Creating Agility in a Highly Regulated Environment

By Paul Campbell
Chief Innovation Officer, Gore Innovation Center
W. L. Gore & Associates

A few years ago, my then-CEO called to ask about the new medical Class II device we had launched earlier that week in Germany. He wondered how we had launched two years ahead of schedule. The team, I explained, had been empowered to ignore the company’s traditional product development and launch processes, namely, those that weren’t critical to the success of the project. As such, they had decided to skip clinical trials and ABC (Absolute Best Cost) manufacturability steps and instead, run an in-market pilot to gain insights about consumer adoption and satisfaction, and channel adoption and pricing. After hearing the team’s approach, the CEO concluded, ”I want to see the results of the pilot. If successful, we should try this approach more often.”

A Tricky Problem
Creating agility in a highly regulated environment is tricky business for both corporations and startups. Why? Business leaders often believe regulatory requirements ossify internal innovation programs. However, innovation leaders have found that regulatory requirements are merely one source of ossification and that by aggressively reworking other sources, they can increase agility in spite of the regulatory burden.

Agility Creation Model
The Free Agility Model shown below helps visualize the challenge innovation executive’s face:  dealing with inefficiencies in their business model, called Wasted Agility. Successfully implementing new approaches frees agility that accelerates new venture creation inside regulated companies.

In the startup phase, companies assemble an efficient level of practices and policies which are needed to effectively compete and create value. As companies win market success and grow operations, their need for quality systems, operational predictability and governance rises, and along with it comes complexity. As companies pass into the growth and mature phases, they inadvertently pile on more processes, practices and complexity in the name of reducing risk and variability. Continuing this trend unchecked leads to increasing levels of complexity and bureaucracy that can stall the company to a point where it can no longer compete, loses first-mover advantages, and is blinded to emerging adjacent opportunities.

Agility Creation Model: As companies scale new businesses, they follow the curve through Startup, Growth and Mature phases, building quality systems, governance and complexity along the way. Innovation executives create agility with new ventures by dealing with inefficiencies, called Wasted Agility, by executing new approaches that Free Agility for new ventures.

What this means for Innovation Executives
Innovation executives create agility by moving from the company’s current position in Mature or Growth phase to the startup phase where agility is high. Let’s take a closer look at a few best practices and what they mean for practitioners like us:

1. Differentiate regulatory practices from policies: Companies decrease the innovation team’s agility with one simple practice:  they raise the internal regulatory bar to avoid failing an audit. Core businesses fear that an innovation project failing an agency audit risks ruining the company’s reputation and invites more audits of core businesses. This fear translates to a mandate to the innovation team: no matter how big the new innovation opportunity is, it won’t come close to that of our core business,  so don’t even think about messing up our reputation. To combat this tendency, innovation leaders must get alignment on expectations for meeting regulatory requirements, spelling out that new businesses may have a new regulatory path.  For new markets, one best practice is to seek external advisors to guide them through the new regulatory path, which is likely to require different expertise from core regulatory paths.
2. Form a Separate Team: Separating innovation teams from core businesses increases agility during the startup phase. This is one of Gore’s tricks. Two-person teams explore new opportunities via ten-week sprints outside of core businesses. The small startup team consults functional experts from inside or outside the company as short term advisors until the idea is validated. This approach fits well with Gore’s culture of self-forming teams in which Associates make their own project commitments instead of top-down assignments.
3. Empower the team: Let’s return to the Class II device example. At the time when the decision was made to launch a pilot, the team was unsure of the likelihood of market success, yet they faced 30 months of passing internal checkpoints before finding out. The team was empowered to explore new approaches that weren’t tied to the company’s traditional development approaches, resulting in a decision to launch a pilot three months later. The result of the pilot was strong validation of the market need, the price point, channel (pharmacy), and customer satisfaction (including consumer “Thank you” letters). Armed with outstanding results from the pilot, the team rapidly finished steps that had been skipped and re-launched it — within twelve months instead of the original plan of 30 months.

Let me conclude with one more point on empowerment in regulated environments. This example demonstrates that innovation teams know how to be agile and deliver on the company’s expectations to meet regulatory requirements. By tapping into regulatory expertise that understood agile methodologies instead of using overloaded internal compliance reviewers who apply the same approach for each product, the team created an innovative new approach that the CEO now wants to adopt broadly.

Paul Campbell, an expert in corporate innovation, has successfully built new businesses that generated billions in revenue for companies like Hewlett-Packard, Philips Electronics, Schneider Electric, and W.L. Gore & Associates. As Chief Innovation Officer at multiple companies, Paul has helped leadership teams assess the cultural, structural and leadership changes necessary to foster an environment of innovation in large companies that matches the speed of startups.

Paul helped teams create new products, technologies and business models in diverse product categories like health wearables, smart homes, PC gaming, and consumer electronics around the globe, i.e. USA, China, Latin America, and Europe. Paul helps corporate leaders improve capital deployment and return on R&D and Innovation programs with deft adoption of Open Innovation, Venturing, Digital Business Model Innovation, Design Thinking, Accelerators, and Lean Innovation.