Obstacles for the ignorant, by Folke Hermansson Snickars, Associate, Standards & Market Access, Ambi Prospect AB. Standardization research

Transcription

1 Obstacles for the ignorant, Market requisites opportunities for the informed by Folke Hermansson Snickars, Associate, Standards & Market Access, Ambi Prospect AB feasible? Are there problems in implementing the standards? Which are the performance indicators, and how are they monitored? Standardization research Organizations involved in standardization, such as ISO and its members, some academics, and in particular the general public, take for granted that standardization is beneficial. They believe that an inability to understand this is due to a problem of communication and a lack of awareness. Studies are therefore initiated to present evidence of the obvious : that standardization is a valuable and desirable activity 1) 2) 3) 4) 5). Studies of this type do not raise any critical questions. Are there standards which are not 1) of standardization, Summary of results, Final report and practical examples, DIN, ) Blind, Kurt, The economics theory, evidence, policy, Edward Elgar Publishing, ) Swann, G M Peter, The economics of standardization, Final report for Department of Trade and Industry, UK, ) The empirical economics, DTI s Paper No.12, ) Product standards in transatlantic trade and investment, John Hopkins University, 2000 ISO Focus June

2 Main Focus Others regard standardization more objectively as any other social activity having special positive characteristics, but also questionable and disputable aspects. One example of this view from an academic angle is the research programme on rules and rule-making of the Stockholm School of s and the Stockholm Centre for Organizational Research (Score). In their book, A World of Standards 6), the authors argue that standardization is a much neglected area of social science one that has not received the attention it deserves in view of its importance to society. Their book seeks to redress the balance by providing an indepth examination of a number of aspects of standardization, how it was developed, and how it affects the world in which we live. Other scientists claim that the increasing power organizations is an example of a neo-liberal de-regulating instrument that has now a political aspect, instead of the pure technical and industrial dimension it had in 7), 8) the past. By transforming ignorance into knowledge, problems can be transformed into opportunities. The opposite neo-liberal perspective is represented by the economists and lawyers who drafted the World Trade Organization (WTO) agreement on technical barriers of trade. It is puzzling for standards professionals that this agreement was referred to as the standards code during its early life within the General Agreement on Tariffs and Trade (GATT). It still includes provisions on standards, and not just on technical regulations, which by the WTO definition are of mandatory nature. Their view is that any outside intrusion on market transactions represents a barrier to trade. Even though standards facilitate trade for those who comply, they present an added obstacle to those who do not consider compliance a necessity. This interpretation is at the heart of this article, which suggests that by transforming ignorance into knowledge, problems can be transformed into opportunities. 18 ISO Focus June 2007 Product labelling for a global market computer. Market requisites for a computer display terminal. Here, standards will be regarded as a market requisite 9), that is, as part of the requisites to which market actors have to react. This article will adopt the market perspective, which is different from the internal standardization perspective or the external academic perspective. In summary, the message communicated here is : standards as such, are of no interest for market actors. What they can achieve is! Different types of requisites In any exchange of goods or services, the players have to identify, understand, and adapt to a number of different types of requisites, spanning from implicit expectations to explicit requirements. Some of these are of commercial nature, for example, price levels, consumer patterns and preferences, tariffs and taxes. Photos courtesy of Folke Hermansson Snickars 6) Brunsson, Nils, Jacobsson, Bengt and Associates, A world, Oxford University Press, ) Higgins, Winton, How we are governed now: globalisation, neo-liberal governmentality and the ullification of substantive policy, Journal of Australian political economy No 57, jape.org/. 8) Higgins, Winton, Standardisation, globalisation and the rationalities of government, paper presented at the SCORE conference Organizing the world: rules and rule-setting among organizations, Stockholm, October ) The term market requisite is chosen as a generic term for all necessary conditions a company needs to address when offering its products to a market. Those legal, logistic and technical requisites issued as technical regulations, standards, and conformity assessment requirements are here called technical market requisites (TMRs).

3 Product labelling for a global market modem. Others are of legal nature, such as legislation concerning trade, consumer safety and competition. There are also a lot of logistic requisites including distribution channels, storage options, packaging and recycling. Finally there are also for most products technical requisites, like performance, efficiency, reliability and durability. Some of these technical requisites are established by the technology used, others by competing technology or simply by competitors. Logistic and technical requisites are mostly issued as technical regulations, standards and conformity assessment requirements. How are the requisites for market acceptance established? Customers, actual or potential, in one sense ultimately define which criteria have to be met. There are however, other stakeholders that constitute the market place: society, competitors, industry associations, employees, and suppliers among others. Society is represented by the public sector, the political system and the private sector, including market players, but also their associations and institutions. The public sector uses legislation, tariffs, fees and licenses as instruments to regulate markets, either in a restricting sense or in a motivating sense, by giving market players positive incentives. Inter-governmental organizations in many sectors either recommend national actions or to regulate the conduct of their member states to avoid unnecessary barriers to trade. Legal product requisites are mostly combined with conformity assessment requirements, and/or market surveillance activities to monitor the compliance and effectiveness of the market requirements. Voluntary initiatives within the private sector to achieve sustainability could define codes of conduct, performance criteria, award criteria, etc. Industry and other business associations are in many sectors establishing common standards, which may be used by producers for production or marketing purposes and also by purchasers for defining requirements, assessments of alternative products and evaluations of suppliers. Such standards may be informal, so-called de-facto standards, or formally established by recognized standards organizations. Competitors either offer the same or similar products, or equivalent products that use a different technology. Some product characteristics will be a fundamental requisite for all market players. The market leader often set such standards. Others may be agreed among the players, and certain product characteristics will be unique for each provider. Verification and communication of conformity to market criteria Most trade transactions are built on trust between the seller and buyer. Producers take their own initiative to verify conformance, either in-house by their own laboratories or externally by institutions and companies offering metrology and testing services. Such verifications will sometimes be demonstrated by a manufacturer s declaration of conformity, environmental product declarations, etc. One way to communicate compliance with specific criteria is marking, or labelling, systems. Such systems are operated in conjunction with man- datory requirements on product safety, e.g. the CE-mark which constitutes a declaration from the manufacturer that the product is aligned with European requirements, but also voluntary for the environmental performance of products (eco-labelling). Purchasers may either trust the producer, or request an impartial assessment of conformity or certification. A certificate demonstrates such assessments. Sometimes it is the purchasers, on their own initiative, that verify conformance by measuring, testing, or inspecting products. Achieving credibility Any declaration of conformity will be either trusted or mistrusted. Manufacturers declarations might be fully accepted according to their general reputation and experience of performance, historical track record, long-term customer-supplier relations, etc. General credibility may be achieved by demonstrating the existence of a management system for a company, covering not only specific production processes, but also the general conduct of its business. Ignorant enterprises will be surprised by market requisites, and neglected or forced to meet high costs of compliance. In other cases, there may be a need for a more impartial, but still informal recognition. This may be offered by specific bodies or laboratories, for a particular industry sector or as tough membership criteria for an industry association. It could also be offered by national and international organizations complying with specific requirements for organizations offering conformity assessment services, as certification bodies. The most advanced form of formal recognition is to utilize organizations that are complying with competence criteria defined for accreditation. Accreditations offered by national accreditation bodies could also be mutually recognized by international agreements in ISO Focus June

