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We are surrounded by the effects of standardization, but don't necessarily appreciate the role that it plays helping to make products safe, reliable and compatible for example, says Sir Digby Jones, director-general of the Confederation of British Industry (CBI). Visiting businesses of all shapes and sizes around the world has brought home to me the important role that standards play not least in enabling international communication and global trade.
Thats a strong endorsement of the impact of standardization, but the fact is that standards do affect and influence all aspects of modern life. From sport to food, from clothing to scientific instruments, from equipment to management or manufacturing practices, standards ensure compatibility between products or systems, and assist in the spread of new technology. They help large and small companies, multinationals and businesses looking to enter new European and worldwide markets. Public standards, such as those produced by BSI, generate an openness and credibility among goods and services.
According to the Department of Trade and Industry (DTI) in the UK, the growth in the number of standards published in the country during the last century has averaged 3.7 per cent per year. Although there have been fluctuations, the greatest growth in the BSI standards catalogue was during the nineties, averaging 6.4 per cent per annum between 1990 and 2003.
So there are more of them than ever, but is that necessarily a good thing?
A healthy UK economy is dependent upon the wealth creation of an efficient, effective and internationally competitive private sector, and an efficient, effective and responsive public sector, says Sir Digby. In a fiercely competitive global market, no business can compete on the basis of price alone. Other ways have to be found to deliver USP.
Innovation, not just in terms of the constant development of new and improved products, but also in relation to associated services, business processes and practices, business organization, supplier and customer relationships, is critical to success. And businesses need to be fleet of foot and flexible too.
If standardization can help organizations with their efficiency, effectiveness, responsiveness and innovation, then standardization can help drive competitiveness not just for individual businesses but for the economy as a whole.
This positive view of standards is not an off-the-cuff opinion. As the voice of business in the UK, the CBI has been cautiously optimistic about standards for years, but has previously questioned whether they are a productivity driver or regulatory burden. The business body has also expressed concerns over the cost-effectiveness and flexibility of standards, and debated whether these have a positive or negative effect on the competitiveness of UK industry.
In recent years, however, these worries have lessened as the business case for standards backed by government research and articulated by the National Standardization Strategic Framework (NSSF) becomes more apparent.
For its part, BSI has always made the case that standards provide British businesses with a foundation for growth, with risks reduced and consumer confidence in products and services heightened. And according to a survey of 100 decision-makers in FTSE 250 companies conducted in 2005, 100 per cent of respondents believed that consumers view businesses that apply standards more favourably than those that do not.
Also, 78 per cent of businesses that adopt standards deem themselves prepared to deal with IT failure, compared with 28 per cent that do not adopt standards. Seventy-one per cent of businesses that use standards feel ready to deal with failure in the supply chain, compared to 43 per cent who dont.
Far from hindering British business, a 2005 DTI study of BSIs portfolio of formal standards demonstrated that standards have contributed £2.5bn per year to the UK economy and account for 13 per cent of annual growth in UK labour productivity, enabling innovation and international technology transfer, and providing a framework for sustainable growth and profitability by streamlining business efficiency.
In the field
As Sir Digby mentions above, no business can compete on the basis of price alone. They need to be fleet of foot and flexible, and if standardization can help organizations with that process, it will drive competitiveness across the economy. This is true both locally in the UK and on an international scale from contracts to spare parts, standards have helped streamline services and production processes and speed up the internal workings of organizations with operations around the world.
Arup, a global architectural consultancy with more than 7,000 staff in 32 countries, uses standardization as a key management tool. Standards are particularly relevant to the company in terms of hiring and training intelligent, experienced and qualified staff, maintaining and managing an impeccable knowledge base, and communicating internally and externally to ensure that the knowledge base is accessed and accessible to relevant staff.
Standardization has also played an important part in ExxonMobils success. As one of the leading global petrochemical companies, the organization had a worldwide turnover of $298bn in 2003. Standardization has now been applied to contractual agreements for suppliers to ensure that the quality of the contractors, including the people ExxonMobil supplies, remains very high, particularly on the safety side. ExxonMobil requires all its contractors to supply the latest safety statistics (such as how many injuries the contractors had on their last five jobs).
But these standards have not just made life easier for ExxonMobil. Standardized contracts have benefited suppliers, as contractors are now able to bid on a level playing field to resource projects. Because of the improved and modified contracts, the UK site has been able to achieve a five to 10 per cent improvement over the past three or four years in the efficiency of the contractors used.
One of the most striking examples of standards making a difference at an international level is in the telecoms sector, in an area most people take for granted. The GSM Association was founded to develop the specification for a pan-European mobile communications network capable of supporting the many millions of subscribers likely to turn to mobile communications in the years ahead. Yet initially, the big problem was there was no single accepted standard.
Uniquely, GSM foresaw the problems arising from a multitude of incompatible and competing systems throughout the world and the need to create one unified and open system, with affordable mobile communications services available to all.
The standard has meant incredible developments. By reducing technical barriers and promoting compatibility between systems, GSM has benefited manufacturers, network operators and consumers in terms of lower prices and increased availability. Taking that one step on, mobile telephony has contributed to the world economy by creating 4.1 million jobs globally and GSM is understood to account for around 75 per cent of these.
For the GSM Association, establishing the standard has allowed them to take a leadership role in defining mobile telephony standards. GSM is the worlds most successful protocol for mobile telephony, used by more than 70 per cent of mobile phone subscribers worldwide (thats more than a billion customers).
Other multinationals also benefit. BT, one of the worlds largest communications companies, reports significant returns on its investment in standardization, for example in e-commerce where £20m savings have been realized. Just in raising invoices alone, BT has reduced its cost substantially by using the web rather than manual means. The company sees standardization as a means to creating industry standards before the establishment of a market. It believes standards reduce waste in R&D for products that will not be accepted, as well as avoiding costly market battles over preferred technologies.
For companies from emerging markets, standards make for level playing fields, with access to new markets becoming more straightforward.
Clearing the misconceptions
One of the most common misconceptions about standards is that they are just another form of regulation. Sir Digby disputes that claim: I now appreciate much more that standards can range from the very formal and very technical to good practice guidelines, he says.
Not only this, but standards can have a role as alternatives to regulation and I know that the DTI is keen to explore this as part of governments Better Regulation activities. He says that the work that the NSSF partners (CBI, DTI, UKAS and BSI) have been doing over the past few years has been centred both on changing perceptions and bringing the UKs standardization infrastructure up to date. Awareness raising and education have been key. Some excellent materials have been developed that not only explain clearly in plain English what standardization is, but also the benefits that businesses, government and consumers can gain from their use.
BSI is doing some excellent work in bringing standardization to life, Sir Digby adds. BSI and DTI have also been doing some sterling work to speed up the standards making process and develop a more strategic approach to new standards work. This is critical. The creation of new standards is not an end in itself. New standards in new areas must be rooted in real need.
Good progress is being made in the delivery of the vision and objectives set out in the NSSF, he concludes. The CBI will continue to play its part, particularly in the strategic repositioning of standards, by ensuring that business interests are properly reflected in BSI, DTI and UKAS activities and by using our good offices to inform and consult with business.
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