Competing in an Unfair Environment

When making strategic decisions as a disruptor, how do you deal with a context in which the incumbent has their finger on the scale?

One of the ways in which an industry can protect itself from free market competition is through regulatory capture. This phenomenon occurs when a government agency whose mission is to protect the public from bad behavior on the part of industry players instead focuses its attention on protecting the economic security of the industry at the expense of the public good.

As Tony Seba points out in his book, “Clean Disruption of Energy and Transportation,” coal mining is an example of an industry that has perfected this strategy worldwide. Government subsidies, cheap or free land, exemption from air, water, and land pollution regulations, and the ability to back out of pension and healthcare costs are all examples of how governments regulate – and tax – people on behalf of the coal industry instead of the other way around.

A regulator might defend their protection of the coal mining industry by pointing out that in various places around the world, such as the Navajo Nation in the US Southwest, the industry has guaranteed employment. Switching to solar or wind in the vicinity of coal mines and closing the mines down cannot easily compensate for the social costs associated with the lost employment because the solar industry requires skills the coal miners don’t have. This is a serious tradeoff that can be easily ignored by some.

Not to go down the conspiracy theory rabbit hole, but is regulatory capture behind the phenomenon noted in a recent article in The Guardian? The article describes the findings of a report by Climate Rights International that “exposes the increasingly heavy-handed treatment of climate activists in Australia, Germany, France, the Netherlands, Sweden, the UK and the US…. [The report] also highlights how these same governments frequently criticise regimes in developing countries for not respecting the right to protest peacefully.” 

So, what is a disruptor – whether a new upstart with an innovative technology, a whistleblower, or an activist – to do when policies and regulations are applied unevenly within a given regulatory domain?

Like many of the challenges of the energy transition, there are no easy answers to this strategic challenge. The most effective response is likely different in each situation, and I don’t have a specific solution to offer.

The point is that when analyzing the context for a strategic decision, teams must factor in theses sorts of obstacles, the kind which might have to be taken as a given that must be navigated around rather than the kind that can be changed through smart decisions.

Our PRISM framework at Tilt Global and the immersive experience of the Decision Making Lab prepare teams to make better, faster decisions in the face of regulatory capture that protects competitors as well as all sorts of other obstacles.