Standards are an investment

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Smart business people know the difference between short and long term investments. They understand what needs to be spent to meet or increase this quarter’s revenue and profit targets, and they balance what they spend so they get growth in future quarters and future years. For example, if you are a commercial software developer and you are starting work on a product that will be available starting twelve months from now, you know that it won’t give you revenue next month. You hope that it will be a product that will be of great value to many customers and really increase your revenues. You will have money and people tied up in the product development for some time as an expense, but the plan is for future revenue to offset this and more.

When you put money in the bank or stock or bonds, you lose the ability to spend the money but you hope for bigger payoff eventually. This is well understood.

If I look around the industry, I don’t always see people making this kind of investment in standards. Not only is there a lack of investment some places, but there is the wrong investment in other places. As in the stock market, sometimes this is simply betting on the wrong things despite good advice to the contrary. Other times it is simply throwing good money after bad: putting more money into something that you think will probably not succeed. Yet another occurrence is putting too much money into something that will under-perform, thereby missing the opportunity to do better elsewhere. If you trust the wrong people to manage your investments, you’ll also not get the returns you expect.

Companies need sound investment strategies for standards. They need to put the right people, the right number of people, and the right money behind developing good standards and then actually doing something with them. If you invest in a stock and then don’t sell at its peak price, you lose. If you invest in standards development and then don’t employ them well in the products you build or the services you provide, you lose again. If your next door neighbor invests in the market better than you do, he or she will be moving to the bigger house down the street. If your industry competitor invests better and smarter in standards development and then executes well on deployment, they will eat your marketshare. So not matter how well you do this quarter, you will suffer in the long run.

Horizontal standards like web services are well understood and have received a lot of industry investment. I think companies and countries who are not investing now in how they will deploy ODF, the OpenDocument Format, will lose big in the future (just my advice). As in the stock market, there are always those who will hawk alternatives or options that have been around for a long time. Past success is no guarantee of future success. The same is true in the standards world.

What are the standards areas that are hot right now and can lead to big gains in the future? Two areas: vertical industries and emerging markets. A lot of people are investing in various ways in these areas and a lot of the investments are problematic. Some are not investing enough, some are investing too much and then executing badly, and some just don’t see the big picture.

Standards solve problems, standards lead to innovation, standards can drive growth, standards can drive competition and offer greater value to customers. Invest sufficiently and wisely or you will pay the price. You heard it here first (ok, maybe not, but I just wanted to say that).

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