The ride-sharing service Uber is challenging regulators across the country. It’s a perfect example of how new innovative business models are transforming the regulatory challenge.

Chris Noone, CEO of publicly listed Collaborate Corporation, has experienced frustration with the existing regulatory frameworks in operating the organisation’s multiple sharing economy businesses, including DriveMyCar.

“Because these regulations have not been created with the sharing economy in mind, if you ask the one question of a department five times, you are likely to get five different answers,” he said.

“There’s no consistency in the interpretation of regulations. And that’s totally understandable because they were created before the sharing economy had taken off and it’s probably the first time the people who are answering these questions have come across this.”

Principal consultant at Nous Group, Claire Noone, says this type of frustration can hamper innovators. She says now is the time to start creating regulatory frameworks that encourage and foster innovation and accommodate new business models.

“We could stymie our innovation potential by not thinking through … new regulatory models.”

“In the innovation conversation we are talking about new products, new services, new business models and entrepreneurship, but we’re not talking about new ideas and approaches to regulation,” she said.

“In the context of the innovation statement, if we don’t start to think about the role of regulation in innovation, we risk missing a huge opportunity. We could stymie our innovation potential by not thinking through and implementing new regulatory models.”

Noone says two key shifts need to take place for regulatory frameworks to support innovation. The first is to create more flexible and outcomes-based regulatory frameworks.

“We need to design regulation that can respond quickly to technological change,” she said. “For example, five years ago we wouldn’t have anticipated that people would be banking on their mobile phones, sharing their homes through Airbnb, sharing rides on Uber, or renting their cars through DriveMyCar. Regulation needs to anticipate the future, be nimble and able to respond quickly when we do things differently.”

Environmental regulation offers a successful example of regulating with a flexible risk and outcomes-based approach. “Environmental policy and regulation has moved from command and control regulation to setting out what companies must do to provide environmental outcomes,” Noone said.

“Because specific solutions to problems are not stipulated by the regulation, the way a business achieves outcomes is up to them. Businesses are often trying to achieve the most efficient and effective outcomes, which is enabled by more flexible legislative frameworks.”

Why existing processes don’t work

The existing policy and legislation making processes pose a challenge to innovative business models.

“It takes a long time to change the legislative framework. So being flexible means we also need to identify where the policy process can be made faster, and how to do that,” Noone explained. “The way we currently develop legislation is not fast enough to respond to the changing nature of the economy.”

“I am advocating that we turn the discussion around to encourage a new mindset …”

The second and most important shift is about mindset. Facilitating innovation is key; Noone says we need to change the way we think about regulatory reform.

“We’ve had a lot of what I would call removing obstacles or reducing red tape discussions, but I am advocating that we turn the discussion around to encourage a new mindset that is about enabling innovation, rather than simply removing obstacles. This requires us to think differently about the regulatory framework and the practice of regulators,” she said.

Given it takes a long time to change the legislative framework, regulators must think about how they adapt their approach to the new business environment, focusing on risk and impact rather than on black letter law.

Regulators — whether they be telecommunications, financial market, taxi or consumer regulators — need to adopt a mindset that enables rather than stymies innovation.

“If we’re saying the ideas boom is the new mining boom, then how we make and implement regulation that not only removes obstacles but also positively enables innovation is a challenge we must overcome,” Noone said.