Government and Nonmarket Factors Can Make or Break Innovation—Ignore Them at Your Peril

In regulated or tradition-heavy industries, countless promising ideas have failed because they didn’t account for the rules and forces outside classic business logic. Economic history is filled with stories—from telecom to health care and education—where government policy shaped the entire tempo of innovation. The ‘motivation/ability’ model explains how regulation, public funding, and even social norms set the stage for what can flourish and what’s stifled. For example, the rise of distance education was made possible not just by technology, but by changes in accreditation and federal grant policies that removed key roadblocks for new providers.

Sometimes, the biggest opportunities come not from fighting regulations head-on but by finding the edges—markets or contexts where existing rules don’t apply, allowing something different and better to emerge. Game-changing ventures often thrive in these pockets before policy catches up. The seasoned innovator knows the landscape, not just the spreadsheets.

Before launching your next project, make it a practice to sit down with colleagues or mentors and diagram all the possible nonmarket influences on your field. For each, ask whether it encourages or discourages action, and whether it limits or enhances your actual capabilities. Where you hit barriers, look for side doors or unserved needs that the rules leave wide open. If a regulation seems unbeatable, channel your energy into those areas where change is legal, feasible, and under the radar. Keep your eyes open for when the rules shift, and be ready to pounce; policy windows often close as fast as they open.