Standards & Momenteum

In the best of all possible worlds standards are a win for everybody in the market. A public good. While economists like to get all fixated on the problem that some players freeride on the public good I find the momenteum problem much more interesting. How do you get the emerging standard adopted by enough players that it becomes a real standard?

You can’t get a standard to happen unless a sufficent number of players in the market get on board. Say you wanted to introduce a new payment’s standard, like for example a stored value card to replace pocket change. You would need to get at least three groups to adopt it; the citizens would have to carry it, the stores would have to take it, and the equipment makers would have to manufacture all the gagets (cards, readers, etc.) to make it work. Writing the standard would be the easy part – unless of course all the players show up at the committee meetings.

All these players in the game tend to hang back; with the exception of the gaget freaks and the handful of people who want to bet their companies on getting first to this new market.

The whole assorted ways of convincing folks to climb on the bandwagon get used to solve this problem.

This is a social engineering problem. One of Cialdini‘s classic ways to tackle this kind of problem is to get the king to give the entire enterprise his blessing. (see also Aramis or the Love of Technology)

These days we don’t have a lot of kings. The liturature’s solution to this is found in the Wizard of OZ. There in the fraudulent Wizard is faced with the problem of how to give the tinman a heart. He announces he has something just as good. A philanthropic metal! We have market leaders!

“On June 11, Linda Dillman dropped a bomb on the retail industry. Wal-Mart Stores Inc.’s CIO announced that, as of January 2005, the world’s largest retailer would require its top 100 suppliers to put radio frequency identification (RFID) tags on all pallets and cases they ship to its distribution centers and stores. The news sent suppliers and competitors scrambling to learn about the wireless technology, which enables companies to identify and track items in the supply chain automatically.” – from Case Study: Wal-Mart’s Race for RFID at eWeek

So, one of the ways to try to build momenteum for your standard is to play the authority card. That comes in lots of flavors. You can get the authorities to say encouraging things, bless your standard, recomend your standard, require your standard, set deadlines for your standard.

This is not just about the power of the authorities though. It is also about their reputation. If Walmart says nice things about RFID that blesses RFID with some modicum of Walmart’s reputation for running a highly efficent distribution channel. If they blow it it damages their reputation.

It not just about power and reputation. It’s also about agency. If the mayor endorses a plan to revise the zoning standards he is speaking on behalf of the constituencies that elected him. Inspite of agencies many tangled aspects, because the momenteum problem is all about getting the majority to adopt, this aspect of “appealing to authority” is actually quite attractive.

All of these appeals to authority can go bad, becoming dangerous and deceptive. If the mayor can’t deliver his base then his promise is hollow. Hollow promises are deadly for a political operative; if he misleads people he’s unlikely to survive the next election. If Wal-Mart forces their vendors to adopt a standard but the rest of the industry fails to get on the bandwagon then Wal-mart’s reputation is damaged and vendors put another thing on the list of reasons why they might want to find a way to get around Wal-mart’s strangle hold on the retail channel.

In vibrant markets and political spheres we have means of goverances that can correct misleading or abusive uses of authority. In failed markets or goverments these means may take long painful periods to operate.

One sign of a healthy market or goverment is that those who appear to have authority are much more tentative in using that authority to force the momenteum of the emerging standard. That tentative behavior is the symptom that there are checks and balances in place that temper their power. That tentative behavior signals that they know their status in the system is tenous. That tenous status makes their acts less forceful, less straight forward, more ambigous. That’s good, even if it makes them seem slippery, or political.

Leave a Reply

Your email address will not be published.