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September 19, 2019

Five reasons why organizations can no longer avoid standardization

In the nineteenth century, Sir Sandford Fleming discovered that with the introduction of increasingly faster steam trains, communication and travel would be difficult – if not impossible –  without a standardized global time system. In his century, Sir Sandford introduced a standard time system and since then, agreeing on standards has become more important than ever. 

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Globalization appears to be an irrevocable phenomenon. What this means in a professional context is that a colleague may not always be in the same physical location – or may even be working on the other side of the world. However, it’s not only a uniform time system that’s important, but also how global information is stored and exchanged.

Globalization has created a growing need within organizations to establish rigid definitions, key performance indicators (KPIs), and processes. A flexible organization focuses on its core competences and asks for help from strategic partners when needed. Worldwide outsourcing of supplementary activities becomes much simpler and less risky if the information within organizations is standardized.

Local customs, standards, and processes are still sometimes an obstacle. The DIN (Deutsches Institut für Normung) a German Institute for standardization, has conducted research into the economic benefits of standardization in ten different industry sectors.

Below is a summary of the five most important advantages:

1. Lower transaction costs

Both internal and external transaction costs are reduced when the same definitions and data models are used within organizations and between business partners. This benefit is apparent in every aspect of the transaction, from setting up the contract to final agreements based on performance.

2. More accessible information

Data standardization makes information more accessible to all the parties involved, especially when the same standard is used across the sector, making benchmarking possible. It also promotes transparency.

3. Avoiding any weak links across the chain

Standardization also requires a more general approach to specific situations. By standardizing processes and information, the dependence on individuals, departments, or suppliers is reduced. This makes the organization less vulnerable to mistakes by these separate components in the overall chain.

4. Certainty in quality and processes

Organizations have more confidence when their departments and suppliers use recognized standards. This makes processes and results more transparent in order to be compared more easily against other market players.

5. Promoting strategic and synchronized partnerships

Standards can be regarded by and large as codified knowledge. However, to achieve a standard, best practices need to be generally acknowledged by the sector specialists. Organizations can derive value from this synergy, because a reliable source of knowledge arises which can help them to enhance the maturity level of their organizations and to connect with partners more easily.

The first standard time was introduced in England during 1675, Greenwich Mean Time (GMT). The last country only joined three centuries later, and a world standard was finally here. Just maybe, it may be time to reset the clocks in your organization too.

David Stillebroer
Director Product Management