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The Globe and Mail

Transcript: The brewing battle over global standards

KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to JoAnne Yates from the Sloan School of Management at MIT [the Massachusetts Institute of Technology].

So, JoAnne, in a globalized economy, global standards are becoming more important. I understand you are studying that. What are some of the key findings you have come up with?

JOANNE YATES – I have been studying, not just standards in the last five or 10 years, but standards over 115 years – how they started back in 1900 and how they have evolved to the present, and that globalizing impulse has been there clear through the whole period.

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As early as 1906, the International Electrotechnical Commission was created to enable standards to allow different countries in a global economy to communicate with each other. Telegraph, at that point, was more central than, of course, many other of the electrical technologies.

In the current mode, I think one of the things that is happening is that global companies are playing a bigger and bigger role – it is critical to them to have standards and there are several mechanisms for setting up standards.

On the one end, you have the firms setting up a standard and trying to win in the market, setting up what they think is right and then trying to win out in the markets – the VHS versus Betamax standards war was in the market. On the other hand, you have companies trying to get the EU [the European Union] or some governmental body to declare a standard so that they know that is standard.

But in between those, there is this huge range of, what are called Voluntary Consensus Standards-setting bodies and groups and committees, as well as consortia and various other kinds of mechanisms. In between the hierarchy and the market is this huge in-between area, and that has become critically important. More fights around standards are going on in that [area]; in fact, now what we are getting is more competition in that middle sector.

So we are having new standards agencies and new groups of people coming up, new consortia popping up, when companies think – and companies are doing forum shopping. They are saying, "Okay, ISO [the International Organization for Standardization in Geneva], they are not heading towards a standard I want, so I am going to start a consortium over here," or "I am going to see whether the IETF [Internet Engineering Task Force] will give me the standard I want," or something like that. So there is a lot of competition for standards setting now.

KARL MOORE – When we look at it, JoAnne, what is a global multinational, given these new standards and how it is evolving – how should a global multinational approach it?

JOANNE YATES – I think the most important thing for any global multinational is to be a player in that vast middle ground of standard setting. They need to have a presence.

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That means, not just when it's critical to them, when the standard is one that they absolutely have a deep interest in, but they have to be present in those standards committees. They have to have representatives, they have to have a standards body or unit within their companies, so they are seen in that standards world and they are seen as co-operative players so that when they do have something that they really care about, they are already in there, they are recognized, they are respected, and when they make their arguments, they will be listened to. If they wait and don't participate and then jump in at the last second, just for something that is critical, they won't be listened to as well.

So it is important to have a presence in that standards-setting community.

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