - Be Prepared

According to surveys, such as this one, legislation change is one of the issues that keeps CEOs up at night. If that is true of you or your CEO, I have a suggestion. Instead of worrying about legislation change, be prepared by developing innovative ideas that anticipate legislation change.

Doing this gives you two big advantages over your less prepared competitors. Firstly, if the law does change, you'll have an innovative idea, that you can implement, that will enable your company to overcome the legislation. Secondly, you may find that your innovative idea is so good you do not need to wait for legislative change. You can implement your idea now and, if the law does change, you will be prepared while your competitors scramble to catch up with you. Making greener products to meet potential future environmental laws, for instance, may appeal to customers who are concerned about the environment and may be worth bringing to the market now, rather than waiting for the change.

Devising and developing ideas that anticipate legislation change is an excellent and straightforward creative thinking exercise. First, identify possible new laws, and changes in existing laws, that  could affect your industry. You probably are aware of most of these potential new laws. Nevertheless, it is worth contacting a legal expert for advice about laws that will less obviously affect your business.

Once you have identified potential new laws and their requirements, use your favourite creative thinking techniques to come up with ideas for products, services and processes that you could launch in the event of legislative change. I recommend bringing in a facilitator from outside the industry as she can help the creative team break down assumptions that can block creative thinking about one's own industry.

Avoid Vague, Little Ideas and Build Visions

Do not stop with little, vaguely worded ideas. Develop the ideas into viable concepts, prototype them and test them now, before any legislative change. Having an idea to build an environmentally friendly mobile telephone entirely out of recycled paper sounds nice, but may be difficult to put into practice. Or maybe not. You won't know until you really play with the idea and build a prototype to play with.

Evaluate resulting ideas twice. First, evaluate them based on the potential legislative change that inspired the idea. This will help you determine how well these ideas are likely to work in the event of new laws. Then, evaluate the ideas based on no legislative change. This will help you determine the immediate viability of ideas. Bear in mind the public relations value of ideas. Often legislative change comes about because the population wants change. So, if your company innovates to meet the change before it is legally obliged to do so, your customers may love you a little bit more.

Here's an example. You've probably heard of Dan Price, the CEO of Gravity Payments. He decided to give all of his employees a minimum salary of US$70,000 per year. His reasoning was that this was the salary level at which people could live comfortably without worrying about having enough money. Thus, this salary would allow them to work better (because they would worry less). Had Mr Price not made this bold and innovative move, you probably would not have heard of him or his company. But he did and you probably have. It is unlikely that US law will ever mandate minimum salaries (as opposed to minimum wage) − at least not to that level. But, if it ever does, compliers will not get the publicity that Mr Price and his company have received.

Don't Dread Legislation - Innovate in Advance

Changing legislation can have a profound effect on your company. Rather than dread it or promote legislative change to protect your business, innovate. Regularly look at legal changes that might force changes on your industry and develop ideas that would conform to those changes. At minimum, you will be better prepared than your competitors for any eventual legal change. At best, you'll have product and process ideas that can be implemented now and which can give you an immediate competitive advantage as well as public relations advantage. In other words, turn the possibility of legislative change in to competitive advantage now rather than a fear that keeps you up at night until the change happens.

 

Need Help? (Shameless Self Promotion)

If you are worried about the damage legislative change could wreck on your business, stop worrying and contact me. I can design a facilitated event to identify possible legal changes and then build ideas that ensure your company does not merely cope in the event of new or changed laws, but that your company thrives. Contact me here...

Want to Discuss This With Me?

If so, get in touch. I'd love to chat about it with you!



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Jeffrey Baumgartner
Bwiti bvba

Erps-Kwerps (near Leuven & Brussels) Belgium