Creating ecosystems: Standardization vs. Innovation and lessons from the console gaming industry

cambrian explosion.jpg

This post is based on an insightful blog from Mike Masnick , CEO of Techdirt who I had the pleasure of knowing for a while and meeting finally in Washington DC when we both spoke the State of the Net conference . Like me, Mike often has a libertarian viewpoint , and his post Which Is More Important For Innovation: A Standard Platform Or Competition? is an insightful and balanced view of standardization for the video games industry.

The question being addressed is a well known one: Within the console gaming industry, is it better to standardise on one platform or many platforms (as we have today – ex Sony PSP, Nintendo Wii and Microsoft Xbox).

I explore the wider implications of this question to the Web and to standardization.

The article says:

It’s just a question of shifting the competition from being between platforms to being on top of a single platform. For example, it’s good to have competition in who can sell you lamps, but it wouldn’t be good to have competition among different types of electric systems with different outlets. So, we standardize on a single electric system, and it allows all the competition on electric devices on top of it.

The above sentence encapsulates the key issue of standardization i.e. the balance between ‘platforms’ vs. ‘innovation’. In other words, standardization and interoperability should concern itself with platforms and should not concern itself with innovation (which is supposed to be ABOVE the platform layer)

Which leads us to the logical question: What is a platform?

Now, here are some of my thoughts on the above discussion as I extrapolate these findings to standardization in general:

• Most people would argue that physical networks like ‘trains lines’ and ‘telecom networks’ are platforms i.e. should easily be interoperable. Does the logic of ‘interoperable physical networks’ apply to games platforms? Clearly value can be availed from the separate games platforms even when they are distinct because they are individually viable ecosystems in themselves. Both the platform owners and also the third party ecosystem (developers) can avail value without the need to interoperate between the platforms.

Art and artistic abilities also play a part in the platform argument. Games have an artistic component. Hence, an IPR component. Art cannot be standardised.

• Now, Does the logic of interoperable physical networks’ apply to the Web? By the ‘web’ we mean any nodes connect by the http and IP protocols. At that level, the standardization DOES apply since the same train lines / connectivity argument applies (value is created from connectivity). However, the interconnect and interoperability argument breaks down beyond the simple connectivity protocols like http and IP. This accounts for the importance of non-standard innovations in the Web – ex Flash (used by YouTube), the chrome browser(which has a different architecture from any Web browser and the woes of standardising HTML5 )

• Thus, the web when viewed as http + IP is a platform. But beyond these simple connectivity protocols, the Web encroaches on the domain of innovation. Chrome, HTML5, Flash do not show the failure of standardization process as they show the ‘non applicability’ of the standardization process to more complex domains (which are the realm of innovation).

If we take a step back and ask ourselves: What is the goal of standardization? It is to create an viable ecosystem.

‘Ecosystem’ includes third parties including (developers, entrepreneurs) and also society at large. ‘Viable’ involves money i.e. commercial viable.

In the IT and mobile domains, the ecosystem will include many elements including open source and microformats

Coming back to the gaming console arguments: The acid test of a viable ecosystem is: Can radical innovation still emerge from within the ecosystem? Including proprietary innovation?

The Nintendo Wii is an example of radical innovation and it DID emerge in the console gaming ecosystem i.e. there was nothing to prevent a Nintendo Wii (or indeed another new platform) from emerging.

Clay Shirky recently said “Communications tools don’t get socially interesting until they get technologically boring.”

Another way to look at this is: Things get technologically boring when they are standardised.

To conclude, being a fan of history, pre history and watching waay too much National Geographic: Standardization is all about creating a viable ecosystem and the diversity in ecosystem is more complex today than ever before.

There was a period in prehistory called the Cambrian explosion around 530 million years ago which saw the rapid appearance of most major groups of complex animals.

One of the theories for the Cambrian explosion is the rapid increase in the concentration of Oxygen in the atmosphere. We are seeing a similar ‘cambrian explosion’ in content, service and connectivity at the current time. It means we will probably see a much more diverse ecosystem which standardization will struggle with. This is not a failure of standardization but rather a healthy sign of a vibrant and viable ecosystem.

The question to ask is: How to preserve an economically vibrant ecosystem and at what level to standardise so as to preserve innovation

There is something to learn from both gaming consoles and the Cambrian explosion

Image source: http://www.biologyreference.com/images/biol_01_img0060.jpg