The Emerging Value of Social Computing in Business Model Innovation

Standards And Transaction Costs Economics

Looking back in time, we can find some illustrative examples explaining the role of standards in technological revolutions. Around 1778, a French gunsmith Honoré Blanc pioneered in developing muskets from parts which were exactly the same for each musket; interchangeable parts. He created some muskets, disbanded them into separate bins and then reassembled the muskets from picking parts at random from each bin. Around 1800, Henry Maudslay pioneered by developing screw thread on interchangeable bolts and nuts, which became a practical commodity. It was a major advance in workshop technology. Not only because they were interchangeable parts themselves, but also because they boosted modularity, since they act as connectors. In the late 1880s, the invention and standardization of electric current caused the so-called ‘War of the Currents’. The feud between alternating current (AC), promoted by George Westinghouse, and direct current (DC), promoted by Thomas Edison involved demonstrations including the electrocution of an elephant and the invention of the electric chair. Only since the wide acceptance of the AC standard, mass usage of electricity, and its commoditizing, ran off. What we can learn from these cases is that standards in an industry support interchangeability, and interchangeability decreases complexness (Christensen & Raynor, 2003).