To Comply or Compete with Emerging Standards

Open Standards word cloud Word cloud created at Wordle.net

Be they in the cloud, on your mobile device, or embedded in your networking infrastructure, standards bodies are working feverishly to set the context for competition. But to decide whether your organization should try to ‘beat em’ or ‘join em’ will require deep understanding of your technological strength and risk tolerance.

Firms considering entry into an established standards-based market will often rely on deep technical experience within their engineering ranks.  Having such expertise readily available for new ventures indicates an already seated commitment to the existing platform.  Should the industry rely on open standards, such a firm may find success developing ancillary products.  In addition, these organizations may benefit from wresting control of complementary technologies from the contemporary market leaders.

As competition within systems industries accelerates, rival technical standards supported by a single firm with multiple investments on the value chain or systems of firms employing a cooperative strategy may emerge.  The competitive advantage alone can be sufficient to justify investment in standards battles.  Even greater incentive in the form of increased profitability exists for those firms able to establish proprietary standards.  Though technically superior standards may be introduced after an initial standardization effort, new adopters will tend to opt for the standard with a significantly larger installed base.  So, once a standard begins to “take off”, this acknowledged momentum justifies continued innovation to eventually become a de facto industry platform.

Before joining the fray, a firm must consider whether it will pick a side in an existing standards battle or present an alternative to an emerging standard.  Small start-up firms depend on the existence of standards in systems industries in order to develop their complementary offerings.  These firms might wait for a clear winner to prevail but more likely will throw their lot in with a larger organization.  If a firm gains enough complementary product support for its standard, customers will find greater value in those products that conform than in those that do not.  To expand their reach to more than just the innovator adopter group, firms can attempt to manage customer expectations attempting to accelerate along the normal adoption bell curve where they may be better able to serve the greater numbers of early adopters.  Since the early adopters group responds to marketing with a great deal of technical content, details concerning the technological benefits of a standard may find an eager audience in these customers and push them to acceptance.  Another way to manage expectations is using preannouncements of product releases.  Such a tactic can discourage competitors, impede customer commitment to existing products, give the impression of impending standardization on the preannounced product, and reassure potential partners of the standard bearer’s commitment to the market space.  Also, standards supporters can deliver more advanced technologies while maintaining compatibility with products a firm produced based on previous standards.  However, ensuring backwards compatibility can increase development costs and result in deliberately limiting of technical advantages.

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Posted in Technology Management

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