Feed innovation to grow competition – Governments and their role

wazoku Blog

Last week we saw the EU slapping Google’s wrist over the Android operating system and its applications. The European Commission sent Google a statement of objections expounding that Google is abusing its dominant position by imposing restrictions on Android device manufacturers and mobile network operators. These restrictions go against EU antitrust rules and are a threat to a healthy competitive marketplace environment. In the words of Margrethe Vestager, European Commissioner for Competition: “It’s not our job to defend companies; it is to make sure there is competition,” so it’s no surprise that the EU got involved.

Innovation and competition go hand in handCompete_competitions

Competition needs innovation in which to flourish, as responding to trends and competitors is a huge driver for organisations to find new revenue streams and improve their services. A thriving economy requires creativity, change and continuous improvement. Governments have an important role as market regulators and as such, should play the role of enabler in innovation, but must be careful not to stymie the key facets of innovation through over regulation or layers of bureaucracy.

In my recent post on the potential UK exit from the EU, I explored the potential impact of this on innovation. It is my opinion that we benefit hugely as a collaborative union in Europe and also in many senses worldwide, through enhanced collaboration facilitated often by grants, legislation, free movement of goods and people etc.

What can governments do to encourage competitiveness?

If your goal is to encourage innovation, often the system gets in your way. To tackle this issue, and create a healthy competitive and innovative marketplace, governments need to:

  • Eliminate red tape – make it as easy as possible to start a new business. Most innovations come from small companies and having too many levels of bureaucracy as well as heavy corporation taxation is a deterrent to these companies to proliferate and grow.
  • Cut out and improve processes – we’ve all heard horror stories of how two governmental departments based in the same building can take months to send paperwork back and forth because their processes are lengthy and haven’t been updated in decades. To respond quickly to changing times, governments need to become more agile, so they can swiftly release regulation that answers to the problems of today.
  • Increase access to finance for small and medium-sized enterprises (SMEs) – too often small companies are unable to grow because they can’t raise the necessary funds. Banks in general, are a lot shyer when it comes to lending money these days, so venture capital, business angels and banks need to be encouraged to invest or lend to start-ups and smaller enterprises. Governments are instrumental in helping lay-off some of the risk and increase confidence in the marketplace.
  • Become more innovation aware – one of the issues governments face is that their systems aren’t designed to take account of innovation, particularly if this is disruptive. Regulations will sometimes ban an innovation entirely (a great example of this is how Uber got banned in so many countries) or leave it unregulated, putting off customers from actually adopting an innovation, due to trust issues (as an example, health apps).
  • Listen to and collaborate with organisations – ideally we would see a more open approach across sector and geography, where there is less protectionism and more open collaboration to help address some of the biggest areas screaming for innovation. Government and big business working in harmony on such areas seems to me like a far more progressive approach.

Whether you agree with the EU’s stance on Google or not, it’s important to recognise how important the role of governments is in regulating markets and generating policies that make sure everyone has a fair chance to grow and innovate.