The importance of innovation friendly regulation for emerging technologies

17 May 2018

The digital revolution is here and offers unprecedented opportunities for the UK, with digital technologies contributing as much as £454 billion over the next decade.

A thriving tech sector requires the right regulatory environment that acts, in some respects, as a mentor and coach towards sustainable innovation. So, the decisions made today will determine the success of our digital economy for many years to come.

These decisions are of the upmost importance given these opportunities offer the potential to boost productivity, increase international competitiveness, create new and exciting businesses, generate new, higher skilled jobs, address regional economic disparities, create a new vibrant UK technology market, and address some of the societal problems we face today.

On this final point, Accenture’s Liquid Studios, together with Age UK, have developed and piloted HomeCare, an AI companion for the elderly to assist with everyday tasks, and living independently.

Thankfully, we start from a position of strength. Digital is already a critical part of the UK infrastructure, and the Government has a strong record of supporting pioneering innovation. As a result, the UK has a compelling opportunity to boost growth whilst putting people at the centre to build trust and provide the needed protections for society.

However, we live in a fast-moving world.  We need to ensure that we move at the same pace as technology to continue to be well positioned, and with Brexit on the horizon, now more than ever is a time to identify where we can go further, faster, to become the world leader in innovation friendly regulation.

Call to action

We, therefore, welcome the Government’s new £10 million Regulatory Pioneers Fund which will help create a better environment for demonstrating and scaling new technologies.

With Britain’s exit from the EU, there is an imperative for the UK to position itself as a hub for business and digital innovation. The call to action is now for government, business and academia – represented at our recent roundtable event with BEIS and Reform on this topic, as part of our Engage Digital programme – to work together to proactively define and drive responsible, ethical and explainable regulatory principles that develop and maintain trust in emerging technologies.

A smart approach to regulation is a critical enabler of innovation – it gives clarity to innovators, confidence to investors, and builds public trust. In this context, an agile approach to regulation can clear barriers to innovation, provide a predictable and sustainable environment for business, protect public safety and help build public trust in technology. An example of this is the UK Financial Conduct Authority’s regulatory sandbox model which has proved so successful that it has now been adopted by other countries, including Australia.

What do we mean by a smart approach to regulation?

As a starting point, we need to look at the challenges:

Firstly, the need to ensure that existing regulatory frameworks evolve so that they do not hamper the development of technology or new business models.

Secondly, the need to to ensure that where emerging technologies or business models create regulatory grey spaces, that regulators respond with new governance frameworks that address the issue, that business can practically apply and that can keep pace with technological development.

Finally, to ensure that, as new technologies or business models disrupt our society, regulatory frameworks continue to reflect our values as a society and ensure an inclusive approach is adopted.

In response to these challenges:

In the first instance, there is a need to understand what is in place already and whether it can respond to the challenges posed by the use of emerging technologies. For example, testing existing competition law and understanding whether current liability rules can respond to new use cases.

Where there are identified gaps or barriers, update existing regulatory frameworks, including through the development and recognition of standards, which can adapt to the speed of technology, while ensuring there is an appropriate level of cyber-security, safety and accountability.

Regulators should remain enablers of the digital economy, and facilitate the uptake of technology. For example, doing more to open public-sector data to SMEs and the research community, encouraging experimentation through sandboxing, providing clear guidance on how to implement new regulatory frameworks such as GDPR, and leading by example through adoption of technology in their own organisations.

Finally, the cross-border nature of the digital economy means that our approach to regulation must be set within an international context. A balance must be struck between the opportunity to create a positive regulatory environment, which will encourage domestic innovation and attract foreign direct investment and the risk that regulatory divergence could create friction for businesses or consumers. The international context is particularly important when discussing access to skills, the free flow of data and market access.

As briefly mentioned, a good example of a smart regulatory approach that is set within an international context, is the UK’s use of regulatory sandboxing for Financial Services. Aligned to the Regulatory Pioneers Fund, the UK should look to implement more regulatory sandboxing schemes wherever possible across other industries, based on the FCA sandboxing model. This enables innovative businesses to test and pilot emerging technologies responsibly in a safe environment and within a safe framework.

Opportunities and how to realise them…

Government and business should focus on how to harness and govern the use of emerging technologies in a sustainable and ethical way to provide better outcomes for all people and to mitigate the risk of jobs being displaced or people being marginalised because of the use of emerging technologies at scale. This is critical given the grey areas in the regulatory space which will prevail longer than the innovation cycle. An example of a grey area, is Machine Learning which raises issues around IP – who is the “creator” of what the machine produces, after it has learned on its own? As it stands, there doesn’t appear to be a clear answer to this question.

To meet this imperative and take a people first approach – to ensure no one is left behind – a collaborative effort should, develop a set of fundamental ethical principles that keeps up with relevant technological, social and political developments, with the flexibility to develop sector specific codes; help create adaptive, self-improving regulation and standards to keep pace with technological change; and emphasise education and training, especially for people who may be disproportionately affected; as well as reconstructing work to take advantage of the respective strengths of humans and technology.

Government should work with business and others to develop a smart regulatory framework that focuses on the use and application of technologies rather than the technology per se. Issues should be addressed as they arise through global, industry driven guidelines, standards, best practice and codes.

These multi-stakeholder initiatives have the strongest influence on creating industry cross-fertilisation and equal access on resources for entrepreneurs and big players alike. They also help to identify gaps in existing standards and certifications, which ecosystem players can then act upon.

This framework would help create and safeguard trust at the heart of the emerging technology and related business models and permit the flexibility for innovation.

Patrick Rowe, Deputy General Counsel, Accenture

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