The FINANCIAL -- Drones, originally developed for military purposes, weren’t approved for commercial use in the United States until 2013. When that happened, it was immediately clear that they could be hugely useful to a whole host of industries—and almost as quickly, it became clear that regulation would be a problem.
according to Harvard Business School, the new technology raised multiple safety and security issues, there was no consensus on who should write rules to mitigate those concerns, and the knowledge needed to develop the rules didn’t yet exist in many cases. In addition, the little flying robots made a lot of people nervous.
Such regulatory, logistical, and social barriers to adopting novel products and services are very common. In fact, technology routinely outstrips society’s ability to deal with it. That’s partly because tech entrepreneurs are often insouciant about the legal and social issues their innovations birth. Although electric cars are subsidized by the federal government, Tesla has run afoul of state and local regulations because it bypasses conventional dealers to sell directly to consumers. Facebook is only now facing up to major regulatory concerns about its use of data, despite being massively successful with users and advertisers, according to Harvard Business School.
It’s clear that even as innovations bring unprecedented comfort and convenience, they also threaten old ways of regulating industries, running a business, and making a living. This has always been true. Thus early cars weren’t allowed to go faster than horses, and some 19th-century textile workers used sledgehammers to attack the industrial machinery they feared would displace them. New technology can even upend social norms: Consider how dating apps have transformed the way people meet.
Entrepreneurs, of course, don’t really care that the problems they’re running into are part of a historical pattern. They want to know how they can manage—and shorten—the period between the advent of a technology and the emergence of the rules and new behaviors that allow society to embrace its possibilities.
Interestingly, the same institutional murkiness that pervades nascent industries such as drones and driverless cars is something I’ve also seen in developing countries. And strange though this may sound, I believe that tech entrepreneurs can learn a lot from businesspeople who have succeeded in the world’s emerging markets, according to Harvard Business School.
Entrepreneurs in Brazil or Nigeria know that it’s pointless to wait for the government to provide the institutional and market infrastructure their businesses need, because that will simply take too long. They themselves must build support structures to compensate for what Krishna Palepu and I have referred to in earlier writings as “institutional voids.” They must create the conditions that will allow them to create successful products or services.
Tech-forward entrepreneurs in developed economies may want to believe that it’s not their job to guide policy makers and the public—but the truth is that nobody else can play that role. They may favor hardball tactics, getting ahead by evading rules, co-opting regulators, or threatening to move overseas. But in the long term, they’d be wiser to use soft power, working with a range of partners to co-create the social and institutional fabric that will support their growth—as entrepreneurs in emerging markets have done.