Innovation is a necessity for rapid business growth. Some great innovation examples include mobile banking, IoT, AI, and even digital twins. In their own way, each of these innovations has shaped entire industries and brought about new business approaches.
Sadly, innovations are typically rife with uncertainty and have a large room for error. While some of these uncertainties can lead to losses, they can increase the chances of your business being non-compliant. This is among the reasons why business leaders might shy away from innovation.
The good news is that an innovative culture can always co-exist with a culture of compliance. All it takes is the right approach.
Why Compliance Matters
Regulations are typically set up to standardize how different businesses function when relating with customers and with one another. They are meant to protect the stakeholders from common risks that can come from non-compliance with these regulations. For instance, the banking regulations that were set up after the financial crisis of 2008 have helped prevent the industry from finding itself in the same situation in the future.
Also, regulations help give businesses a competitive advantage. Since data breach cases have been on the rise in recent years, a security-conscious customer or partner would love to know that they are working with a secure business. Since some regulations are simply standardized data security requirements, businesses that are compliant with them can prove that they take security seriously by proving their compliance to customers.
Lastly, compliance can save a lot of costs. In the cybersecurity world, for instance, it might be tough to identify the security tools and measures to invest in without having a blueprint. You can risk investing in inadequate security controls or investing in the wrong tools. Regulations point out the threshold controls businesses should have in place, saving this extra cost. Also, it can help to eliminate the cost that comes with data breaches and the ensuing PR nightmare.
How Compliance Complicates Innovation
Some innovations may come with grey areas- aspects whose effect on the entire business you might not know. The chances are that embracing these innovations can make you non-compliant with certain regulations. Since it might be tough to understand these grey areas completely, leaders might feel that it is easier to stay away from innovation, regardless of the promise it offers.
In some cases, when leaders understand what they need to do to ensure that their business remains compliant, some of these measures might be too expensive, especially for small businesses. Instead, it might be easier to let go of the innovations in the interest of costs.
How to Create a Compliance and Innovation Culture in Your Business
1. Understand the Risks Involved In Each Innovation
Before choosing to invest in any innovation, you should understand the risks that come with it. While not all risks are worth it, some can be calculated. For instance, innovative projects will always come with financial risks, as there is no certainty of ROI. If the innovation leads to the expected goals, that’s when you can enjoy some financial gains.
Ideally, risk analysis needs to be an integral part of innovation. Business leaders should identify risks, assess them, rank them, and find a great way of treating these risks. When it comes to compliance risks, you should also be in constant dialogue with compliance counterparts to ensure that you understand the dos and don’ts.
Furthermore, they will be more willing to help you identify workarounds for these risks than have to clean up your mess afterward. It might also help to work with compliance officers who have business acumen. Otherwise, they may end up being roadblocks to innovation.
2. Leverage Experimentation
The promise that innovations come with can, at times, blind leaders to the risks that they pose. It is typical for leaders who fall in love with these innovations to want to pilot them as soon as possible. Sadly, pilots come with a lot of drawbacks. Other than them requiring a lot of effort and money to launch, they can expose customers to invalidated risks.
While they can be great learning tools, it might be wiser to experiment and prototype before launching any new renovations. For instance, if you want to launch an application, you can use a separate test environment to identify compliance loopholes and security issues. The good thing with experimentation is that if you fail in any of the experiments, you can always try again until you get it right.
When experimenting, be sure to monitor and note down any progress in the innovation, regardless of whether it was positive or negative. All this information can be pivotal in refining your innovation to come up with something worthwhile as it presents you with a trail to follow.
3. Build the Right Team
Risk is an integral part of doing business, and any innovation you are aiming at launching will certainly come with its risks. However, without the right team of people around you, it might be tough to circumvent these setbacks. When it comes to compliance, you might easily miss compliance risks, or even hit roadblocks that make moving forward tough.
Ideally, you should spare no time creating an adept team to push your project forward. If the innovation will need software developers, involve them in the planning stage. If the project also requires external professionals, it might be wise to involve them too. When great minds sit together, they can easily work on ways to improve the innovation’s success rate.
4. Leverage the Right Technology
Technology can always offer you insights and help that you can’t get from relying solely on manual processes. For instance, take the amount of data that modern-day businesses collect each and every day. If you dig deep enough into your business’ data, there is a high chance that you will find insights that will improve your innovation. By leveraging big data technologies, analyzing such data will become easy.
At the same time, apps like compliance software can help automate the compliance role. Instead of making the role feel burdensome, they can make tracking compliance as well as sending out reminders on overdue compliance tasks quite easy. They can also provide insights on what needs to be done to ensure you remain compliant as you embrace new innovations.
This is only but a tip of the iceberg when it comes to technologies that can actually increase the success rate of your innovations. Be open enough to use new technologies. Ideally, you should also ensure that the tools you choose to use are scalable enough for you to use in the future. Otherwise, you might build your innovations around tools that won’t grow as the innovation grows.
5. Build a Culture That Tolerates Failure
Innovations come with unknown and uncertain terrains. Since success isn’t always guaranteed, you shouldn’t be too tough on employees when they fail, regardless of whether they risk non-compliance or something else. Once employees feel that they can take calculated risks, this will make it easier to build a culture of innovation. You will learn some of the risks as you press on with the innovation.
However, being tolerant of failure will need you to work with competent people. This will help you avoid failure that results from flawed analyses, poorly thought-out designs, bad management, or lack of transparency.
Failure isn’t always a bad thing. There are productive and unproductive failures. The former is ideal and should be celebrated. Even though your team failed, it provided you with insights that can make other versions of the innovation better.
It is the leader’s role to set the expectations for the types of failures that can be allowed. While the failure of a team member shouldn’t always mean that they will get terminated, it can warranty having them reassigned from the innovation project.
6. Use Monitoring Tools That Keep Pace with Current Developments
Monitoring tools can play a significant role in identifying compliance risks as well as other business risks. They will alert you whenever you step into risky territory as you embrace innovation. However, monitoring tools come with the potential limitation of failing to change with environmental changes. For instance, if your business chooses to use a multi-cloud environment, your current monitoring tools might fail to identify risks due to incompatibility. The fact that other risks also come with such moves also makes them less than effective.
Ideally, you need to evaluate the performance of these tools throughout the different aspects of the innovation process. You can do so through experimentation. For instance, you can intentionally switch certain services on and off to find out whether the events you are monitoring will be reported. It might also pay to revisit your current application inventories to find out whether they are comprehensive enough for the new changes.
It is useful to audit your operations in order to ensure compliance and that an easy way to do this is to construct an internal audit checklist which you follow every month or quarter, depending on your industry and business need
7. Watch Out For Emerging and Evolving Regulations
The GDPR (General Data Protection Regulation), a privacy regulation by the EU, has revolutionized how businesses carry themselves in European countries. The fact that non-compliance can lead to hefty fines makes compliance a necessity. While some businesses are putting in the work to ensure compliance, others are choosing to be risk-averse by completely avoiding any business in the EU. Changes in regulations can also have the same effect as this.
The onus is on your compliance department to keep an eye on compliance changes as well as identify new and current regulations that will affect your business. You can have them attend seminars, network with other compliance officers, or even pay for extra training to keep these employees informed enough. Having such insights will help create the right compliance and innovation culture.
Compliance shouldn’t be a hurdle for innovation. In fact, regulations are meant to make your innovations much safer and better. Focus on the tips above to break glass ceilings in your business and grow it exponentially.