So you’re trying to innovate in a heavily-regulated industry…

By Naomi Fried, PhD, Innovation & Digital Healthcare Leader

naomi-larger-eventSeveral years ago, my innovation team at Boston Children’s Hospital came up with the idea that our doctors could provide care virtually, via videoconferencing, to critically-ill patients in small community hospitals. We brought this idea to the legal department, where it was met with scowls and deep skepticism. Our lawyers were worried about patient consent, physician licensure, medical liability… the list of legal and regulatory concerns they had around this innovation in care delivery went on. And on. And on! 

But after many conversation and much hard work, we ultimately launched our “Teleconnect” program to help critically-ill kids in other hospitals. Our legal team provided invaluable guidance and advice. Ultimately, they even became internal advocates for the Teleconnect program. 

The importance of innovation is widely accepted. Every company must innovate to survive and thrive, and to avoid being overtaken by peer companies—and upstart firms—that are themselves eager to gain a competitive advantage. 

But engaging in actual innovation is far from easy. There is experimentation, testing, tinkering and—sometimes—significant risk-taking. Often, the outcome is failure. In short, innovation with its risk of failure is SCARY.  

In industries that are heavily regulated – such as pharma, healthcare, insurance, and banking — there are additional barriers to innovation. Legal, compliance, and regulatory requirements can loom large, and have the potential to stifle innovation — if you don’t address them head-on.

Nevertheless, innovation can thrive in large organizations in heavily regulated industries. I know. I have been working on innovation in regulated industries for over a decade now.  I have facilitated innovation within health plans, hospitals, and biopharma companies.

Here are seven tips to navigating the internal legal and regulatory roadblocks to innovation that you often encounter in these kinds of organizations.

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1. Build relationships proactively with internal regulatory and legal folks. 
That’s right. Seek out—don’t avoid – the staff responsible for legal, regulatory, and compliance within your organization. Innovators sometimes think they are better off steering clear of these gatekeepers and guardians for as long as possible. That is a mistake; you can’t avoid working with these folks. If you don’t find them, they will still find you!  

Don’t wait until your innovation is “ready” to talk to your regulatory colleagues.  Rather, invite the legal, regulatory, and compliance folks into early conversations about innovation.   It’s best to discuss your innovation project when the stakes are still low, at the beginning of the innovation lifecycle.  Give them time to digest the new idea. Let them provide input and guidance in the early stages, at a time when you are still able to shape and mold the innovation. 

I found the regular monthly meetings we set up with our legal team at Boston Children’s Hospital gave us the time and space to discuss issues that were emerging around the deployment of our “Teleconnect” videoconferencing innovation.  Because we discussed our plans well in advance, these meetings were calm and collaborative. While it’s great to have informal check-ins, nothing beats regularly scheduled meetings for making sure legal and regulatory partners are up-to-speed and on board with plans. 

Also, regulatory folks are less defensive and more open in the planning stages than after considerable resources have been invested in the innovation. Don’t wait until the idea is fully baked or tested to share it with legal and regulatory.

What if you still encounter resistance? Is it time to go over the heads of the lawyers, pull rank, and bring the CEO in? Sure, this approach can quickly break through an impasse. But I would not recommend it in an organization where you are trying to repeatedly innovate over time. This type of maneuver is likely to alienate your legal partners and make it harder, not easier, the next time you seek their support or approval.

In discussions with the legal and regulatory folks, it is important to continuously reference the importance to the business of the innovation. Remind them that shutting it down or blocking it is not an option because it is bad for business. That will keep the lawyers at the table, and keep them focused on finding ways to drive the innovation forward.

2. Find a champion within your legal and regulatory departments who is interested in innovation. Find an innovation partner—someone you can work with throughout the project (and perhaps eventually on multiple projects over time.)  This internal innovation partner can help you navigate not just your organization, but also the industry.  Having a legal or regulatory innovation champion also lends internal credibility to your project. 

Wondering where to find this legal or regulatory innovation ambassador? Be open to an innovation partner from any of your organization’s legal or regulatory groups. Your legal innovation champion could be a seasoned lawyer, or a more junior attorney who is interested in innovation. 

