Innovation Island or Regulation Nation?
The IoD’s November seminar, sponsored by JT, explored the relationship between innovation and regulation. Recently, regulators have had to look at ways to minimise "regulatory disruption" which occurs where innovations/technologies are not explicitly dealt with in an existing regulatory framework.
The rate and pace of innovation, particularly technology-driven change, has the potential to exacerbate that disruption, but regulators across the globe have stepped up to deal with it by employing a number of different approaches.
Regulators Try to Keep Pace with Innovation
Emma Bailey, The Guernsey Financial Services Commission’s (GFSC) Director of the Authorisations & Innovation Division, introduced some of the ways in which the GFSC is looking to keep pace with innovation including Innovation SoundBox, Soundbox Sprint and SoundBox Dash days. She also described membership of the Global Financial Innovation Network (GFIN) which is designed to "provide a more efficient way for innovative firms operating in multiple jurisdictions to interact with regulators.’ Guernsey was one of the founding members.
However, Emma mentioned that much of what she saw, for example, at Innovation SoundBox, was not tech-based and that it was important to remember that innovation is broader than just digitally focused projects.
Innovative Environment and Culture
Innovation must not be viewed as merely technological advances; it encapsulates much more. The panel stressed that innovation is about improving the way we do things – and anyone can do that, ergo – we can all be innovators. Innovation is a state of mind, a culture that needs to be nurtured.
It was suggested that in some respects the regulator's job is almost more important than the current legislative framework as it potentially establishes the environment, even the mindset, of the jurisdiction towards innovation. Perhaps never more so in small jurisdictions like Guernsey where access to regulators, civil servants and politicians is relatively easy.
The regulator can set the tone for the perception of Guernsey, striking the right balance between innovation and regulatory frameworks. While the shift to a more collaborative and adaptive regulation is seen as progressive, the regulator still treads a fine line – as regulation, or even the view, tone and approach of a regulator, can shape the developing innovation and emerging technology. Equally a misstep can potentially create social, competitive and economic disadvantages. Again, particularly in a place like Guernsey where the island’s competitive advantage often comes in the form of its regulatory or legislative framework.
Is the Legal & Regulatory Framework Flexible Enough?
Wayne Atkinson, Group Partner, Collas Crill was asked how flexible the legislative and regulatory environment was when it came to dealing with the innovative structures crossing his desk. His response was ‘generally positive’, and that having an approachable regulator was a benefit.
Do we Have an Innovation Ecosystem?
Matt Thornton, co-founder of Cortex, a local tech consultancy and self-confessed tech geek, said that innovation is almost inextricably linked with technology for him, but he recognised that they were different skills. Sometimes the digital/coding whizz kids need to connect with entrepreneurs and that the average age of entrepreneurs is nearer to 45 than 25. He said: ‘Teaching kids to code or bringing more extensive digital skills to the boardroom is one thing, but creating a culture of innovation is very different – we need to focus on both if we are to create the right ecosystem where Guernsey is looked at as an innovative incubator.’
The ecosystem needs to incorporate the right balance of “pick the winner" approaches such as business or technology incubators, grants, tax incentives and support programs as well as growth-oriented approaches that focus on the entrepreneurial leadership of start-ups, innovative businesses, growth firms etc. Matt stressed that getting the right balance and ensuring the ecosystem is aligned is vital.
Asked whether Guernsey has the right framework/ecosystem in place to promote and drive innovation, the panel's response was mixed and even subdued. It seems that we have several different elements within the ecosystem, i.e. Guernsey Digital Greenhouse, Start-up Guernsey, the new Skills Plan etc. but how aligned these institutions, policies and frameworks was questioned.
For innovation to thrive, the ecosystems needed include government policy, regulatory frameworks, options for funding and finance, entrepreneurial drives, access to mentors/advisors and other support, education and training, human capital and of course access to markets.
The panel raised funding and the fundamental impediments like the cost of incorporating a company or the time and effort it takes to open a bank account. Seemingly simple things can make life difficult and led to the question: are we resolving the problems that are preventing Guernsey from becoming an innovative jurisdiction?
Skills and Training
Moving onto skills, Suzie Crowder from Bright Futures talked about the importance of having the right human capital policies in place. This includes having the proper training available - from schools right up to the boardroom.
As Ted Dintersmith, author and “innovation change agent” said: ‘The single most significant driver of the innovation economy is our education system, but we are better at crushing our capabilities for innovation than nurturing them. Innovation is a state of mind.’
It was acknowledged that although Guernsey is focusing on creating better tech and digital skills, we need to go beyond that.
Suzie also mentioned that she had got back from a recent trip to Vienna where she spoke with Skills Future Singapore team and the Education Minister for Singapore who said they admired some of the approaches Guernsey was taking.
She said: ‘The trip to Vienna was an opportunity to learn about how and why the Singapore model was developed. It stems from a considerable amount of political support and is thus well resourced.
‘The initiative is one that the Singapore community believe will promote the island as the destination of human capital excellence (particularly in tech, finance and education). Whilst I was praising their work, they were very interested in our innovative philanthropic model and visionary strategy for Guernsey. They were particularly taken by the fact that a group of business people cared about the skills challenge so much that they would voluntarily come together to drive change in such a (socially) entrepreneurial manner. Our culture and mindset were admired.’
The audience also considered this quote from Steve Leonard, CEO SGInnovate - the government entity that supports entrepreneurs leading Singapore's innovation efforts. He said: ‘I think there's just this good, old-fashioned will which says if this is important enough, we commit to it. At the cutting edge of innovation, there is no playbook. There's no precedence or useful examples. What we do is try, experiment, start small, start fast (and) if you have to fail, fail fast. And learn those lessons and apply them again.’
Event moderator and IoD committee member, Iain Beresford made the point that while the new Skills Action Plan had been well received, the language used in it is very passive and weak compared to the language used in the above quotes. He explained: ‘Singapore is all about committing, doing, getting on with it etc. Guernsey is all about reviewing, considering and looking at with a 20 point plan. The very different language used says a lot about the two approaches.’
Are Boards Prepared for Innovation and Digital Transformation?
The panel was asked: where does the innovation mindset start? The answer - from schools right through to boards, which led on to a discussion about the role that the board must play and if directors are equipped to drive innovation.
He mentioned that a recent report by Amrop showed that digital skills on non-tech boards were around 5% and that companies are struggling with a lack of innovation-focused culture, an absence of robust internal processes and the type of leaders who promote this kind of success internally.
‘How many boards have innovation or digital skills on their agenda or if they have a digital strategy that goes beyond implementing technologies, let alone having "innovation" on their radar?’ Iain asked.
‘Is there an imbalance between the need to focus on governance and compliance, and the importance of focusing on innovation and disruptive influences? Surely not giving enough focus on innovation is a potential governance issue in itself? After all, a board needs to be equipped to ask the right questions, find the answers and implement solutions in the right place at the right time.’
It was agreed that ultimately, fostering the right culture, not just for boards, but across the whole ecosystem, is critical and in Guernsey, we have many parts of that ecosystem, but do they go deep enough? Are they aligned enough? The general response of the panel was that at the moment, we have a long way to go.
Are we Ready to be an Innovation Nation?
Iain closed the event by referring back to the Moving Brands presentation at the IoD’s recent convention. ‘Innovation in Guernsey needs to consider what lies in the “sweet spot” of what we want, what the world wants and what the island is good at.
‘Are we truly ready to be an innovation nation or are we simply interested in maintaining and improving the status quo?’