What Is Regulatory Hacking?

Posted on May 28, 2019 by Evan Burfield

When I wrote my book “Regulatory Hacking: A Playbook for Startups” in 2018 — I grappled with using the term hacking in the title. To those unfamiliar with its origins, hacking can have a negative connotation.

It usually elicits thoughts of secretive, expert knowledge used to gain unfair access to something. This stereotype has appeared in too many bad movies and TV shows – someone hunched over a computer in a darkened room wreaking havoc on mankind.  

To understand the true essence of hacking, you need to go back to its origins. Hacking is about using creativity, expert knowledge, and experimentation to create something much faster than a non-hacker (if the non-hacker was even able to do it at all).  In this sense, every smart startup would do better by employing one or two hackers over a team of “regular” engineers.

The Origins of Hacking (Engineering)

Hacker culture started in the 1960’s among hobbyists at MIT who wanted to make software do things never before possible. The culture was based on sharing — once you found a hack (discovery that helped you do something new) you shared it with the community.

Silicon Valley took hacker culture and evolved it into a set of formal methods and tools. Groundbreaking books like “Hackers & Painters: Big Ideas from the Computer Age,” “The Lean Startup,” and “The Startup Owner’s Manual” are now required reading for any founder looking to successfully scale a company.

The winning Silicon Valley formula for hacks goes something like this: Gain a deep understanding of your customer, release of a minimally viable product, gather customer feedback, analyze, iterate, and repeat, repeat, repeat.

Growth Hacking (Engineering + Marketing)

In 2010, hacking moved beyond engineering and technology when entrepreneur, angel investor, and startup advisor Sean Ellis coined the term: growth hacking.

Growth hacking is a marketing technique that uses data, automation and viral mechanics to drive revenue, increase product adoption and secure new customers.

For startups, this alternative to traditional marketing efforts focuses on accelerating growth at a low cost.

Just like hacking in general, growth hacking can be misunderstood. In some instances, it was used solely to wow investors and secure another round of funding. Built upon unscalable marketing techniques – the end result was inflated customer numbers and high churn rates.

Sean’s work with Dropbox is the perfect use case for growth hacking done right. The online storage company grew its footprint quickly by incentivizing existing users to refer their friends (to receive additional free storage on the site). This word of mouth meets viral marketing program gave Dropbox a huge return on investment.

Regulatory Hacking (Engineering + Marketing + Public Affairs)

Today’s startups are tackling important problems like the energy crisis, fixing transportation infrastructure and eradicating disease – to be successful founders need to navigate in complex markets and effectively change  the regulations that are keeping the world the way it is.

Regulatory Hacking sits at the intersection of startup disruption and public policy. When done correctly — it is hacking in the public interest and for the public good. It produces win-win outcomes for citizens, policymakers, and business leaders.

Like its predecessors – regulatory hacking has the potential to be misinterpreted and done incorrectly. It is not a way to cut through red tape (or worse circumvent the law). It is about stretching and bending…not cutting and breaking. Regulatory hacking is a process not a one-size-fits-all strategy. A brilliant hack for one regulated startup might be a disaster for another in a slightly different context. For most regulatory hackers, solving important problems for citizens involves collaborating with government far more often than fighting with it.

HopSkipDrive is great example of how regulatory hacking can transform an industry. This transportation network company provides service to kids with operations in 6 metropolitan areas in the United States.

Founders Janelle McGlothin, Joanna McFarland, and Carolyn Yashari Becher instinctively understood that ride-sharing for kids wasn’t simply a minor tweak to ride-sharing for adults. They thoughtfully and methodically crafted their approach to regulation and used collaboration and trust to refine their own playbook.

I’ll be sharing their story in a future blog post – so stay tuned.