The Economic Importance of Standards

2005 May 18

http://www.w3.org/2005/Talks/0518-stds-tbl/

Tim Berners-Lee

MIT Computer Science & Artificial Intelligence Laboratory (CSAIL)

Director, World Wide Web Consortium

We are not alone

View without standards

What is missing?

Strategy with others
Technology development pooled
Market development multiplied
Market size, market existence determined

Examples of markets

Cellphones
Anything on the web
Anything which plugs into power
Graphics
Digital photo development
Railways

Who benefits?

My division?
My company?
My competition? The first mover?
My country?
My business area? (do I have to shift to profit?)
My customers?
Society at large? (eg health sites, news, etc)

Internet stack benefits

Separate markets exist for:

Hardware
Operating system
Browser
Connectivity (IP)
Search services
Shoes

Standards allow different layers to evolve independently and therefore faster and better

Difficult decision

Plan A: Pursue standard. Commit resources. Transition products. Work with competitors. Encourage it to to all take off
Plan B: Continue working in isolation. Keep proprietary control of customers.

Decision Difficulties

Estimating the size of new markets (eg cattle market site, MWI)
Guessing* whether everyone else will
Estimating the cost of lack of standard
Cost and benefit in different centers (eg patent policy).
=> Decision has to made at CXO level

Participation costs

Strategist participates in standards planning
Experts participate in standards group
Product development aligns with upcoming standards
Marketing of new standards

Participation direct benefit

Strategy is informed by community
Expert effort is multiplied 10-100 fold
Product development may use shared codebase
Marketing effort is multiplied

How to you measure the cost

... of the US still using feet and pounds?
... of power sockets being different all over Europe?
... of US cellphones not being GSM?
... of the first WAP not being an open Internet platform?
.. of the / in MS-DOS being backwards?
... of U Minn asking for a fee for Gopher in 1993?

Gopher example @@

... of U Minn asking for a fee for Gopher in 1993?

Gopher traffic drops when fee announced

IT User benefits

Avoid vendor lock-in
"Give me my data back" - Bosak
Access for all -- accessibility, new devices
Unexpected reuse (Web)
Cross-application integration (Web Services, Semantic Web)

Summarizing

	Costs	Benefit (fail)	Benefit (success)
Plan A	Standards group participation Product transition Standard promotion (?)	conformance to a sidelined standard	Market size jump Market share jump
Plan B	Normal product development Normal product promotion	Business as usual	Market share loss Catch-up cost

Often, Participation carries the least risk

Working for success

Avoid Not Invented Here and the wrong side of the competitive ethos
Chose launch community (size tradeoff)
Make it open: Enlarge the multiplication factor
Make it royalty-free: no economic disincentive
Openly support standards

World Wide Web Consortium

Global organization for a global infrastructure

Users, Vendors, Academics meet
Pool investment of energy
Forming consensus: hard work but invaluable
Well-honed process and patent policy
Decentralized architecture

Thank you

Questions?