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On the Leading Edge… or Behind the Curve?

August 1, 2009
Are you sure you’re doing all you can to gain and maintain your competitive advantage? Of course, you are spending a great deal of effort on increasing efficiency, reducing costs, and looking for that one little ‘thing’ that differentiates you from your competitors and lures customers and new prospects your way. But are you ‘on the leading edge’ or ‘behind the curve’? The NPES Standards Programcan help.

The Economic Benefits of Standardization

The German Institute for Standardization (DIN) commissioned a research study to determine the value of standardization to corporations. The study was developed from questionnaires sent to over 4,000 companies in 10 industry sectors, selected at random, in Germany, Austria and Switzerland. The final report on that study, entitled “The Economic Benefits of Standardization,” was published in August 2000, and the findings continue to ring true…maybe even more so, in today’s competitive economic environment.

One part of the report focused on both the benefits of standards for business and on the benefits for the economy as a whole. In comparing both company-developed standards, and industry-wide standards, the report states that “…company standards have the greatest positive effect on businesses, for they help improve processes. When it comes to the relationship with suppliers and customers, however, industry-wide standards are the main instruments used to lower transaction costs and assert market power over suppliers and customers. In fact, industry-wide standards play a vital role in our increasingly globalized world.”

The report further notes that “…it is significant that standards make a greater contribution to economic growth than patents or licenses, that export-oriented sectors of industry make use of standards as a strategy in opening up new markets, and that standards help technological change.”

Strategic Significance of Standardization

“Companies are generally unaware of the strategic significance of standardization.”

Although the persons involved in the standards development process are aware of the significance of the standards to their company’s success, often this awareness does not extend to the corporate decision makers. In addition, the decision to participate in the standardization process is often made only on the basis of how time consuming and costly this will be.

The economic payback of participation in standards development is not always obvious, but the survey showed that companies actively involved in the standards process are more likely to see both short- and long-term cost benefits than those that do not participate.

Potential Competitive Advantage through Standards

“Having influence in the content of a standard is an important factor in gaining competitive advantage.”

It is often said that you can be part of the solution, or live with the solution developed by others. Being part of the standards development process allows the company to gain ‘insider knowledge’ and to exert greater influence on the substance of the standards.

Cost Reduction through Standardization

“Standardization can lead to lower transaction costs in the economy as a whole, as well as to savings for individual business.”

The interviews with representatives of major firms as well as small- and medium-sized companies revealed that the costs of developing standards are not easily quantified. However, the businesses interviewed rated the positive effect on transaction costs as positive, noting that transaction costs drop considerably as a result of standards since they make information easily accessible to all interested parties.

Effects of Standards on the Supplier-Client Relationship

“Standards have a positive effect on the buying power of companies.”

Standards can encourage competition within the marketplace, and can be used by businesses to exert market pressure on companies further down the value-added chain. Businesses are, therefore, able to use standard to broaden their potential markets. Companies also have increased confidence in the quality and reliability of suppliers who use standards.

Standards and the Formation of Strategic Alliances

“…it is clear that cooperation between companies in matters of standardization is advantageous, for the resulting synergy can help reduce costs and increase profits.”

In the survey, respondents rated the effect of standardization on cooperation with competitors as positive, indicating that standardization encourages cooperation between businesses that are at the same stage in the value chain.

Standards and Research Development

“Businesses not only reduce the economic risk of their R&D activities by participating in standardization, but can also lower their own R&D costs.”


The economic risk of research and development is lowered when a company can influence the content of standards to its advantage. In addition, the expense of R&D can be reduced when participants in standards work make their results generally available, eliminating duplication of research efforts.

Product Safety and Liability

“Lower accident rates are partly due to standards. Participation in the standardization process increases awareness of product safety.”

The development and implementation of safety standards contributes to the reduction of accident rates, and raises awareness of safety features and practices. Representatives of consumer organizations see their involvement in the standardization process as having increased the industry’s awareness of the importance of product safety.

“Because standards reflect the current state of technology, they can help businesses reduce their liability risk.” NPES makes it easier for you to become part of the standards development process.

For more information about the NPES Standards Program, refer to the brochure enclosed with this edition of NPES News or contact Debbie Orf at e-mail: dorf@npes.org or phone: 703/264-7200.
 

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