Standards Are Better for Most, but Bad for Niche Players

Over time, all technologies migrate towards standardization. Sometimes this can be a boon for the first-to-market or owner of the standard that “wins”; most of the time, it forces them to find new grounds to differentiate and compete as suddenly everyone is using the same technology interfaces that they are.

As shown brilliantly by Simon Wardley’s mapping, all services start out as highly customized, and eventually move to standardized commodities. While these standards may not be 100% global, they do tend to standardize within an industry or a region. Here are 2 examples:

  1. Power: When the power generation business first came to the fore, every provider had his or her own format for providing power – current, voltage, and of course “plug”. While some of that continues in the differences between, say, a UK-style plug (type G) and US-style plug (type B), you are pretty much guaranteed that any refrigerator bought in North America can plug into any socket in North America. It doesn’t matter if your power provider is Consolidated Edison of New York, PSE&G or Hydro-Quebec, it will just work.
  2. Shipping: Fifty years ago, every package you shipped had to be custom fit to the boat on which it shipped. Every shipping involved a direct or almost-direct negotiation with a ship manager. As a result, shipping was expensive and slow. With the advent of standardized intermodal containers, the situation is dramatically different. Every shipbuilder builds boats to handle just standard container sizes and interlocks, and every shipper just fills a container. When you ship a large box from LA to Singapore, UPS just fills it into a container already planned to go. It knows precisely what percentage of space your box will take, and therefore what the relative cost of shipping your box is, without any need to to now go to Zim Lines and ask them if they have space for a 2′ x 2′ x 6′ box.

The same process is occurring continuously in the hardware and software space. Here are two examples.

Wired Connectivity

In the early days of computers, there were multiple dedicated cables for everything:

  • Coaxial – for television transmission
  • Coaxial – for early networking (and no, it couldn’t coexist with television)
  • Ethernet (RJ-45 connectors) – for later networking (still in use, in its 6th major iteration)
  • Telephone (RJ-11 connectors) – for telephones and the fax lines (and later modems) that ran on them
  • Serial (RS-232) – for connecting some computer peripherals
  • Parallel – for connecting some other peripherals, notably printers and scanners, that had “a lot of data to pass”
  • VGA – for monitor output
  • PS/2 – for keyboards and mice
  • AT – for other keyboards and mice

Given the above – each with its design, electrical requirements, and signalling – it is hardly surprising that even if we could have gotten core computer processing smaller, the machines still would have been huge, just to accommodate the many ports and interconnections.

Over time, many of these have consolidated down into simpler interfaces. Almost all peripherals are now USB; displays are rapidly moving to mini-DisplayPort or HDMI (still to be determined), and networking is rapidly becoming copper Ethernet cables everywhere, except for extremely high capacity or long distances, where fibre rules.

As a matter of fact, if you look at a modern laptop, the only connectors you are likely you see are:

  • 2-4 USB ports
  • Power
  • HDMI/mini-DisplayPort

It was inevitable that these would consolidate further. Apparently, the team behind DisplayPort and the team behind USB have agreed to 2-way audio and video over the newest version of USB 3.0. You would connect your TV and display the same way you connect a hard drive or mouse – via USB.

What does this mean for different constituencies?

  • Laptops: One fewer connection on each, which will be able to connect to just about every display out there, including, if they get on board, televisions.
  • Televisions: More and more, these are becoming monitors with lots of connectors and some digital smarts. Most of them already include USB ports, so it is almost inevitable that Samsung, LG and Vizio will start to manufacture TVs that can accepts digital data streams from USB, not just HDMI.
  • Adapters: Companies that make connector cables – DisplayPort to HDMI, USB to VGA, etc. – will see shrinking revenue from such adapters. Companies for whom it is a marginal side business – like Apple, despite their absurdly inflated prices on such items – will not care very much; they will more than make up for it with the lower cost of computer manufacture which will, paradoxically, allow them to charge more for more compact devices. Those for whom it is more of a core business, like Belkin, will see a more significant impact. Perhaps this is the reason that most online “cable adapter” sellers appear to be niche Chinese players rather than major companies.

Of course, this will not happen overnight, but it appears to be happening relatively quickly.

The net result is that businesses that “adapt” one incompatible market to another – whether DisplayPort to VGA or non-standard boxes to non-standard boat holds – are an important fabric in the early growth of an industry, but eventually put themselves out of business. Eventually the growth caused by matching creates a momentum to work without matching, whether to save space on laptop motherboards and cases or to ease shipping on boats, which eliminates the “matching” expertise in the first place.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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