Opinion

Innovative SME leaders must not wait for the law to catch them up

6 min read

20 November 2015

As more new market disruptors and mould-breaking businesses emerge, the law has been increasingly slow to respond and catch up – but new businesses shouldn’t be put off innovating.

That’s the view of Pascal Culverhouse of the Electronic Tobacconist, a key player in a new industry that politicians, the courts and regulators are struggling to come to terms with.

“Many of the most successful businesses of recent years, whether in social media, search, or peer-to-peer, could be described as being ahead of their time,” said Culverhouse. “In fact, these businesses may be so far ahead of their time that they exist in a kind of legal limbo — with innovation taking businesses beyond the reach of cumbersome regulatory bodies. The legal battles between Uber and London’s black cabs, for example, reveal the tensions that may emerge when the law is slow to respond to innovation.”

However, he believes that business owners can’t, and shouldn’t, be slow to innovate simply because innovation may take them into a legal grey area. Business owners do, though, face the very real possibility that changes to the law could potentially put them out of business. To avoid this, innovative and disruptive SME owners need to protect themselves against legal challenges and threats.

“Regardless of whether or not their business exists in a legal grey zone, entrepreneurs need to become experts in the key ways that the law applies to their business,” argued Culverhouse. “If your business is prone to legal controversies, then this is doubly important. Set up a Google Alert for every time your sector is mentioned in connection with proposed legal changes, and stay in contact with well-connected individuals in your industry who can help you keep abreast of any developments.”

Once they’ve identified how any proposed legislation could affect them small business bosses and entrepreneurs need to “rally the troops”. They need to identify and recruit allies. “An organised group is much more likely to be effective than a lone voice shouting against the wind,” said Culverhouse. “See if there are any relevant industry bodies that you could join and what their plans are on dealing with legal challenges.”

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SME owners need to start with the grassroots to build up momentum. “Engage with your customers on the issue and how it will affect your industry, both online and in person, as your customers could end up being your sturdiest support base.”

They should then start to either develop strong arguments about how the law is appropriate to their business if its effects could be positive or, if it’s a threat, why the law would be against the public good if it were applied to their particular business. He pointed to that fact that Airbnb became legal in London this year because MPs were convinced that the “sharing economy” would provide cash-strapped Londoners with an additional income, despite the howls of protest from the hotel industry.

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SMEs have to start getting more political, emphasised Culverhouse. “There’s a reason why politics and big business have become increasingly inseparable in recent years – decision makers have the power to make or break industries,” he added. “If at all possible, it’s best to have these guys on your side. Work out who the key policy makers are with regards to the new legislation and try to identify important people that may have a sympathetic ear.”

A select group of entrepreneurs in a new sector may be asked to act as government advisors and provide the government with their expert opinions on the new industry. This, he argued, will become increasingly common as public spending is cut and private enterprise is asked to fill in. Owners of small and medium-sized businesses might be busy with their day jobs but they should contact their local MPs and the local and national media.

If necessary, believes Culverhouse, entrepreneurs and market disruptors should consider a legal challenge. “It’s time-consuming and expensive, but it could be the only way to save your industry,” he commented. “There’s a precedent of successful legal challenges in this country, from Uber claiming that it does not count as a taxi company because it doesn’t use a taximeter and e-liquids not having to label their ingredients because they don’t count as either food or medicine — but instead as tobacco products.”

Finally, he concluded that, since there’s no guarantee of success for small market disruptors winning legal challenges, each should take into account the possibility that things will turn out badly – but challenging the law is still important.

If you think you are a disruptive presence, or know of a business that is, then make a nomination for our annual Everline Future 50 accolade. Bringing together 50 companies each year, it has been a market leader in identifying the game-changing enterprises populating the UK.

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