Technical standard-setting is painstaking but necessary. But is it possible to devise a more flexible, dynamic system for agreeing standards to keep pace with changing technologies? A panel, organised by the Science|Business Innovation Board, discussed this at the Innovation Convention 2014
China may produce some of the cheapest steel in the world, but the standards it applies in doing so do not conform to international standards. The result, as Alan Begg, senior vice president for group technology development at SKF recounted on kicking off the panel debate, is that his company cannot sell ball and roller bearings made from Chinese steel to the automotive giant, Ford.
Begg’s anecdote potently illustrates how a lack of standards can impact on competitiveness and restrain trade, underlining the need to create a dynamic, flexible framework to support the setting of global standards.
On a basic level, standards are essential rules which ensure quality and safety and make things interoperable, driving the adoption of new technologies and the growth of new markets. The problem is that setting standards is a long-winded bore. Not only that, the process is expensive, and while national committees pass the files around, companies can use market dominance to set de facto standards, fostering cartels and monopolies.
In short, a new recipe is needed for a better, equitable system of technical standard-setting that adapts faster to changing technologies.
The experts on the panel discussed the ingredients for a new standards-setting framework, such as geography, transparency, regulation, and the role of disruptive innovation.
Making standards global
While the panel agreed there are not enough global standards, there wasn’t much agreement on how to deal with this shortage. “An ideal setting would be to have global standards. If not, then at least ensuring the global interoperability of different standards would be enough,” said Reinhilde Veuergelers, of KU Leuven.
The problem is that interoperability does not go far enough for global companies. And this is why there is a need for a global framework, Begg said.
Standards v. regulation
The panel also discussed the risks raised by standard setters who push for these standards to be embodied in regulation. Legal expert Howard Fogt, partner at Foley and Lardner, gave the example of a standard used in the chicken farming industry in California, which later became a regulation. This had a negative impact on newcomers to the market, and small companies could not afford the cost of compliance.
Creating an overarching legal framework that can avoid such market imperfections and protect broader social interests would be very challenging. But there is a need for a new – global- way of developing a standard that takes into account the increasingly blurred line between regulation and standards, Veuergelers said.
The role of SMEs in standard setting processes
Standards might help big multinationals, but they can create difficulties for SMEs and for the innovation they generate, said Mohammed Chakri, Partnership Director at Sanofi R&D. Disruptive innovation often takes place in SMEs, but these companies are ignored when it comes to standard-setting processes.
For example, currently there are no mechanisms in the EU’s Horizon 2020 R&D programme that would help SMEs to take part in standards-setting, said Sabine Brunswicker, Director of the Research Center for Open Digital Innovation, Purdue University. The Commission needs to step in and help SMEs to have their say.
SMEs are good at innovating and at creating new products, implying that intellectual property rights are more important than standards. But telling SMEs to focus solely on protecting IP is not entirely appropriate, Veuergelers told the meeting, saying, “We should keep in mind that the designer of the standard will profit more than the patent owner.”
What to do next?
Standards can ease the process of innovating, but they can also become an obstacle for disruptive innovation. In order to avoid the negative effects that standards have on innovation, an EU-wide policy framework for standards is needed.
This framework has to take into account the need for interoperability on a global scale, to strengthen the border between standards and regulation, and it should find more ways to include SMEs in the standards-setting process.