Standards, Complexity and Transitional Technology Markets

Shane Greenstein, Bolin/Cargill, The Standard's Edge

9/12/2008
(Original Publish Date: 1/28/2006)

In this essay, I address two common and seemingly unconnected beliefs about the market role for standards: The first belief is that despite increasing knowledge and study, standardization strategy has become more complex over the last two decades. The second is that the introduction of standards can make a market either more or less differentiated - yet, because of the market’s increased complexity, one cannot make predictions about the direction of change. I argue that analysts must first analyze different types of transitional technology markets. In such markets, vendors sell users goods and services that move the user from one level of technology to another. Analysts should ask two sets of questions. First, they should ask whether a standard makes a market more autonomous or interconnected. Autonomous markets display behavior disconnected from events in other markets. Second, analysts must ask whether standards in the installed base define a comparatively uniform installed base or a varied one. That is, are potential adopters of the new technology improving on a similar (uniform) situation or on a different (varied) one. The framework is illustrated on many examples from a variety of electronics markets.