At a biotech company I worked at, my regulatory champion on a social media initiative turned out not to be someone who was assigned to this domain, but rather a relatively new lawyer. He had recently joined the company and was thoughtful, caring, and interested in exploring the possibilities of social media. He was willing to work with us and serve as our champion, creating a bridge back to other regulatory experts in the organization.

3. Reframe the conversations. The easiest and safest thing for legal and regulatory folks to say when confronted with innovation is “no.” To avoid a conversation that ends in “no,” try to reframe the discussion. Get your legal partners to speak in terms of “yes, but.” That is, “yes, you can try that idea, but here are the restrictions…” Or perhaps they can provide a “yes, with” answer. “Yes, you can innovate but with certain constrains.” These “yes, but” and “yes, with” conversations provide space for exploration and potential for innovation — unlike instant “no’s.” Reframing can be done by asking questions and exploring hypothetical scenarios.

At Boston Children’s Hospital, when we began planning our first hackathon, the question of who would own the intellectual property that was generated came up as planning for the hackathon progressed. The initial response from our lawyers was that the innovators could not own any IP developed at our hospital-sponsored hackathon. But over the course of a series of discussions, we were able to reframe the conversation. Ultimately, everyone agreed on a mechanism for sharing IP between the hospital and the innovators ( outside entrepreneurs, inventors or designers, for instance.)

4. Recognize folk law. In regulated industries, there are certainly rules that need to be followed and laws to be aware of. However, there are also often grey areas — where the law is not clear.  Innovation frequently occurs in uncharted territory, where regulations may not be well defined. Often in the absence of clear laws and regulations, people rely on “folk law.” Folk law is not real law. Rather it is the way things have always been done, or the assumptions people have always made — and thus is treated by some as if it were a real regulatory constraint.  Folk law develops as a result of what people are familiar with and comfortable doing. Once restrictions are identified as “folk law,” it becomes easier to move past them. 

At a biotech company where I worked, our legal team was initially uncomfortable with executives tweeting. But once we began to discuss the source of their discomfort, it became clear that the concern was rooted in the fact that none of the executives had ever been active on Twitter.  The “folk law” that “executives can’t tweet” crumbled once it was identified. Soon after, the regulatory team issued a set of internal policies and guidelines around the use of Twitter by employees.

5. Track the competition. Legal and regulatory folks are not always comfortable having their organization be the first to innovate and chart new territory. However, when other organizations in the same industry are innovating and pushing the envelope, in-house legal and regulatory experts become more comfortable with their organization doing the same. 

There is a sense of “safety in numbers.” Tracking how your competition is innovating can help you make the case for innovation with your internal legal and regulatory experts.

6. Communicate broadly. Strong internal communication is always important when innovating. Effective, broad communication across the organization is even more vital when innovating in a heavily-regulated industry.  Why? In regulated industries, other folks in the organization besides the legal and regulatory experts may also worry about innovation-related risk. Developing a broad communication plan that reaches all areas of the organization and keeps folks regularly updated can make the difference in overcoming internal resistance to innovation.

When I was Chief Innovation Officer at Boston Children’s Hospital, we had monthly forums where we shared updates on our innovation programs. I continuously made rounds to all the clinical departments at Boston Children’s to provide updates and information to the doctors and nurses there.  And we produced an annual innovation report that proved a great way to disseminate information about our progress on a yearly basis.

7. Be patient. Innovation in a regulated industry takes more time than it does in other industries. There will often be folks who are uncomfortable with innovation and may raise red flags. But just because you are in a regulated industry doesn’t mean that you can’t innovate successfully.  Just be patient. Celebrate progress as you make it. Focus on the ultimate goal of your innovation, and don’t get discouraged when there are setbacks. (I’ve been there!) What doesn’t work is treating legal, regulatory, and compliance folks as the enemies of innovation. In fact, they can be great enablers. 

No one said it’d be easy, but with time and patience, and by following the steps above, you can bring innovation to a highly-regulated industry.

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Naomi Fried has held senior innovation and technology roles at Biogen, Boston Children’s Hospital, and Kaiser Permanente. Fried has also worked in venture capital and for startup companies in the healthcare sector.

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