Session 7: Managing standards Flashcards
1
Q
When do network extrernalities (standards) arise?
A
Network externalities are common in industries that are physically networked.
Network externalities also arise when compatibility or complementary goods are important.
2
Q
Who sets standards?
A
- “De jure”
a) set by governments
b) enforced by law usually - “De facto”
a) set by market - Committees
a) Set by private “clubs”, industry associations (e.g., IEEE)
b) Or by public national or international agencies
3
Q
The ability of a firm to establish its technology as an industry standard has…
A
…become a key determinant of its long-term competitiveness.
4
Q
The outcome of standards wars depends on…
A
…how compatible each player’s proposed new technology is with the existing one.
5
Q
Key assets for winning standards wars include:
A
- control over an installed base of users
- intellectual property rights
- ability to innovate
- first-mover advantages
- manufacturing capabilities
- brand name and reputation.
6
Q
What are the market strategies in standard wars?
A
- PRE-EMPTION: is based on early lead and positive feedback.
(early product launch, aiming at early adopters, with penetration pricing) - EXPECTATIONS MANAGEMENT: is about establishing credibility with customers.
(pre-advertising, assembling allies, making ‘grand claims’ about your product current or future popularity.)
7
Q
Key learning points in Standards Management
A
- Network externalities: the higher the number of users, the higher the value of a technology for these users.
- Network externalities often drive standards wars between firms proposing alternative technologies.
- When the switching costs between technologies are high and the benefits of changing to a different technology are marginal, lock-in may occur, sometimes in inferior technologies.
- Standards wars are hard to predict, but can make or break companies. Who wins is the outcome of a complex interplay of factors.