Do Business Well

It would be hard to overestimate the importance of standards. And by “standards” we are not referring to moral or ethical standards. We mean languages, symbols, conventions, scales. These are the DNA of civilization. Without our ability to devise and then accept standards, we could never have developed such a complex society.

Standards enable us to communicate. Each language is simply a shared set of standards. If you don’t share someone’s grammatical standards, and if you cannot agree on what certain symbols mean, then you can’t speak that person’s language. All communication, no matter what its medium, demands shared standards—just ask a Windows user who has tried to download a document from his Mac-bound buddy.

Standards drive learning. The skill of arithmetic is teachable precisely because all the students and all the teachers know that they are adding and subtracting in “base ten.” Shared standards make skills transferable.

Standards make comparison possible. For example, in order to function, market-driven economies needed a standard system for comparing the value of one company with that of another. Until the late fifteenth century no such system existed. But in 1494 a Venetian monk, Luca Pacioli, formalized that system and communicated it in the first book detailing the standards of double-entry bookkeeping. Wall Street still uses that system today.

Counterintuitively, standards fuel creativity. Take music as an example. There is no right way to structure sounds. But in Western Europe in the late sixteenth century, a structured scale gradually became standard. This scale, called a “chromatic scale,” used twelve tones per octave, with each tone being one hundred cents apart in pitch—represented by the seven white keys and five black keys on a piano keyboard. On the surface this sounds as though it would restrict the composers’ genius. But the opposite was true. Being limited to just twelve tones didn’t dampen their creativity; it fostered their creativity. The chromatic scale, and its formal notation system, spawned two centuries of the most prolific and original composition. Composers as diverse as Vivaldi, Miles Davis, Stravinsky, and Madonna all used the standard chromatic scale to give voice to the unique music playing in their minds.

Standards, then, are the code in which human collaboration and discovery is written. Great managers know that if they want to build a cooperative, creative organization, they will have to ensure that their employees use the relevant codes. Lawyers must study case law. Air traffic controllers have to learn the standard navigational protocols. Accountants have to learn the rules of double-entry bookkeeping. And engineers have to design products that will operate on the standard electrical frequency broadcast twenty-four hours a day from the National Bureau of Standards‘ radio station.

If standards are important today, then that importance will surely multiply many times over in the coming decade. Here is how Kevin Kelly, writing in Wired magazine, describes this decade:

The grand irony of our times is that the era of computers is over. All the major consequences of stand-alone computers have already taken place. Computers have speeded up our lives a bit, and that is it. In contrast, all the most promising technologies making their debut now are chiefly due to communication between computers—that is, to connections [italics added] rather than to computations.

Connections mean networks, and networks require standards. And as we speed into this networked world, the companies that define the new standards—the new languages, platforms, scales, conventions—will gain a huge advantage over latecomers. They will be the gatekeepers, perfectly positioned to meet the needs of the hungry new community they helped to create.

Making your standards universal is already a telling competitive advantage. This is how VHS beat Betamax. This is how Microsoft beat Apple. Over the next few years you will see more and more companies breaking all the rules of traditional business in order to build networks. This explains why Netscape gives away its browser; Sprint, MCI, and AT&T lure us with free cellular phones; and Sun Microsystems floods the market with Java. They are all trying to launch their standards toward the critical mass needed to become the standard.

Since building networks is so important, all employees will have to play their part. In the same way that Swiss clock makers were not encouraged to devise their own units of time, the employee of tomorrow will not be allowed to create his own standards. For example, given their intense competition with Sun Microsystems, Microsoft programmers will rarely be given the freedom to write new software using Sun’s version of Java. Or, in a less high-tech setting, with the national focus on standard achievement tests, teachers will not be permitted to redesign their curricula based on their own preferences.

This doesn’t mean that in the future management will be rigid and intrusive. It simply means that employees will have to express their creativity and individuality through a standard medium. Here again, unrestrained empowerment can kill a company’s value.

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