Innovation

Output Constraints

December 3, 2019

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And then there are forces outside of an organization such as regulations, compliance and standards. For libertarians (including myself), the thought of more political control and regulations make them cringe. Yet, when the EPA banned chlorofluorocarbons (CFCs) from hair sprays and aerosol cans, it forced the industry to come up with an alternative. The very next day after the official ban, the original inventor of the aerosol valve developed a system with a non-CFC propellant that not only protected the ozone layer but worked better than prior CFC versions.

Sometimes it’s deregulation that can spur industry-wide innovation. In 1975, the Securities and Exchange Commission (SEC) deregulated commissions to allow market competition to drive down trading fees. This has spurred innovation such as discount brokerages, self-directed advice platforms, robo advisors and overall lower money management fees.

And of course, too much output constraints can cause devastating effects. The Heritage Foundation, for instance, claims that regulation cost the American public between $810 billion and $1.7 trillion per year.

Output constraints also include product specifications and market requirements. The Internet of Things is a good example of developing edge devices with the most functionality, processing speed, memory and bandwidth but with the lowest energy footprint. This has forced the tech industry to innovate in such ways that the design, hardware and software systems deliver the biggest punch with the least energy consumption.

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