The economic impacts of documentary standards

Standards Coordination Office
The Economic Impacts of
Documentary Standards:
A Case Study of the
Flat Panel Display
Measurement Standard
Erik Puskar
Standards Coordination Office
National Institue of Standards and Technology (NIST)
June 2011
• Status Report
• Assessment of a documentary standard using the NIST approach
• Why do we care?
 Documentary standards in the U.S.
 Getting a handle on NIST support for SDOs
• The Flat Panel Display Measurement (FPDM) Standard
 Background
 Findings & Illustrations
 Measures of Economic Impact
•Lessons Learned
•What’s next?
Status Report
• Contractor developed
• Full report is in review
• Expected to be finalized in summer 2011
• To be published as NIST publication
Economic Impact “the
• Assessment of a documentary standard
• Involves communicating rich details with performance metrics focused
 Project-specific sources of value creation, absorption, and diffusion
 Generation of cumulative social benefits
• NIST has conducted dozens of micro-economic, case-based, economic
impact assessments
 Quantitative and qualitative
 Retrospective and prospective
 Utilize a microeconomic framework refined by NIST’s Dr. Gregory Tassey
 Emphasizing “infratechnology”
 In the case study tradition of Griliches/Mansfield
Why Do We Care About
Economic Impact?
Standards & the Innovation Process
Adapted from Gregory Tassey, The Economics of R&D Policy, 1997.
Why Do We Care About
Economic Impact?
• Documentary Standards in the U.S.
 Voluntary/Industry-driven
 NIST plays an important supporting role
• How do we best manage NIST support for SDOs?
 Over 300 NIST experts are involved in more than 1100 documentary
standards committees (2011)
 Impact assessments provide clues about how NIST’s expert resources
should be focused: to advance measurement science and maximize
economic competitiveness, safety, health, and quality
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Background (1)
1960-1980 — U.S., Asian, and European firms productized and commercialized underlying FPD
material, component, and device technologies
1992 — Significant demand for IBM Personal Computer Company Thinkpad— precursor to 14
inch “killer app”
1992 — NIST Flat Panel Display Laboratory (FPDL) established
1994-2000 — Notebook PC and FPD TV industry “take off”
1995 — VESA organizes the FPDM Workgroup with NIST’s FPDL as a collaborator and editor
1998 — FPDM 1.0 released.
2001 — FPDM 2.0 released.
2007 — VESA’s FPRM Workgroup reorganized within Society for Information Display (SID) as
the International Committee for Display Metrology (ICDM)
2010 — NIST discontinues Display Metrology project funding
2011 — Expected release of Display Measurement Standard (DMS) by ICDM/SID
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Background
• Westar, Microvision,
Autotronic Melchers,
Eldim, Radiant
Imaging, NEIO, AMA,
Contrel, G&H,
End Users
Original Equipment
Manufacturers (OEMs)
• Dayton T. Brown,
• General consumers
• Professional
• Dell, Apple, Sun Microsystems,
HP, Sony, Lenovo, Sharp,
Samsung, AUO
• Boeing, Lockheed-Martin,
Raytheon, Northrop Grumman
• Samsung, LG, AUO, CMO, CPT,
HannStar, Innolux
• (Aerospace Displays) Honeywell,
Rockwell-Collins, American Panel
Industry Value Chain
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Findings (1)
• FPDM standard enabled the transition to “structured dialog”
between FPD manufacturers and application OEMs
 Users able to specify tolerances of product attributes
 Technology to measure attributes is available, reliable
and unambiguous
 Procurer understands how, when, and why variation will
affect system performance
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Findings (2)
• Economic Impacts of FPDM:
Industry metrology labor-saving (measured)
SDO consensus-making labor saving (measured)
 Enhanced quality of products that use FPDs, FPD industry
revenues, and consumers’ “willingness to pay”
Measurement device designs (a product of NIST’s role in
the FPDM Workgroup) transferred to industry
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Illustration of Metrology Labor-Saving
• Metrology labor saving (net): ~$2.4 million annually (1998-2010)
• In 1994, prior to the publication of FPDM 1.0 (1998), a NIST workshop
on display standards concluded that:
 Few companies could afford to follow all the display standards
 Industry metrologists needed access to the latest measurement
 OEMs needed a bedrock of measurement standards to enable
their choice of the best display for their application.
