OMEOME

economics of economics of standardisationstandardisation

3030thth March 2007 March 2007

Patrick CourtneyPatrick CourtneySeer Green, UKSeer Green, UK

Page 2

Introduction Introduction

Background Background

• innovation + diffusioninnovation + diffusion

• literature in last 10 yearsliterature in last 10 years

Definition of 4 types of standardsDefinition of 4 types of standards

Economic significance to producers and usersEconomic significance to producers and users

• macro-economic rolemacro-economic role

• micro-economic rolemicro-economic role

Trade competition and market size: evidence/data/attitudesTrade competition and market size: evidence/data/attitudes

Function of market structure and product life cycleFunction of market structure and product life cycle

Relevance to OME file formatRelevance to OME file format

• What’s missing, next stepsWhat’s missing, next steps

Page 3

Types of standards (1 of 4)Types of standards (1 of 4)

Interface standards

• eg VHS/betamax, Blu-ray/HD, XBOX/PS3

Economic effects• Switching costs (learning, exchange)• Reduces risks as perceived by producers & customers

Network effects: Metcalfe’s law• Direct: eg mobile phones• Indirect: eg car parts• May be positive or nil• Fairly weak for OME

– unless collaborations arise…

Source: Swann, wikipedia

Page 4

Types of standards (2 of 4)Types of standards (2 of 4)

Minimum quality • especially safety

• legal

• usability

• basic functionality

• etc

Economic effects

• Reduces risks that are hidden/hard to assess

• Helps to protect a market against Gresham's Law – “bad drives out good”

• Reduces transactions costs between different producers, as well as between producers & customers

Not applicable to OME file format (but see later…)

Source: Swann, wikipedia

Page 5

Types of standards (3 of 4)Types of standards (3 of 4)

Variety reduction

• eg clothing sizes

• very applicable to software

Economic effects

• Avoids wasteful profileration

• Provides economies of scale

• Helps to build cohesion & critical mass in the formative stages of a market

• Can focus technology trajectories

Applicable to OME file format !

Source: Swann, wikipedia

Page 6

Types of standards (4 of 4)Types of standards (4 of 4)

Information/measurement on product description• eg screw thread

• eg mm vs inch (japan?)

Economic effects

• allows innovative producers to demonstrate to the satisfaction of the customer, that products are as innovative as they claim to be

• role of public bodies

Not directly applicable to OME file format (?)

Source: Swann, wikipedia

Page 7

Linking types of standards to economic benefit

Four types• Interface standards and network effectsInterface standards and network effects• Minimum quality and hard-to-assess features• Variety reduction and focus of effortVariety reduction and focus of effort• Information/measurement

Economic significance to producers and users• micro-economic and macro-economic role

For users• Reduced transaction costs• Reduced risk• Increase market size and volume -> Increase competition • Ability to absorb faster rate of change

In short, the existence and use of standards makes it easier to produce, sell and buy products and services. Standards enable a market. They are part of the infrastructure for innovation-led growth

• Codifies state of the art technology and best practice • Role in diffusion of innovation…

Source: THE ECONOMICS OF STANDARDIZATION: Final Report for Standards and Technical Regulations Directorate UK DTI, G M Peter Swann, Manchester Business School

Page 8

Economic benefit of standards: survey of attitudesEconomic benefit of standards: survey of attitudes

Gains to companies Help in technological change Export and new markets Competitive advantage:

• be ahead of competition, assert interests

• participation offers insight, product opportunities, learning, networking Reduce development costs, save on rework Co-operation with suppliers and complementers Hindering R&D: mixed but reduces risks & hinders less than administration

(Companies that use standards perform better)

Gains to economy Used as trade barrier in 1970/1980, international standards increase trade Mere existence is positive Innovation (as patents) + diffusion (as standards) Standards are at least as important as patents…

Source: DIN (2000) Economic Benefits of Standardization: Summary of Results, Berlin: Beuth Verlag GmbH

Page 9

Data on German macroeconomic growth between 1961 and 1996

Output = growth of value added Inputs

– Value of assets Number of employees

– Stock of patents Value of licences Stock of standards

Importance of standards to support innovation+diffusion Standards contribute more to economic growth than patents and licences

