Does Standardisation Stifle Innovation?

Lessons from the smartphone industry

Regulation = Communism?

Proponents of the liberalisation and deregulation regularly tout the technological benefits that arise from privatising industry and deregulating it. There is little doubt that “freeing” the markets has immense benefit. The IT revolution is essentially a by-product of this “freeing” of a market, leading to rapid, revolutionary innovation. Yet it is extremely simplistic to consider this innovation happening in vacuum. Transistors and the internet were products of concentrated government(and by extension society) investment in R&D.

Often, there is outcry about governments “picking” and “choosing” technology. Proponents of “letting the market” decide what the “best” technology and path forward is believe that entrepreneurs, engineers and innovators will eventually find the absolute best solution to the problem at hand.

That rarely happens. History is littered with examples of governments (and society) picking innovations and making society better off. Think railways, postal services, telephone and telegraph lines, hospitals and public universities, the interstates etc. More recently, think billions in subsidies and R&D grants for EVs, renewable power and associated technologies. The market for wind power and solar PVs existed for decades but did not lead to sufficient efficiency gains to become cheap enough to replace coal and gas. Ultimately, governments aiming to (somewhat) make their pledges to protect the climate pumped billions into the industry. The results are clear.

What of the smartphones?

The smartphone industry is largely unregulated and left to its own machinations. This has sparked immense development as phone makers developed rapidly with the rapid development of the semiconductor industry alongside. Incredible efficiency and performance gains powered the industry to dizzying highs and unprecedented penetration across the world. More recently, as the industry attains maturity, innovation has slowed. Most smartphones look similar and have similar levels of performance(for a given price). This isn’t unique to the smartphone industry. All innovation cycles reach this point, until a breakthrough comes along. Think smartwatches and the watch industry.

In context of the smartphone industry, there is furious debate over the EU’s new law mandating USB-C as the standard for charging mobile phones. Presumably, this goes against the free market and free choice and is likely to stifle innovation. Let’s consider this in more detail.

To C or not to C

Charging standards have evolved as smartphones have evolved. Phones have transitioned from so-called “round jacks” to various kinds of USB standards. All major smartphone makers bar Apple have adopted USB-C as the standard of choice today. This was before the EU passed it’s legislation. The innovation around the charging port was fairly limited as differentiation emerged in fast charging and techniques to make phones charge in hte shortest time possible. Larger bricks, split batteries and minute management of the battery were areas where manufacturers focused their innovation efforts. Apple stuck to its lightning cables for iPhones but began updating other devices to USB-C. Clearly, a standard was emerging. Therefore, the argument that mandating a charging standard will stifle innovation clearly holds little ground. On the contrary, this is likely to discourage innovation of two kinds which is largely detrimental to society.

Innovation — Always Good?

Is innovation always positive? By the very nature of technology, tail risks and breakthroughs, it is difficult to predict the direction a technology will take, especially in its infancy. Innovation is hardly limited to groundbreaking ideas. It is also about balancing trade-offs and finding a more efficient or effective combination. Incremental innovation isn’t always beneficial. Recent complaints and quips about Apple re-releasing the same phones every year or OnePlus/Oppo/Xiaomi and its confusing lineup are essentially a byproduct of incremental innovation. Slightly faster chips, slightly better batteries, a little more memory and not much else.

The other side of “innovation” is one perfected by Apple. The so-called “walled garden” of Apple products is designed to capture and keep customers. While Apple’s products are often class-leading, there’s a definitive role of this philosophy in ensuring Apple has an extremely loyal consumer base. But overall, good luck using, say, an Apple Watch with an Android phone or pairing an iPhone to a Windows laptop.

Innovation is a raging torment

Countless studies have looked for ways to understand the drivers of innovation, often with varying but usually low degrees of success. This is because innovation is a complex phenomenon. It should be a science by itself, with rigorous study and experimentation. Ultimately, it is futile to think of innovation as a standalone phenomenon occurring independent to society and likewise futile to believe that any control to direct it where it can benefit the most is misguided.