Except for a brief period of deregulation in the 1980s, the number of regulations on the books has been steadily increasing for decades.

According to statisticians at George Washington University, regulation reached its highest level ever in 2016, topping out at nearly 100,000 total pages of Federal rules and regulations. Startups and entrepreneurs have long feared the negative impact of increasing regulation on innovation, and many entrepreneurs are even battling new rules around raising capital to launch their ideas in the first place.

This environment brings with it spectacular costs of doing business. The National Association of Manufacturers estimates that regulation adds more than 12% of the total US GDP to the cost of doing business. And although it's expected that regulation will likely decrease under President Donald Trump, it will always be a critical concern in many industries such as medicine, finance, food production and transportation. So how can your business stay innovative in a highly regulated environment?

Understand the effects of regulation on innovation

People often think that regulation inhibits innovation, but in fact, it's not so simple. After all, some of the biggest business innovations - such as biotechnology, online banking and other online financial services - come from some of the most regulated industries.

Regulation can actually spur innovation as companies get creative about ways to do business while remaining in compliance when the regulatory environment changes. Global consulting firm Accenture recently published a report on regulatory compliance functions within global businesses that outlined three basic approaches to regulatory compliance:

Innovators that leverage technology and new business approaches to establish leadership positions in their industries.

Integrators that share infrastructure, skills and capabilities with others within their organizations or with business partners outside to innovate.

Improvers that watch the regulatory and business landscape to determine which investments to make in compliance.

Companies that choose to be innovators in the face of regulatory change can set the standard for their industries.

Leverage technology to future proof your business

To stay innovative, your business needs to be able to operate in any regulatory environment. That means the systems you select to run your business need to be flexible and adaptable - in other words, they need to be "future proof." If your business systems are too dependent on the current regulatory environment, you can quickly find your business at a disadvantage when forces outside the business require you to make changes rapidly.

According to David Yonkof, vice president of sales and marketing at global trade management software provider Precision Software, "future proofing" means seeking solutions that can be adapted to support innovation even as regulatory requirements change. "In our business, the margin for error is razor-thin: Letting shipments get caught at the border is a great way to lose customers. That's why extensibility is crucial, especially in the short term. We have to enable our customers to clear compliance checks consistently--without modifying our code every time a country tweaks its regulatory framework." Regulatory change can be evolutionary or revolutionary: It can happen quickly or slowly over time. "Future proofing is all about being able to accommodate the unexpected without having to replace your software applications whenever the global trade environment shifts," added Yonkof.

Future-proof solutions like Precision Software allow businesses to innovate and stay in compliance with changing international trade regulations. Says Yonkof, "We know that we'll be adapting to requirements tomorrow that we can't even fathom today. With the right technology, businesses can adapt to the unknown and remain innovative regardless of what the future may bring."

One of the most exciting technological waves today is the expansion of AR and VR technology, one that is slated to impact every vertical in the coming years. Yet, VR and AR are still technically in infancy, which means that there are looming legal questions that will undoubtedly come to the forefront as these applications and programs become more mainstream. For example, if consumers are glued to their screens and engrossed in a virtual world, or one that is overlaid with augmented imagery, does that mean the chances of injury spike? This is just one of the questions that legal professionals are exploring, and that will likely impact the development of these programs. However, many prominent companies shaping the VR and AR space understand that agility is part of the game.

Build a solid team

Operating within a highly regulated industry means that you're going to encounter constraints and limitations. But even with boundaries, innovation and progress can still exist. As an entrepreneur with a career spanning over 16 years and multiple successful companies under his belt, Blake B. Johnson knows that building a solid core team is a pillar of innovation. Surrounding yourself with people of varying experiences and skillsets who are passionate about building a product that breaks barriers is the only way a company can truly evolve. Sure, technology is key, and leadership with big ideas sets the tone, but if the right mix of passionate individuals who are willing to test new waters is not amassed, no idea, no matter how outside-the-box, will ever fully come to fruition.

Azazie, an online bridal party retailer, is committed to providing innovative solutions in a traditonal industry by focusing on team first. The ecommerce world is dynamic, just as often as trends change, ecommerce providers also have to be ready to tackle new shipping, payment, and security regulations. By amassing a team of passionate individuals who are all equally committed to providing exceptional designs and client experiences, Azazie has positioned itself to constantly find new solutions and adapt to shifting customer expectations and mandates.

Develop strategic partnerships

Some regulations limit the types of activities in which businesses can engage, or the locations in which they can engage in them. One example is the moving industry, where some states require companies that move household goods to hold a state or local license. This creates a challenge for companies that are moving items across state lines where they may not hold a license and can limit their ability to serve certain customers or to expand their business beyond the local area.

In situations like this, where regulation is limiting your ability to do business, one strategy to cope is developing partnerships to expand your business reach. National Van Lines, one of the nation's largest moving firms, works with a network of movers across the country to help customers complete their moves no matter what the regulatory environment may be in the states they are moving to or from.

"We've really built our business on being able to serve customers across state lines," says Tim Helenthal, President and COO of National Van Lines. "A tight regulatory environment can make it challenging to expand your business but if you approach it from a perspective of creating mutually beneficial relationships, it can allow you to innovate and grow your business."

Regulation creates a compliance burden on businesses that can stifle innovation in companies that can't adapt. Yet, regulation can also make businesses more innovative as they seek to meet or exceed the standards set forth within the regulations that impact their industry. Rather than rail against regulations, savvy business leaders should position their businesses to stay innovative no matter what regulatory environment they find themselves in.

Published on: Sep 15, 2017
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.