By Joselyn Biira Mwine
Arguably, one of the most influential popular writers on the nature of globalisation is Thomas Friedman, New York Times foreign affairs columnist. His best seller, The World Is Flat, makes for an interesting read and a point of discussion. I agree with Friedman’s assessment that the world is flat. According to Friedman, a “flat world” means that there is now a level global playing field, where all competitors have an equal opportunity.
It has now become very possible for many people around the world to collaborate and compete with each other on many different kinds of work, markets and products from many different corners of the planet – and on a more equal footing. But there’s more. Although today’s global economy is flatter than at any previous time in the history of the world, not all companies and countries are created equal nor do they stand an equal chance of succeeding.
All too often, the race for small and medium-sized enterprises and developing countries is rigged long before it even begins. Unfair? Certainly, but what’s the solution? It’s very unlikely that I’ll have a chance to raise the issue with Friedman, but how do standards fit into the bigger picture?
First of all, standards are tools that help companies interact effectively with suppliers, customers, public authorities and stakeholders at large. Second, being aware of the standards environment and perspectives is central to the economic intelligence needed for most businesses. They provide the means for market access and help acquire and disseminate new technologies and best practices.
With Standards, business is no longer left to chance. Acting as powerful tools for sharing best practices, standards are leaving small and medium-sized enterprises (SMEs) better equipped to develop products that meet market expectations, overcome artificial trade barriers and get a toehold on the international market. Now SMEs can at least make it to the side-lines of the pitch. By setting the framework for fair competition and paving the way for growth, standards level the playing field for companies and economies all over the world, ensuring everyone plays by the same rules.
The theory that standards slow growth is bunk. In fact, they are an economic opportunity. How do we know? Because these savings and advantages can be determined. Businesses – both large and small – can calculate the savings and benefits they make today, which amount to a whopping 4% of a company’s revenue in some cases. If that isn’t tangible, I don’t know what is. Which begs the question: are standards one of the flattening factors in Friedman’s theory? The answer is yes.
The benefits of using standards are valued at between 0.15% and 5% of annual sales revenues, in terms of contribution to company gross profit or EBIT (Earnings before Interest and Taxes).
Quantified benefits include:
- Streamlining internal company processes
- Decreasing waste and internal costs
- Increasing the efficiency of Research &Development
- Innovating business processes
- Reducing risk
- Enabling international expansion
- Supporting development of new products and markets
To me, it’s all about getting companies throughout the world playing by the same rules, which also opens up the market for those wishing to be more global. It’s about having a standard that is regionally, and universally recognized, so a client knows that a company using an international standard that has been adopted in Uganda is operating on the same level as a company using the same standard in Indonesia. They might not offer the same types of services or even the same quality, but at least, they both abide by a standard of operation that is agreed on as the “international standard”.
By setting the framework for fair competition and paving the way for growth, standards level the playing field for companies and economies all over the world, ensuring everyone plays by the same rules. Not only can using standards offer opportunities for an equal, level playing field and economic growth, but it would be unwise to pursue one without the other. Because operating in any other way is the antithesis of good management.
Some see standards as a passport to export markets, some as a necessary evil or a hoop to jump through, and others still as the priceless knowledge of experts. But whatever side of the fence you’re on, you will have to admit that standards are rarely described in numbers. Take, for instance, the percentage of increased sales or GDP growth that may result from their use. We know that numbers speak volumes, all the more so when there is a shilling or dollar sign in front of them.
Standards have a direct impact on the bottom line, which you can calculate. The cost of standardization has always been relatively easy to determine, but the calculation of its benefits was much trickier… until recently. You can now find out how your company can assess and communicate the economic benefits of standards, and pinpoint exactly which areas are likely to result in the highest benefits. This has been the focus of a long-term study by international standardisation organisations around the world who have scrutinized the use of standards and calculated the savings that have been made. Of course, the picture is very diverse, with varying experiences depending on company size, sector and use of standards. It has been concluded that for companies whose products and services have been certified, standardization is not a foolish use of corporate funds. It is key to raising productivity and efficiency across the whole value chain.
Over the past decade, increasing interest has been taken to qualify and quantify the economic and social benefits of standards. But how much of an impact on the national scale are we talking about? A series of recent studies point to a direct relationship between the use of standards and economic growth, labour productivity, ability to export and more. A study in the UK by the Department of Industry and BSI, has estimated that standards make a contribution of GBP 2.5 billion to the UK economy and attributes to standards 13% of the improvement in labour productivity in recent years. Likewise, Germany has determined that the benefits of standards represent 1% of the gross domestic product. Similar studies in the USA, Australia and Canada corroborate these findings.
All’s not fair in love and war, or in business for that matter. In today’s flat, global economy, all companies are not equal. All too often, small and medium-sized enterprises lack the right weapons and financial resources to compete on an even keel on the global marketplace. And so the large groups take the lion’s share of the market, making millions in profit and expanding their customer base. Unfair? Certainly, but not without the remedy of using standards.
The writer is the Public Relations Officer at Uganda National Bureau of Standards