International Standards common platforms enable business innovation

Issue 39 – June 2012

Emerging technologies – Standards help to build markets and reassure stakeholders
Standards help to reduce innovation risk and speed up adoption
Innovation and Standards – the right timing for standardisation is crucial
The impact of Standards on the innovation process
Innovation – IP can be protected in the standardisation process

Emerging technologies – Standards help to build markets and reassure stakeholders

Emerging industries need to convince investors while reassuring potential users and sometimes authorities. International Standards can be of significant help and the development of Standards can be critical to the expansion of a new industry.

Gain trust and stimulate investment

Emerging industries are often seen as high-risk simply because their future is still unknown. Ever since the internet bubble burst, start-ups have a much harder time getting investment. Especially for new technologies, Standards can help investors better understand what a technology involves. For example, minimum performance or efficiency metrics or testing requirements, can provide guidelines that allow companies to substantiate claims and reduce perceived risk. Investors are better able to judge technologies, which makes them more likely to make good investments. Standards also make it easier to demonstrate viability, reliability, and longevity, providing additional assurance to authorities, insurers, and users.

Build a critical mass

Often, for a new technology to penetrate and grow, it needs a critical mass, a minimum number of players. By setting down the basics and expertise gained during early deployment, innovators are able to provide the guidance for others to follow. Early Standards that cover vocabulary, performance and safety assessments, communication protocols, interoperability parameters, and more, make it easier for academics and researchers to share their findings. Together they help to build markets effectively.

Reach commercialisation

New industries may find early standardisation crucial to reach a higher level of commercialisation and enhance the viability of a new technology by sharing it across countries. This helps increase know-how and allows new entrepreneurs to lobby for financial or regulatory support or even to influence policies.

Reduce risks

In emerging technologies, cooperation on Standards can effectively help reduce risk. While trial and error are the motto during the prototype test phase, successful commercialisation requires that technologies perform within given risk and performance tolerances. By identifying and describing those risk factors and tolerance levels, Standards help increase overall safety and performance.

Access the think tank

The ability to interact with individuals from across the globe, all with widely varying backgrounds in science, engineering, and standardisation experience, provides valuable insights and often helps young companies to access resources that would otherwise simply be too expensive.

Demonstrate interoperability

Emerging technologies and techniques can significantly reduce insecurity by establishing how they fit, interact, or integrate with established systems.

Standards help to reduce innovation risk and speed up adoption

Innovation is essential for business survival but it can also be risky. There are ways to reduce risk and help to grow markets while building profitability.

Profitability is directly linked to a company's ability to innovate and differentiate. While innovation is indispensable for the survival of any company, it can comprise risk. Often innovation results in minor improvements that allow a company to better differentiate its products from competitors. Sometimes innovation leads to breakthrough advances and products and this can create uncertainty.

Reduce risk

Uncertainty can slow user adoption and market growth, and make it difficult to attract investment or gain distribution, which can hamper the establishment of new markets and sales.

Risk reduction is a key element of enhancing market success and protecting value creation – Standards can play an important role in this context.

Expand markets and protect intellectual property

Standards enable new ideas to take root and help them progress faster. They allow companies to increase the awareness of the wider community about a new technology or technique, which results in better market access and helps protect intellectual property (IP) and patents.

Create real differentiation

The ability to protect IP with the help of voluntary international Standards may seem counter-intuitive. Nevertheless, more businesses are coming to understand that users expect products to work together, no matter which company produced them. Even in high-tech products users are becoming less tolerant to what Justin Rattner, CEO of Intel, calls 'useless differentiation' through proprietary interfaces. Rattner underlined that companies are able to achieve a high degree of Standards compatibility and still differentiate and innovate successfully.

Interconnect to grow

Here is a concrete example: A telecommunications company built innovative data transport equipment that offered significantly higher performance and data speed compared to other existing solutions. The company had to demonstrate that their product could function within the existing infrastructure to penetrate the market. Their customer base – communication service providers – would simply not have picked up the new technology if the product had only worked with fibre networks. While high-speed networks are preferable for broadband, much of the installed base in certain countries is still copper wire; the high capital equipment investment for fibre deployment would have been a killer for this innovation. The fact that the company built their product so that it could work in both environments was key to its success.

Benefit of built-in basics

Standards provide the insurance that safety, performance, efficiency, interoperability, and other aspects that are crucial to the development of a viable market for a new technology or process have been properly considered. They provide a tool that takes into account fundamental requirements and reflects many regulations. You don't need to shop around, it's all there.

Innovation and Standards – the right timing for standardisation is crucial

Opportunities offered by technology are growing exponentially, and that means faster than most of us can keep up with. Today we see an avalanche of technological innovation and the application of existing technologies in many and sometimes unexpected ways. This opens exciting possibilities.

The ability to stimulate innovation

Standards play a considerable role in stimulating a knowledge-intensive activity such as innovation, regardless of whether this is focused on products or processes. Researchers, developers, engineers, and marketing experts use standardisation documents as important sources of information about state-of-the-art technology and processes. Standards and standardisation activities strongly support the processes by which new technology is adopted and used, and they have a potentially powerful influence on the dissemination of information about technology.

When is the right time?

