Standards Wars

Today I have been...

Reading an article entitled "The Art of Standards Wars" by Carl Shapiro and Hal R Varian

Why?

Required reading

So What?

The article tells a few stories (AC vs DC, Betamax/VHS, CBS/RCA for N/America colo(u)r TV etc).

They state you need

• Control over an installed base of users
• intellectual property rights
• ability to innovate
• first-mover advantages
• manufacturing capabilities
• strength in complements
• brand name and reputation

To successfully wage a standards war.

Is your technology and your rivals' technology backwards compatible?

• You have a Rival Evolutions war.

Is only yours backwards compatible?

• You are fighting an evolution vs revolution war

Is only yours not backwards compatible?

• You are fighting a revolution vs evolution war.

Is neither backwards compatible?

• You are fighting a Rival Revolutions war.

Control over an installed base allows you to pursue an evolution strategy.


If you have strong copyrights/patents you have the intellectual property right advantage.

If you have the ability to innovate you can often out-engineer your competition.

If you have done lots of product development work and so are farther down the learning curve you have a first-mover advantage.

If you have good manufacturing capability you can use this to your advantage in a standards battle.

Strength in complements allows you to use your advantage in, eg. other products (sony ps3 and blu-ray, intel motherboards/interfaces and cpus).

A reputation and good brand name can give you instant credibility in your market.


Pre-emption - build an early lead so positive feedback works to your advantage. One way is to be first to market. Find pioneers and sign them up.


Expectation management - one way to do this is vapourware. Announce a great new product and watch your rival's sales dry up - even if your product is some way off. Assemble allies and make your claims about your product's current or future popularity.


Once you've won - stay on your guard. Technology marches forward. Offer customers a migration path as you move forward. Commoditise complementary products, whether yours or someone else's. And be careful about competing against your own installed base. Video games producers are not huge fans of the second hand games market. Protect your position. Leverage (ugh) your installed base. Stay a leader.

But if you don't win? Usually it's not possible to wrest leadership from another technology that is as good and more established.  Why not position yourself to make a run at the next generation of technology. Be careful about damaging your reputation by stranding customers. Consider adapters and interconnection. But avoid survival pricing.



How will I use it?

To note:

The winner is likely to be the one who has the best strategy, not the best technology.
Not all standards battles are alike.
It can be worth building an alliance.
The focus is entirely on markets. Regulatory influences can also occur.