Competitive Standards Strategy

Brian D. Handspicker - 4/26/2006

While competitors and customers believe in standards that are fair, impartial and open, a
company's competitive interests are often met by seeking unfair, proprietary and closely
controlled advantage. Yet the open standards process is valuable to a company in
broadening the potential market, building a positive market reputation and building a
community of potential customers. The challenge is to participate in and drive standards in a
fair, impartial and open manner while internally pursuing an aggressive competitive product,
market and standards strategy. This article will discuss:

• Value of the Standards Process;

• Ethics and the Standards Process;
• Challenges of the Standards Process;
• Competitive Strategy and the Standards Process.

Value of the Standards Process

"Standards solve issues ranging from product compatibility to addressing consumer safety
and health concerns. Only through the use of standards can requirements of interconnectivity
and interoperability be assured and the credibility of new products and new markets verified."
IEEE ThinkStandards site

Of the majority of standards we develop for high-tech industries, one fundamental value is
that they enable products from multiple vendors to readily interoperate or integrate with each
other. Yet standards and standards process contribute significantly more value to a
company's strategic product positioning:

• standards broaden markets;

• standards drive markets to excellence;
• standards foster innovation;
• standards enable comparison and differentiation.

Standards Broaden Markets - While it is often tempting to skip the long standards process
and develop proprietary products, history has shown that sales-volume of products based on
de jure and de facto standards is enhanced by products provided by other vendors. Some of
these products may be competitive, many others will be complimentary. Both competitive and
complimentary products contribute to the growth of a broader market for all related products
and broader potential demand for individual products (e.g. PC-clone versus Mac market
segments).

Standards Drive Markets to Excellence - In addition to creating a broader market, broad

adoption of standards-based fundamental functionality helps to drive markets to excellence.
Standards reduce development risk and often reduce development cost of compliant
products. By reducing integration and interoperability complexity, development efforts can be
invested in delivering better products. Even standards-based products must compete in the
market-place. Vendors naturally develop proprietary value-added features to gain a
competitive advantage. Thus standards often serve to "raise the bar" for competitve products
– to the benefit of the customer.

Standards Foster Innovation - The standards process also contributes to innovation at and
below "the bar" through the contributions of multiple participants. The standards process itself
is competitive, with multiple vendors vying for inclusion of their basic functionality and
exclusion of their competitors functionality. This can result in standards that take a longer-
term market perspective with competing vendors trying to ensure their long-term product
plans are not compromised by a near-sighted standard. In addition, the standards process
attempts to ensure technical competence and correctness of standards through peer-review
during the process.

Standards Enable Comparison and Differentiation - De jure standards processes are

designed to be fair, impartial and open. Competing products based on de jure standards all
customers to compare "apples-to-apples" when making purchasing decisions – at least with
regard to standards-based fundamental functionality. De jure standards also enable equitable
comparison testing of products from multiple vendors. Yet by enabling easy comparison of
fundamental functionality, standards also enable companies to more easily highlight their
products competitive differentiators.

Ethics and the Standards Process

The standards process contributes to the creation of a common community of technical
participants and potential customers. This community can have significant sway over public
perception of a company. Ethical participation in open standards can enhance a company's
market reputation and pique customer interest in the company's products. Unethical behavior
in open standards participation can damage a companies reputation and potentially open the
company to legal liability.

Most open standards organizations, whether de jure or consortia, operate based on a set of
ethical guidelines which include:

• consensus-based decision-making;
• democratic voting;
• transparent deliberations;
• openness;
• inclusive voluntary participation;
• due process to resolve disputes;
• impartial operation.

Avoiding conflict of interest (and the perception of conflict of interest) is critical to a company's
standards sucess - even while pursuing a highly competitive standards strategy. This is
particularly important when acting both in a standards operational role as well as acting as an
individual or corporate representative.

Challenges of the Standards Process

De jure standards take a long time to develop, particularly with respect to fast-moving
technical markets.
 • consensus decision-making can result in lowest-common denominator standards
rather than best-in-breed standards;
• "voluntary" nature of participation can result in wide-variations in knowledge, skills,
effort and contributions by members;
• participation of non-contributors and non-stakeholders can slow deliberations (rubber-
necker syndrome);
• infrequent meetings and poor inter-meeting group collaboration;
• multiple venues progressing similar proposals;
• prioritizing standards projects within the constraints of an open, concensus-driven
process;
• competitive reality within the standards process.

These various weaknesses in standards processes each present competitive strategic

opportunities.

Competitive Strategy and the Standards Process

"The benefits of robust competition stem from strong incentives to innovate, so it should come
as no surprise that such benefits tug in a direction opposite to standardization. One should
like to win market share by being the best, not by preventing the best from coming to the
market. " Of Standards and Monopolies - Richard Volkman

While competitors and customers believe in standards that are fair, impartial and open, a
company's competitive interests are often met by seeking unfair, proprietary and closely
controlled advantage. Yet the open standards process is valuable to a company in
broadening the potential market, building a positive market reputation and building a
community of potential customers. The challenge is to participate in and drive standards in a
fair, impartial and open manner while internally pursuing an aggressive competitive product,
market and standards strategy.

Technical competence and correctness is critical to the success of a standard in the industry
and the market. However, an internal corporate standards strategy has as much, if not more,
to do with competitive positioning within the market as with the underlying technology of the
standard under development.

Part of the reason that de jure standards take years to develop is that often those standards
are being developed for a market in which there are already competing and divergent
products. Whether those products preceded the standards effort or are early “jump the gun”
standards-based products, many standards participants will have a vested interest in
protecting the market position of their existing products.

Standards strategy should be an integral part of competitive strategy, using the standards
process to:

• create standards based on commodity technologies and fundamental functionality to

broaden the market for related value-added products, content and services;
• standardize fundamental functionality, highlighting and more clearly differentiating the
value-added features of a company's products;
 • drive markets to excellence through standards to winnow out less capable vendors and
focus potential competition;
• deliver open source software for commodity functionality which can hobble the revenue
streams of competitors with narrower visions;
• gain first-mover advantage once standard has stabilized by driving internal product
development in synchrony with standards evolution
• pre-empting the market and potentially create a de facto implementation by "jumping
the gun" - delivering products once key functionality is firmly entrenched in the
developing standard.

A company can participate in standards in fair, impartial and open manner while pursuing the
company's competitive interests. The open standards process can be used to broaden the
market for standards-based and related value-add products. Simply by participating in the
process will contribute to a positive market reputation and build a community of potential
customers. Effective participation also includes internally pursuing an aggressive competitive
product and market strategy while executing a subtle yet aggressive standards strategy.