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Standardization is no prerequisite for industrialisation

“Standardization is no prerequisite for industrialisation” this is surely a provocative statement and is definitely as true or false as the opposite: “Industrialisation is only possible if Standards are available”. The truth probably lies somewhere in between.

Using this extreme view points (drawing a black and white picture) helps to contrast and focus on the essential, which we will do in later discussions.

Let us start with the first statement – assuming there is no standardization, but a need for industrialization. Industrialisation in banking industries simple shall be a reasonable distribution of responsibilities and capabilities across a network of independent companies, which is obviously a very narrow definition (but sufficient for this discussion).
No available standard means that you have to identify and define a way to interact with your counterparties in the network – every interaction/collaboration is at least somewhat proprietary. Maintaining every interaction/collaboration individually is surely a very cost intensive activity (just think about establishing connections towards a new counterparty). One consequence – there are very likely many others – due to the high “connection”-cost many activities are probably cheaper done within your organisation. Industrialization would happen at a minimum level – one simply can not afford to outsource activities.

Looking at the second statement – every thing has to be standardized – unveils a different picture. All IT communication is based on a standardized set of properties and thus regulated, by someone who is trusted as a regulator (not limited to geographic boundaries).
One severe outcome of such a regulation is the limitation of innovation. An entrepreneur optimizing any part of the financial services value chain would find no market due to missing standards for communicating with its target market. At least a severe hurdle would be given by that regulation.
And by the way how would a cooperation provide an attractive and outstanding offer to a target market if a large portion is prescribed by standarization?

Of course the above two simplified scenarios are only a thought experiment. We almost immediately see that there is some compromise in the middle of these extremes. It is also a simple fact, that major areas are already standardized in Financial Services (payments, cards, etc.).

But looking at the complex landscapes within banks and across the banking networks (including other institutions and corporates) it is not clear what should be standardized and what should be left to individualism or proprietary approaches. At least we have identified in these two extreme views some essentials we can discuss in more detail:

  • Costs or the assorted business case are definitely one aspect. Standards need to pay-off in the end.
  • Agility or time to market is a second aspect. Regulation (which – to some extent – is the overhead companion of standardization) and innovation are not best friends.
  • Unique selling proposition. How much room do I need to for my own specific offers, which are distinguishable from other vendors?

Lets take these essentials and follow up on them in subsequent blogs.

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1 Comment

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  1. Oliver, you raise an interesting debate that will surely run as long as counterng views exist, but that is surely the indicator of a free-market ;o)

    Here are some thoughts, 

    As for outcomes and possible guidance to be offered, i have often found merit in evolutionary theory and the idea that ‘convergence’ across organisational/political/ecological boundaries drives ‘conformance’.

    In this way not only do the strong standards survive, but ,interestingly, standards become strong through adoption and a common repeatable ‘way of doing things’ – industrialisation by another name?

    Then that’s surely why IVN’s exist to drive such outside-in guidance and use momentum from customers to guide our implementations.

    An interesting blog, can’t wait for the next!

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