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What Value Standards?

by Robert R. Carpenter

Standards developing organizations must face issues such as intellectual property rights, consortia-based standards development, and pricing controversies head-on to thrive. Robert Carpenter discusses his view of these and other pressing concerns that bring into question—what value standards?

As we all now have both feet firmly planted in the 21st century, perhaps we should take a good look at the business of standards today. Since becoming president and CEO of Information Handling Services in 2001, I have had the opportunity to do that. Over the years I have worked at companies (Square D, AT&T and NCR) that have been both users of standards and members of various standards organizations. Now as a standards-republishing partner of many SDOs including ASTM, I’m happy to share some of my observations.

While historically the standards business has had a strong sense of mission and purpose, many standards bodies now appear to be searching for strategy and relevance in today’s highly dynamic world. Technology has opened the door on new processes for both the development and delivery of standards. In the corporate world, there is a blurring of lines across industries and technologies. Increasing numbers of companies question the value of standards bodies from an economic perspective of having to pay dues, and having to supply volunteers to be involved in a standards-writing process where the standards take too long to be developed. New consortia are being formed to create standards for specific industries more rapidly than is done by the traditional SDOs. Many SDOs seem to be struggling in a world of possibilities.

Undoubtedly, SDOs today face risks—some more than others. I see three major risks:

• Disintermediation;
• Consolidation; and
• Intellectual property rights violations.

Disintermediation occurs when companies, in order to meet the urgent needs of their industries and markets, take part in the standards development and distribution process by participating in consortia rather than following the route of established SDOs. Competition is fierce to be first-to-market with new products, and consortia can sometimes play a significant role by providing needed standards, even though they may not be blessed by the traditional voluntary consensus standards development protocols.

There appears to be a great deal of consolidation going on in the standards business—both in the area of the SDOs themselves, and in the mutual adoption/recognition of standards. Economics, as well as the push for increased internationally recognized standards, will continue to drive this trend. Its ultimate impact, good or bad, is yet to be determined, but the challenge to SDOs is undeniable.

Intellectual property rights violations occur largely from the ease of “sharing” electronic documents today. Some of the sharing could be considered “innocent.” Many times users are surprised to learn that standards are copyrighted documents, subject both to copyright law and to the terms and conditions of the standards seller or reseller. Some sharing is a blatant violation of copyright to avoid incurring the cost of purchasing standards, or to avoid the cost of loading those standards onto a corporate network or intranet. Much of this cost-avoidance will be eliminated once SDOs and standards resellers employ the digital watermarking and document locking technologies now available. Until then SDO revenues and budgets are at significant risk.

Improving Growth Rate for SDOs

Paradoxically, while the challenges are significant, the opportunities for standards organizations have also never been greater. Globalization of companies’ target markets increases the need for more standards from more sources. Technology is enabling mid-sized firms to compete, as they have never done before, and they are doing so on a global scale. The economic climate is conducive to “make vs. buy” decisions, and this creates an urgent need for corporate process improvements in cycle time, productivity and quality. The use of appropriate standards helps fill that need.

In an increasingly dynamic world, what will determine the growth rate for the standards industry as a group? What will determine the success of individual standards associations? I believe the answer to these questions lies in four major challenges:

• Understanding the value of “content”;
• Pricing accordingly;
• Selecting partners/channels carefully;
• Improving the entire standards process.

The wealth of standards content today has taken decades, even centuries, to accumulate, and millions of man-hours to build. The effort of so many lives has been put into the development of standards, and these very documents have in turn touched so many lives in so many ways. This magnificent collection of information is highly valuable intellectual property that must be valued and protected.

It is important that standards be priced appropriately for sale in the marketplace. Not only do they need to be priced appropriately so that SDOs can produce revenue to, in turn, continue to support the standards-development processes; they need to be priced to reflect value, to reflect customer make/buy decisions, and to reflect market competition.

There seems to be considerable pressure today to make standards available for free on the Web. This pressure for “free standards” is sometimes a result of a need to have a particular standard quickly recognized as an “industry” standard—oftentimes benefiting a select company or subset of companies. Other times this pressure results from efforts on behalf of companies seeking to secure a “free ride” without investing time or effort in the standards creation process.

And finally, the “free” philosophy finds its support in the belief that free standards will greatly encourage their use. This argument for many, many companies is seriously flawed. The adoption and use of standards is accelerated when the delivered value of the standards is high, not when the cost is low or zero. This is because the acquisition cost of the standards is far outweighed by the cost of integrating the standards into critical business processes and applications.

To re-emphasize, the value of standards is not in their low/no acquisition cost; the value of standards to the vast majority of companies is in the impact on their critical business process.

An Example

To illustrate this, consider jet fuel. What is the value of jet fuel? Jet fuel spilled is worth nothing; jet fuel in a tank on the ground is worth a certain price per gallon. But what is the value of that jet fuel to the aircraft in the sky? And what is the value of that jet fuel when the aircraft is in the sky, the tank is running low, but the target airport is socked in by bad weather? The value of the jet fuel is relative to the particular situation in which it is being used. The value of standards to a company rests in how well they are used in an integrated system to improve a critical process—cost, quality, or speed.

To bring the example a bit closer to home, a standard document has a certain price when offered for sale. But what is the value of that standard to the company that lost a huge contract because its products were not certified to that standard? Or what is the value of certain standards to the company that had to spend huge dollars retooling and rebuilding products that were not built originally to the correct standards required in another country, or the cost of creating an unnecessary internal company-specific standard? The value of standards is their impact on these critical business processes and the products and services they support!

The second major challenge outlined above addresses pricing standards appropriately. To understand the key issues here, the standard has little value until it is used to create products, incorporate safety, streamline processes, improve quality, avoid over-design, and speed time-to-market. While there is a cost in utilizing and integrating the standard into these processes, the return on the standards investment—the value of the standard—is realized only by the resulting significant improvement in these processes. Consequently, the price of the standard should reflect the value it creates for customers.

But to create and understand the value created by standards integrated into key processes requires not just good business partners, but great ones. This is the third challenge for SDOs, selecting the right partners and channels.

SDOs should be cautioned to choose their resellers carefully. SDOs are advised to choose a partner that brings substantial additional value to the standards package and provides additional “value-added” services such as consulting, integration, and education. SDOs would be well advised to choose partners that focus on the successful integration of standards in applications and processes, that have a global infrastructure and that have, most importantly, an understanding of and a committed willingness to protect the value of the standards’ intellectual property.

Finally, in order to keep improving the value of standards to users, it is critical that SDOs continue to review and improve the standards development process and incorporate state-of-the art technology to do so. Standards users expect and deserve to be provided with relevant, timely, high-quality standards. When we, SDOs and IHS, listen to the users and are truly responsive to the needs and requirements customers face in their daily business operations, the issue of pricing fades and value and return on investment become the prime issue.

It is up to all of us to ensure that standards users truly perceive the value of standards to critical business processes. In the inimitable words of Warren Buffett, “Price is what you pay. Value is what you get.” //

Copyright 2002, ASTM

Robert R. Carpenter is president and chief executive officer of IHS Group. Before joining IHS, he was chairman and CEO of System Software Associates, a leading enterprise application systems supplier to major corporations. Earlier, Carpenter served as President and CEO of Origin Americas, as well as heading up NCR's worldwide services business.