Sources of growth in the business sector, 1961 - 1996

Source Average annual percentage changes

61 - 90 61 - 65 66 - 70 71 – 75 76 - 80 81 - 85 86 - 90 92- 96

capital 1.6 2.6 2.0 1.7 1.3 0.8 1.1 1.1

labour 0.2 0.6 0.1 -0.6 0.5 -0.6 1.1 -0.7

patents 0.1 0.2 0.2 -0.4 0.3 0.2 0.0 -0.3

licenses 0.5 0.6 0.5 0.4 0.2 0.1 1.3 0.6

standards 0.9 1.5 1.2 0.9 1.1 0.4 0.2 0.3

Total:

fitted 3.3 5.7 4.1 2.1 3.5 1.0 3.7 1.0

realised 3.3 5.2 4.4 1.7 3.6 1.1 3.8 1.5

Source: K Blind, H Grupp and A Jungmittag, 1999, The Influence of Innovation and Standardisation on the Macoreconomic Development in Germany, Paper to 1st IEEE Conference on Standardisation and Innovation in Information Technology, Aachen, September

Page 10

Role in product life cycleRole in product life cycle

Promote growth of supporting products and servicesPromote growth of supporting products and services

Source: THE ECONOMICS OF STANDARDIZATION: Final Report for Standards and Technical Regulations Directorate UK DTI, G M Peter Swann, Manchester Business School

Page 11

Role of industry structureRole of industry structure

If market is concentrated If market is concentrated

• de facto standard, closed or open standardde facto standard, closed or open standard

If market is fragmentedIf market is fragmented

• Innovative – need to avoid waste of limited resourcesInnovative – need to avoid waste of limited resources

• Not innovative – doesn’t matterNot innovative – doesn’t matter

So is this relevant to microscopy/cell imaging for research/drug So is this relevant to microscopy/cell imaging for research/drug discovery ?discovery ?

Page 12

Relevance to OME file format: what’s missing, next stepsRelevance to OME file format: what’s missing, next steps

Some suggestions for users and suppliers:Some suggestions for users and suppliers:

1. Make network effects direct1. Make network effects direct• Collaborative scienceCollaborative science

2. Harness benefits to users2. Harness benefits to users• Encourage user pull (including publishing needs)Encourage user pull (including publishing needs)

3. Coordination of smaller suppliers3. Coordination of smaller suppliers• Save resourcesSave resources• Reduce riskReduce risk

4. User levels and profiles according to usage types (minimum quality effect)4. User levels and profiles according to usage types (minimum quality effect)• Screening: control , SOPsScreening: control , SOPs• Core facilities: share dataCore facilities: share data• Pharma: control, SOPsPharma: control, SOPs• Bio/image informatics: control, SOPsBio/image informatics: control, SOPs

5. Continue promoting, meeting, sharing experiences5. Continue promoting, meeting, sharing experiences

Page 13

……too many standards ?too many standards ?

MIACA - Minimum Information About a Cellular Assay MIACA - Minimum Information About a Cellular Assay • (http://miaca.sourceforge.net/)(http://miaca.sourceforge.net/)

OME - Open Microscopy Environment OME - Open Microscopy Environment • (http://www.openmicroscopy.org/index.html)(http://www.openmicroscopy.org/index.html)

Libics - Image Cytometry Standard Libics - Image Cytometry Standard • (http://libics.sourceforge.net) (http://libics.sourceforge.net)

MIAME - Minimum information about a microarray experimentMIAME - Minimum information about a microarray experiment• (http://www.mged.org/Workgroups/MIAME/miame.html) (http://www.mged.org/Workgroups/MIAME/miame.html)

Bioinformatics Standards for Flow Cytometry Bioinformatics Standards for Flow Cytometry • (http://flowcyt.sourceforge.net/) (http://flowcyt.sourceforge.net/)

FCS - Flow Cytometry Standard FCS - Flow Cytometry Standard

API's Standards API's Standards • (http://www.pathologyinformatics.org/standards.htm) (http://www.pathologyinformatics.org/standards.htm)

DICOM - Digital Imaging and COmmunications in Medicine DICOM - Digital Imaging and COmmunications in Medicine • (http://medical.nema.org/dicom/2003.html) (http://medical.nema.org/dicom/2003.html)

LDIP - Laboratory Digital Imaging Project (http://www.ldip.org/) LDIP - Laboratory Digital Imaging Project (http://www.ldip.org/)

Source: Ilya Ravkin 2007

Page 14

Source:

THE ECONOMICS OF STANDARDIZATIONTHE ECONOMICS OF STANDARDIZATION Final Report for Standards and Technical Regulations DirectorateFinal Report for Standards and Technical Regulations Directorate Department of Trade and IndustryDepartment of Trade and Industry

G M Peter SwannG M Peter Swann Manchester Business SchoolManchester Business School University of ManchesterUniversity of Manchester 11th December, 200011th December, 2000

http://www.dti.gov.uk/files/file11312.pdfhttp://www.dti.gov.uk/files/file11312.pdf http://www.dti.gov.uk/files/file11316.pdfhttp://www.dti.gov.uk/files/file11316.pdf