Why should a firm pursue standardization? There are two reasons: it reduce costs and it surfaces abnormal or non-standard conditions, the addressing of which constitute powerful organizational learning.
Taking the cost issue first, firms pay a significant cost penalty when there is no concept of standardization. Standardizing something really means defining your “normal.” When something is not standardized, whether it be a product, process, or service, variability is likely to ensue, and that variability results in unwanted costs.
When normal is not defined, anything goes. For a firm, this may mean that processes are executed differently by various persons, that products are developed using an ad-hoc process, that services delivered in varying ways – the list goes on and on. All of this variation results in non-standard outcomes and unwanted costs associated with addressing the undesired results.
The second main reason for standardizing is that when something is standardized and normal defined, abnormal becomes apparent. This allows a firm’s personnel to undertake problem solving and learning, leading to corrective action designed to remove the causes of the abnormal condition and prevent its recurrence.
Abnormal conditions are the precursor to undesired outcomes and results. When they are detected early, an undesired outcome can often be prevented through a timely intervention. Only when standardization exists and a normal state defined can an abnormal condition be identified.
Can you imagine a non-standardized world? A world where the colour of traffic lights is left to the discretion of each municipality, a world where your banking transactions are carried out differently be each teller, a world where your car manufacturer builds your car differently in each of its manufacturing plants? We often take standardization for granted, and in every firm there are often signficant opportunities for standardization of products, service and processes that can lead to dramatic cost savings. Failing to identify and pursue these gaps can result in signficant profit erosion and inefficiency.