When the Internet era was born, one of its more appealing qualities was the sense of individual empowerment and freedom it gave us all. The chief factor enabling the Internet to empower users in this way is, I believe, the culture of standards that the Internet brought to the IT industry. Before the Internet era, technology companies competed with each other to try to establish control points with their proprietary interfaces and protocols. The Internet showed everybody how much more valuable IT becomes when you can connect and access everything regardless of vendors, and started the IT industry on a whole new strategy based on embracing open standards.
However, the rise of standards, along with the availability of increasingly powerful and affordable technologies, is misunderstood and even feared by many, who see it as a commoditizing influence on the IT industry. This fear may be valid for vendors whose products and services are all pretty much the same, and who therefore have to compete primarily on price. But, those same standards that can turn businesses into commodity providers with price as their chief competitive differentiation, can turn other businesses into successful innovators, who will leverage those standards to quickly and efficiently create differentiated offerings. In other words, far from just commoditizing what businesses and individuals do, a standards-based Internet is unleashing vastly more customization and individuality. It is making its users feel empowered, distinctive -- special.
The more standardized the underlying technologies and services available to a business, the more critical innovation becomes as a way for the business to avoid becoming just another commodity provider, and instead becoming a provider of genuinely high value offerings. This is one of the biggest challenges every business faces, especially in the increasingly open, integrated and global world, which Tom Friedman has written about in his very successful book "The World is Flat", and which we in IBM have been calling the On Demand World.
Further adding to the challenges faced by businesses is the fact that continuing technology advances are sparking a business process revolution that could affect us in the 21st century as profoundly as the Industrial Revolution affected previous generations. Lots and lots of hard work and innovation lie ahead of us to foster such a business process revolution. For one thing, we need a much deeper understanding of the business processes we want to improve and transform; for another, we need to evolve from today's labor-intensive and one-of-a-kind approach to building business solutions, and embrace methodologies based on science and engineering, using sophisticated tools and disciplined processes, much as happened during the Industrial Revolution. And, as was the case with the Industrial Revolution, we need to standardize those processes where differentiation brings little or no incremental value, so as to avoid the huge inefficiencies involved in re-inventing the same process over and over again. We can then apply our energies to innovating around those processes and business models that bring true differentiation and value to the business.
I think that standardizing these business processes will have exactly the same kind of impact -- vastly stimulating innovation -- that we are seeing from technology standards. A truly innovative business can leverage the availability of increasingly standardized, low priced technologies and services to create a special and unique experience for everyone in the business, including employees, dealers, partners, and most important, customers. What’s more, just as the Internet proved to be a highly democratic platform available to lots and lots of people, the availability of standard business processes in a competitive marketplace means that small and mid-size businesses can have access to many of the same advanced technologies and capabilities once available only to large companies, thus helping them better compete with those companies. The criterion for success won't be size or established position, but how capable you are of doing something truly special and innovative.
History has shown us that over time, all successful technologies and services become increasingly standardized and available to more and more people at lower and lower prices. But history has equally demonstrated that those same standards open up enormous new areas to people's innovative capacities. Becoming an On Demand Business -- extending your processes across your value net, becoming more responsive and flexible -- leaves you in a position to focus your talents and resources collaboratively on the real creation of new value -- and that, then, usually leads to new growth well into the future.