Standards enjoy a unique challenge in private industry sectors. Standards require competitors to agree upon consistent approaches to technology implementations and business processes. However, in a competitive marketplace how can a company obtain differentiation if all the players within an industry are using the same processes and technology? Standards evangelists offer an answer to the dilemma. Pundits proclaim that industry leaders should delineate business processes between those which do and do not provide competitive advantage. Those which are non-differentiating functions should be standardized across companies for the sake of optimizing efficiency in the marketplace. Conversely, for functions that do provide competitive advantage standards should not be as strictly enforced.
The argument is logical. However, there is critical flaw in the theory. In most cases, there is not consistent agreement on what functions or technologies are the sources of competitive advantage. What one company considers a commoditized, low-value function might provide another with an opportunity for innovation and advantage. Most would agree that functions such as product design, customer service and marketing/merchandising can provide differentiation. What about back office processes such as order fulfillment, transportation management and accounts payable? Most would argue that these “behind-the-scenes” functions offer little opportunity for differentiation. However, real world analysis suggests that there are many different competing models for each business process. Some companies use a buyer-PO driven approach to traditional order management while others use Vendor Managed Inventory (VMI). There are numerous permutations of shipment and logistics models gaining increasing adoption. Examples include drop-shipping, cross-docking and floor-ready merchandise. Even accounts payable organizations are defining more innovative approaches to business processes such as evaluated receipts settlement and supply chain finance.
What about technologies such as B2B e-commerce which enable the sharing of data between different business partners? Most would argue that it is the information that is of value, not the approach to sharing it. However, real world analysis suggests that there is an increasing tendency to deviate from standards for sharing information in the supply chain. In fact, there are over 100 different B2B e-commerce standards being used in the information supply chain around the world. A multitude of XML standards now exist, which model every conceivable buyer-to-supplier transaction imaginable. Examples include RosettaNet, OAG, Tradacoms, EAIJ, Odette, CIDX, PIDX and SPEC2000. New frameworks for sharing XML with rich choreographies and comprehensive data models have been developed in the form of Global Data Synchronization Network (GDSN); Collaborative Planning, Forecasting and Replenishment (CPFR) and RosettaNet Partner Interface Processes (PIPs).
Someone once said “The great thing about standards is that there are so many to choose from.” That phrase has been repeated for years, somewhat in jest, by various thought leaders in the technology and engineering industries. But it reflects a paradoxical challenge that exists with trying to standardize business processes and technology interfaces in a competitive marketplace. And the B2B e-commerce industry offers an excellent case study for exploring these challenges.
Why are there so many different standards competing to automate the same procurement, transportation and forecasting business processes? An even better question is why are so many large companies increasingly deviating from B2B e-commerce standards they helped to develop? These are questions I will explore in my next post.
