Standards of the Fourth Kind

[Former Member]

This blog was going to be called "Standards of the Third Kind" after Steven Spielberg’s 1977 film "Close Encounters of the Third Kind"  that portrays mankind’s first encounter with alien beings, until I remembered that SAP has already defined three kinds of standards on the standards page on the SAP web site.

But the point is still true. Standards of the fourth kind, which I am calling "Best Practice Standards", don’t get much attention as, from a software/technology company perspective, they can seem quite alien as they don’t necessarily have the software/application focus of the other three.

What standards are currently described on the SAP web site?

The SAP standards page describes the following three main types of standards:

• Business semantics standards - which are defined as standards for defining the information that flows through and between enterprise applications
• Technology standards - that enable systems running those enterprise applications to more easily connect and communicate, and
• Open source standards - that provide SAP customers with a choice of technology platforms to use.

These standards focus on software applications and the platforms on which they run. They all provide significant value. But the fourth kind, Best Practice Standards, are just as important and just as valuable.

How standards provide value

So let’s start with a brief recap of the business value that standards can deliver that I first described in a white paper I wrote in mid 2007. There are two:

• Lower Costs. Standards increase speed and efficiency by reducing the cost of adapting for differences - you don't have to start from scratch. For example business semantic and technology standards allow applications developed by different solution providers to exchange data while minimizing the need to develop one-off code
• Increased Agility. The increased speed and efficiency that standards bring, allow a business to respond to business challenges and support new business processes more rapidly as they can integrate with their business partners more easily - also see business network transformation.

Examples of Best Practice Standards

At their essence "Best Practice" standards define ways of carrying out activities that are proven to deliver value over time. Like other standards, they need to lower costs and increase agility - so let’s look at some examples:

• Driving on the correct side of the road. Standard rules that define which side of the road to drive on reduce accidents. This obviously reduces costs. It also increases agility as people can drive faster but still safely. As I’m from the UK but live in the US I really understand the importance of this
• Application/Software Development Standards. These define best practices for how to architect/design/develop/test/deploy/operate software solutions and manage their development. For several years I delivered training courses on best-practice software development standards. The standards reduced costs, because they were based on techniques and processes that had been used on many successful implementations.
• Accounting Standards. These provide a consistent way of reporting on the financial performance of a company that allows it to be more accurately compared with another. To this end the US and Canada are replacing the current GAAP accounting standard by the internationally accepted IFRS accounting standard.  In promoting IFRS, the Securities and Exchange Commission (SEC) states that a "widely accepted set of high quality accounting standards would benefit both the global capital markets and U.S. investors by providing a common basis for investors, issuers and others to evaluate investment opportunities and prospects in different jurisdictions".
• Sustainability Standards. Standard approaches have been developed to calculate the greenhouse gases a company consumes or generates as part of its operations. This standard reduces the cost and effort required to use the sustainability performance of company in purchasing/partnership decisions.

These are just a few examples of best practice standards. There are many, many, more ...

What Best Practice standards have in common

Best practice standards often have the following in common:

• Training, Assessment and Certification. Many best practices rely on consistent behavior whether in driving a car, software development, business accounting or sustainable business practices. If best practice standards exist, then individuals can be trained in the required skills, which can then be assessed through exams often leading to certification
• Transferable Skills. If someone is trained in best practices, then they can be more productive more quickly in a new situation. For example, a developer trained in a company's software development standards will have a much shorter learning curve when they move to a new project. Proven experience of "best practice" skills also means that an individual is probably more employable
• Continuous Improvement. If best practice processes are consistently followed, then it’s easier to measure performance and conduct benchmarks that provide the insight you need to identify how to improve. Best practices are not frozen - there is always scope to improve them. See Kaizen for more background
• Automation. Some best practices can be automated by embodying them in software, for example, SAP’s Chemical Solution complies with the EU Registration, Evaluation, and Authorization of Chemicals (REACH) regulation that defines a best practice for registering the chemicals a business uses to ensure they are handled responsibly
• Backed by legislation. Some best practices provide so much value that they are backed by legislation. One example is the REACH regulation described above, but there are many more from Sarbanes Oxley  that resulted from Enron/Worldcom accounting scandals, to HIPPA privacy standards for healthcare.

Don’t forget the audit ...

The implementation of best practice standards in an organization doesn’t necessarily mean that they are being followed. This is why conducting audits are a really good idea.

Audits that compare actual performance with best practice standards also make it easier to identify if anything is going wrong. I remember, as a consultant, reviewing software development projects that had gone wrong by comparing them with the best practice techniques I taught. All I really needed to do was compare the process/techniques/documentation/management of the project against best practice. It made it much easier to identify gaps and problems and so make recommendations on what was needed to put things right.

... and don’t forget to audit the audit

An audit is also a best practice. So it is also a good idea to audit the audit. An example where this failed is the Bernard Madoff scandal. Bernard Madoff ran an investment firm in the US that failed in December 2008 with the loss of $50bn (US) of investment funds. He was charged with securities fraud by organizing what was effectively a Ponzi scheme. Much of the blame has been placed on the failure by the Security and Exchange Commission of their audit procedures.

Best Practice Standards and SAP

SAP includes best practice into its product development standards, such as the recently finalized Web Content Accessibility Guideline (WCAG) 2.0. SAP solutions also build in support for financial best practice standards, such as IFRS and GAAP. In fact one of the stronger arguments made for using SAP solutions is that they allow a business to more easily implement best practice because SAP’s solutions have best practice built-in.

To sum up, best practice standards define ways of carrying out activities that have proven to deliver value over time. Some provide so great a benefit that they are backed by legislation. They also often benefit from audits to ensure that best practice is being adhered to. Finally, best practice standards are not static - they should evolve and improve over time.