Lateral effects, sometimes called "externalities" are effects which come indirectly from the decision and group (or person) in which they were meant to apply.
For example, as the governor of one's own body, one might have a policy of "It's okay to smoke cigarettes (since it's my body)". However, the increased production of tobacco, the second hand smoke, etc. impinge upon others and society at large, for better or for worse... hence the term "lateral."
Collaborative governance provides a bottom-up platform in which to feed such lateral effects back into the system by organizing the input from "the crowd," thereby increasing the intelligence and efficiency of the system.