On Course for Efficiency and Quality Thanks to Standards

On Course for Efficiency and Quality Thanks to Standards

Standards and norms are dull in name only. They enhance the quality of products and services and boost efficiency – and not just when shipping containers.

The Swiss newspaper NZZ once wrote that a world without international conventions “would instantly fall apart.” But despite their paramount importance, standards and norms lead a shadowy existence. So, it’s high time to shine the stage lights on them, provided that electricity flows. The International Electrotechnical Commission (IEC) has been setting global standards for electrical technologies since 1906.

The Geneva-based IEC, an organization with 173 member countries, can lay claim to having established almost 11,000 international standards. Its vast array of norms includes the well-known standby symbol, for example, as well as IP67 and IP68, the dustproof and waterproof protection classes for smartphones and the like. How do such standards get developed? We called up the IEC to ask. “It’s a fine art,” replies Gabriela Ehrlich, the head of communications at the IEC. “One mustn’t force innovations into compliance with a norm prematurely, or else there’s a danger of missing out on further innovative developments.”

One mustn’t force innovations into compliance with a norm prematurely.

Gabriela Ehrlich, International Electrotechnical Commission

But the opposite – waiting too long – is also hazardous. The IEC knows a lot about that. At the start of the 20th century, homes across many countries were electrified, but the power line manufacturers in each country developed their own electrical sockets and plugs. To this day, there are still 15 different systems in use around the world. This may delight the travel adapter manufacturing sector, but it continues to be a major nuisance for every other branch of industry and especially for tourists. “It would be incredibly expensive to retrofit electrical plugs and sockets,” Ehrlich explains. “I know of only three countries that have done something along this line: Saudi Arabia, Brazil, and South Africa.”

Switzerland’s Financial Industry Defines Standards for Open Finance by Itself

Open finance, i.e. the exchange of customer data between financial institutions and third-party providers, is gaining traction worldwide, so the call for standards is accordingly loud. Unlike in the European Union, where the PSD2 directive sets certain compulsory guidelines, financial institutions in Switzerland can be part of the solution them - selves without the need for a regulator. This requires, however, a “shared understanding of the legal framework and coordination across the industry,” as the Swiss Bankers Association (SBA) recently wrote. The SBA therefore has defined institutional responsibilities and competences in collaboration with the Swiss FinTech Innovations (SFTI) industry association and relevant market participants. The SBA takes on a coordinating function while SFTI, together with other market participants, lays the groundwork for standardized application programming interfaces (APIs).

The new OpenWealth APIs prove the success of this approach. In December 2020, delegates from the wealth management industry reached an agreement on adopting communally shared APIs. SFTI incorporated them into its common API catalogue. The standards are managed and maintained by the Open - Wealth Association, which was founded specifically for this purpose under the leadership of Synpulse together with the members St. Galler Kantonalbank, Zürcher Kantonalbank, Alphasys, Assetmax, Etops/ Evolute, and SIX. The association selected the bLink open banking platform from SIX to operationalize the APIs, which supplement existing API offerings for accounting tasks. The benefit for financial institutions lies in scalability. Once they and thirdparty providers are on bLink, they can enter into partnerships with all other participants with little expenditure of time and resources. This, in turn, fosters the nationwide establishment of recognized API standards in the market.

Everyone has been annoyed by different, incompatible plugs at one time or another, but very few of us likely ever face the awkward situation of having to verify the quality of a bulk shipment of instant coffee. Brewing up a sample cup without further ado doesn’t suffice to certify quality. Coffee merchants need an objective basis for discussing the quality of the product with suppliers, one that they can resort to as a reference in the event of litigation before a court. The International Organization for Standardization (ISO) provides that basis with its six-page ISO 6670:2002 norm titled “Instant Coffee – Sampling Method for Bulk Units with Liners.” The ISO had already developed a total of 23,850 such standards as of the time writing this article, and around four more are added every single day.

For Trucks, Trains, and Ships

The ISO arose in 1947 out of an organization that the IEC had founded for non-electrotechnical technologies two decades earlier. It has 165 member countries and is likewise headquartered in Geneva. The ISO’s container standard revolutionized global freight transportation. Some 90% of all ISO containers are 8 feet (approx. 2.4 m) wide, 8.5 feet (approx. 2.6 m) tall and either 20 (approx. 6.1 m) or 40 feet (approx. 12.2 m) long. They fit as easily on trucks as on trains and can be stacked by the hundreds on ships. And then there is the famous ISO 9001: There’s hardly a company above a certain size that can circumvent complying with the gold standard for quality management.

The examples above and below illustrate how standards enhance the quality of products and services, and boost the efficiency of the world economy. During the French Revolution, Liberté, Égalité, and Fraternité were naturally the decisive driver of standardization. The new universal system put an end to the arbitrariness of local governments, which had occasionally even imposed the local potentate’s arm length as a unit of measure. The international prototype meter and kilogram supplanted 250,000 different units of length and weight.

Standards Can Extinguish Fires

Throughout history, however, it wasn’t always noble motives that brought forth standards. For instance, in the 19th century, British engineers forced through the establishment of the ohm as the de facto standard unit of electrical resistance, thereby giving the empire global dominance in the telegraph industry. Something similar was achieved in around 1870 by oil tycoon John D. Rockefeller, who sold petroleum lamps in China that worked only with the petroleum that he exclusively sold.

This lock-in effect that creates dependence on a single supplier regrettably occurs repeatedly to this day in various industries. Fortunately, though, and thanks to numerous standards, it no longer occurs as dramatically as it did in 1904, when a devastating fire erupted in Baltimore in the US state of Maryland. Cities in neighboring states sent their fire engines to the scene, but their hoses didn’t fit the local hydrants. The fire raged for 30 hours and destroyed 2,500 homes.