PriceWaterhouseCoopers: Law on Innovations & its Effect on How We Do Business

With the new Law on Innovation, adopted by the Parliament of Georgia in June 2016, it is a good time to think about the future, consider what the new law aims to achieve and also take a look at some of the recent technological trends which are affecting how we do business.

Law on Innovation

The new law intends to promote the knowledge and innovation economy in Georgia via the establishment of a number of new mechanisms. First, the law provides for the creation of the Innovation & Research Board at the Prime Minister's Office. The Board will be charged with defining the national strategy for innovation and coordination of the creation of an innovation ecosystem in the regions.

Second, a new Agency for Innovation and Technology will be created within the Government of Georgia which will try to commercialize research work and provide various incentives for innovation.

Third, the law provides for the creation of various new types of infrastructure hub to promote innovation. For example, it is intended to found scientific/technological parks which should provide universities and other interested parties access to various services which will foster innovation. Business incubators will provide infrastructure and administrative support to certain businesses, selected via a competitive process. Another type of infrastructure which the law envisages is the business accelerator - centers which will provide competitively selected businesses with services, such as business modelling, concept development and, in some cases, financial support.

Finally, under the new law, patented innovations which have been financed by the government may have to be licenced out by the patent holder to suitable applicants, if the government chooses. In some cases, if the government has provided financing, the relevant agency may require a share from the revenues, and the law specifies that this should not exceed 5 percent per annum.

It is too early to say how the law will impact on innovation in Georgia, but it is nonetheless worth looking at some of the avenues which might be explored by businesses and universities which are looking to innovate.


You might have seen spectacular online videos which show images of Narikala, Gergeti or other famous sites captured by drones from above. But do these remote controlled flying robots have an application beyond holiday photos? Our colleagues at PriceWaterhouseCoopers (PwC) Drone Powered Solutions Center of Excellence in Poland have carried out research and the answer is clear: Yes.

A broad spectrum of industries will be able to use drones, equipped with cameras and other sensors, to do business better, whether doing existing jobs more efficiently or creating new products and services. They value the emerging global market for “drone powered solutions” at over USD 127 billion.

Infrastructure and Agriculture are the sectors which could benefit most. “Businesses that manage assets dispersed over large areas have a long history of issues that new drone powered solutions can address.” For example, drones can be used to gather high quality data in hard to reach places, supervise ongoing investments and support the maintenance of existing infrastructure. Our colleagues think that other industries ripe for drone innovation are Transport, Security, Media & Entertainment, Insurance, Telecommunication and Mining.

Beyond taking pictures and gathering data, drones may even be used to deliver items or perform other tasks in populated areas. Whilst giving consumers more convenience, a drone falling from the sky would be clear risk to public safety. It gives rise to the question how should the use of drones be regulated and by whom, if they are becoming bigger and heavier and if their use is more prevalent.

Internet of Things

Drones are not the only things which are gathering images and other data, bringing to mind another technological trend: the “Internet of Things” (“IoT’) – where “connected sensors” are built into physical products allowing them to talk to each other. Soon your fridge may remind you that you have run out of milk or matsoni.

Our colleagues at PwC UK have analysed this technological advancement. “IoT helps businesses achieve the goal of ‘intelligence at the moment’–giving them insights and analysis into parts of their physical operations that just wasn’t measurable in the past.” For example, sensors can be used to monitor stock levels, soil quality, engine efficiency and tyre wear and tear, among many others.

From these new sources of data, businesses “can make and implement better strategic and operational decisions–and in many cases, to gain competitive advantage.” Our colleagues explain: “The 10 sectors leading the IoT charge include Financial Services, Technology, Healthcare and Automotive- but it’s energy and mining that currently tops the list. In that industry, sensors are dramatically improving safety in mines by monitoring carbon dioxide levels and noxious gasses.”

In sum, IoT is about more data from more sources delivered more quickly. Given Georgia’s economic make up, the use of IoT has the potential to help many industries. This opportunity to make better decisions is not without risks. Connecting devices to the internet can cause “cyber security headaches” – without adequate protection, connected assets are susceptible to being hacked, causing loss of confidential data or, worse even, loss of control.

Sharing economy

Just as devices and machinery are, we humans are also reaping the rewards of better connectivity. The internet allows us to keep in contact with friends across the country and globe via social networks. More recently, the internet lets us as individuals sell and buy goods and services from others. This is the so called “sharing economy.”

Perhaps the most well-known sectors of the sharing economy are Transportation and Accommodation. By downloading an app and signing up to its terms and conditions, we can use our cars or homes to become a small-scale taxi business or a mini hotel. Other areas where the peer-to-peer model has established itself are, Professional, Household (e.g. food delivery, cleaning and dating) and even Financial services. For example, in some countries you can get funding for your business from private individuals via a website rather than a bank.

According to its The Future of the Sharing Economy in Europe 2016 analysis, PwC UK thinks that the sharing economy in Europe could see a 20-fold increase to EUR 570 billion by 2025. The key message is that hiring property or getting services from individuals is increasingly popular among younger consumers and it may become “a shining beacon amid a “new normal”’ of lower growth across Europe.”

Again, in Georgia there appears to be room for “sharing” service providers to connect individuals with one another, whether it is for a ride, a room or romance. As with the other trends, the sharing economy does challenge traditional forms of regulation and perhaps more so, taxation. Sharing economies give more individuals the opportunity to earn extra income, but governments around the globe are still deciding how – or even if – this economic activity should be taxed.

For the Law on Innovation and all the above-mentioned trends, it will be interesting to see how existing and new businesses in Georgia will be affected and inspired to innovate in new ways. There will also be work for the government to do to make sure regulation keeps pace with the changes.

Simon Parsons and Vano Gogelia, PriceWaterhouseCoopers

15 August 2016 16:14