Developing the right Standards at the right time becomes increasingly challenging and can also depend on the technology itself. For technologies that require that different components come together to connect, exchange information efficiently, and provide a unified set of services, it is important that standardisation happens early. However, when standardisation happens too early, it may impede the innovation process.

The impact of wrong timing

A study by Professor Peter Swan of Nottingham University found that when standardisation happens at an inappropriate time it can lead to economic inefficiency. Too early and it may shut out promising and ultimately superior technologies; too late and the costs of transition may be too high – preventing dissemination.

The study also study found that beyond a given number, when more Standards are added, they increasingly constrain innovation. Furthermore, the age of Standards (how long they have been in existence) can impact on innovation: both Standards that are very old or very new can have a negative impact. The first locks the innovator into legacy systems and the latter challenges the innovator.

The impact of Standards on the innovation process

This article explores how the boundaries imposed by Standards impact innovation and whether they limit creative thinking.

Regularly in discussions on innovation and Standards, an argument surfaces that is at first glance difficult to refute: 'the boundaries imposed by Standards limit the amount of creativity that can occur in innovation'. The defenders of this theory state that people naturally or unconsciously limit their thinking when they feel that 'colouring outside the line' is not allowed. But how useful is unbounded creativity in the innovation process?

In business terms creativity is the ability to develop an idea/innovation that translates into revenue. In this context any idea, no matter how creative, that doesn't produce this outcome is ultimately worthless.

Do boundaries stifle innovation?

There are many examples that prove that best-practice frameworks still allow organisations to create new and innovative ways to define services and products that could not otherwise have been broadly commercialised. Examples include the Information technology infrastructure library, which provides best practice for information technology service management, and Internet protocol television, both of which are used as the basis for differentiated products and services by many companies. There are also the many information and communication Standards that enable computing and interconnectivity between such diverse objects as televisions, phones, or household appliances, and which enable a multitude of smart phone applications.

Common frameworks provide access to broader markets

Take the example of the bar code, which today is commonly used to encode product and personal data. In the early 1970s supermarkets saw the benefits of easily identifying and checking stock and developed electronic tracking systems. Only when a common Standard was developed did the bar code take off. Today the bar code is no longer only used by supermarkets; it appears on mobile phones, access cards, airline boarding passes, and much more. The common Standard was able to focus creativity to generate new and unexpected applications that add value.

Reduce innovation risks

One could argue that producing a pyramid-shaped credit card would be hugely creative; since it would not fit into any existing machines, however, it would not be commercially viable. Innovation needs creativity, but creativity without boundaries is risky and costly and produces uncertain outcomes. Boundaries in the form of clear metrics that define shape, size, performance, efficiency, safety, and other aspects help focus the creative effort to achieve commercial value.

There will always be people who will challenge boundaries to see what they can create, and that is a good thing. However, to remain profitable, businesses need to reduce risk and avoid unfocused innovation processes that ultimately cost a lot of money with uncertain outcomes. That's why Standards need to be part of the innovation tool chest.

Innovation – IP can be protected in the standardisation process

How companies can benefit from broader market access while protecting their intellectual property rights during the standardisation process.

Interoperability builds markets

Compatibility Standards are used to govern the interaction of products and components in a technological system. They facilitate coordination between independently designed products or components by establishing a common interface to govern their interactions. These Standards are positive for the technology adoption process.

Compatibility Standards are important in industries where a large number of interdependent suppliers coexist with a very rapid pace of technological change.

Standards wars delay market uptake

Sometimes, however, until an industry Standard crystallises, intense competition between technologies is felt, as happened with VHS vs. Betamax, Explorer vs. Netscape, and HD DVD vs. Blueray.

Patents and standards encourage innovation differently

Both patents and Standards intend to achieve the same goal of encouraging innovation. The basic principle is that innovation requires competition, competition is facilitated by interoperability, and interoperability is facilitated by Standards.However, they function in opposite ways: patents are for 'private exclusive use' but Standards are for 'public collective use' and are more beneficial the more widely they are implemented.

Gaining market power through standardisation

Interestingly, with the start of open innovation (companies opened up their research and development processes, involving customers, suppliers, universities, and third parties in the innovation process) more businesses appear to be moving away from cooperating on Standards towards business models that emphasise intellectual property (IP) ownership as a primary source of revenues.

This is unfortunate as IP can be protected in the standardisation process. When patent holders participate in the standardisation process they gain market power if a Standard uses their intellectual property.

World Standards Cooperation participants help protect IP

World Standards Cooperation (WSC) participants, the International Electrotechnical Commission (IEC), the International Organization for Standardization (ISO), and the International Telecommunication Union (ITU), have strict patent policies in place, which consider the interest of the Standards user and the rights of the owner of intellectual property.

Also, especially with compatibility Standards, it is often unnecessary for patent owners to reveal detailed proprietary information, as long as interconnection platforms are standardised that enable two-way communication.

Note: The WSC was established in 2001 by IEC, ISO, and ITU to strengthen and advance the voluntary consensus-based international Standards systems of IEC, ISO, and ITU.

Summarised from the World Standards Cooperation (WSC) April 2012 Newsletter.

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Published in business and ICT.