4 Main Focus more than one country. This public-private infrastructure is usually called the quality infrastructure. One attempt to understand this concept is described by the conceptual model in Figure 1. The conceptual model illustrates and defines the components of a national quality infrastructure and their relations. The model is activity-based, using the verb form to describe different activities. It does not cover different organizational infrastructures created to perform the different activities, as these may differ for each country. This model is based on the market perspective, that is, of actors in the market place. It does not intend to establish clear differences between requisites to which compliance is mandatory, and requisites that are voluntary to apply. One reason for this is that market actors generally do not care so much if the requisites are mandatory or not. Once adopted, the rules are followed! Well informed enterprises can see opportunities to enhance their business position. Activities, such as awarding (for quality or business excellence) and labelling (environmental performance, grading system of restaurants and hotels, etc.), are generally voluntary, and therefore not usually included in the quality infrastructure concept. Mandatory labelling (CE-marking, content declarations, etc.) is included in the certify activity. There are a number of relations between the components, some obvious (accredit/assess conformity, test/produce, inspect/use), others more subtle. The relations between standardize and the other components are roughly indicated in the model (block arrows), illustrating the fact that standards are used by producers (all types ), regulators (reference to standards), conformity assessors (measurement standards, testing standards, requirement standards, etc.), as well as accreditors (assessment standards). 10) Porter, Michael, Competitive advantage creating and sustaining superior performance, 1985 Award Produce Import Figure 1 The national quality infrastructure A conceptual model. Lessons learned Standards need to be seen as part of something rather than as a discipline on its own. Standards on household equipments, for example, should be regarded as one component of the total collection of requisites, to which stakeholders on the market more or less subscribe, such as legislation, customer preferences, testing and marking requirements, etc. About the author Sell Folke Hermansson Snickars has more than 30 years experience in standardization at several positions in the Swedish Standards Institute (SIS). In the early 90s, he actively participated in planning of the review of the ISO series, which led to the year-2000 edition. He was the first Managing Director of SIS Forum AB, the training subsidiary of SIS. Since 2000 he has devoted his time mostly to international development cooperation and training. He has a Master of Science degree from Chalmers University of Technology, Gothenburg, and is now active as Associate, Standards & Market Access, of his own company Ambi Prospect AB. Regulate Standardize The Market Place Recycle Every enterprise needs to make the strategic choice of which market segment to which they want to belong 10). One aspect of this strategic analysis is illustrated by the diagram in Figure 2. Here we disregard the group of criminals which does not even intend to comply with legal requisites (level 0), and concentrate on those who start with the basic assumption that every legal requirement should be met (level 1). This is also an integrated part of the requirements of existing management system standards, as ISO 9001, ISO 14001, OHSAS To survive, the next level of excellence is to satisfy one or more customers (level 2). Level of excellence Best in class Competitors Customers Legal Buy Calibrate Test Certify Inspect Assess conformity Accredit Use Consume Satisfying future customers Satisfying all customers in the market today Satisfying existing customers Serious but less developed Criminals Figure 2 Different grades of satisfying stakeholder requisites Label 20 ISO Focus June 2007

5 Customer satisfaction is key to any free market economy. Dissatisfied customers will move to competitors, and may hardly be substituted by any new customers. To make a business sustainable, however, you have to attract not only existing but also new customers (level 3). If the customers move from your competitors to your enterprise, you win market shares. If you reach market leadership you might think you have reached the top, but that could be only temporary. To stay at the top, you need to attract future customers (level 4). This requires permanent strategic thinking, openness, adaptation, and flexibility. Only then can you claim to be the best in class. These upper levels of stakeholder satisfaction are further developed in standards like ISO 9004:2000, Quality management systems Guidelines for performance improvements and most national quality award models. Participation in developing market requisites needs training. (Photo by Folke Hermansson Snickars) Ignorant enterprises will continue to be surprised by market requisites, existing or in development, explicit or implicit, and will be either neglected or forced to meet high costs of compliance. Enterprises that are well informed through business intelligence or by actively participating in the development of the requisites will see, well in advance, the opportunities to enhance their business position. ISO Focus June