• Other standards spoke to the issue of what to measure but nothing had
been published on how to measure and how to avoid the pitfalls of bad
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Illustration of Metrology Labor-Saving (Continued)
• Prior to the development of FPDM, a producer or buyer of flat panel
displays (FPDs) would consult any (or all) of a number of existing
standards, depending on the specific application and:
 Expend considerable resources working out which measurements best
suited a given need
 Working out the numerous technical measurement inconsistencies among
the various measurement standards
 Negotiating agreement on chosen metrics and measurement procedures to
be used in qualifying a FPD for future use
• The FPDM resolved many of these technical difficulties by offering a
measurement standard with a set of measurement procedures that
is unambiguous, that applied to multiple display technologies, and
that was practical to utilize
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Illustration of Consensus Labor-Saving
• Consensus labor-savings (net): ~$640,000 annually (1995-2001)
• The range of reduced time commitment for industry WG participants by
10-1200 hours.
• Prior to the resolution of measurement issues in the FPDM, attempts to
reach consensus in so technically challenging and complicated a field
could be bogged down in “specsmanship”:
 Reporting a measured value that could mislead or where the
display is measured in a configuration in which it would never be
used but provides better reporting values to hide a deficiency for
competitive purposes
• NIST staff analyzed, tested, reviewed, composed, and edited the
FPDM drafts under the auspices of NIST’s Flat Panel Display
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Illustration of FPDM’s Revenue Impact
• One test equipment manufacturer with average
annual sales of $700,000 (2005-2010) estimated
that, without FPDM, sales would have been much
lower, in the range of only $200,000 - $500,000
• FPDM was developed faster due to NIST’s
 FPDM 1.0 (1998): Avg. estimate was 4.5 years faster
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Illustration of FPDM’s Consumer Surplus
• Intense competition in the FPD industry forces prices below
some consumers’ willingness to pay. Economist call this
benefit, “consumer surplus”
• A few survey respondents indicated that FPDM increased
consumer surplus (increased willingness to pay above
competitive market prices) by 36%, 36 cents worth of value
for each dollar actually spent by consumers for FPDMsupported products
Flat Panel Display Measurement
Standard (FPDM)
FPDM — Measures of Economic Impact
Very conservative estimate of VESA’s/NIST’s return on investment (ROI) in FPDM
Net Present Value (NPV) in 1992: $15,573,930
 Value, in 1992 dollars, of the eventual outcome of the VESA/NIST
Net Present Value in 2010: $56,323,545
 Value, in 2010 dollars, of the 1992 NPV invested for 19 years at 7% per
Real Social Rate of Return: 48%
 The discount rate that makes NPV 1992 = 0 and makes BCR = 1 (VESA/NIST
Benefit-to-Cost Ratio (BCR): 4
 NPV of benefit stream/NPV of cost stream
Lessons Learned
• Documentary standards have significant economic impacts,
similar to the economic impact of other “infratechnologies”
• NIST collaboration with SDOs is a significant technology
transfer platform
• NIST involvement in SDOs improves the efficiency of the SDOs
operations by reducing consensus-making time and speeding
standard release date
• NIST’s measurement know-how played a critical role in the
dynamics of this global, knowledge-driven industry, enabling
the “structured dialog” that lead to the proliferation of FPD
What’s Next?
• NIST Standard Coordinating Office (SCO) plans to continue to support the
development of impact assessments
• SCO will translate “lessons learned” into a strategic planning approach to
advise NIST staff about the likely impact of their SDO collaborations
• Ultimately “leading indicators” of the economic impact of NIST
engagement with specific SDO committees
 Many economic studies point to the value of standards in general:
“more is better”
 The management question is, “Will this engagement in standards
development be economically significant and add significant value
and best support NIST’s mission?”