|The Next Challenge for the RFID Industry: Rapid Growth|
The technology adoption life cycle isn't a smooth upward curve, and that will present problems for users and providers of RFID technologies.
By Mark Roberti
Dec 08, 2014—The radio frequency identification industry is on the cusp of rapid growth. When precisely we will reach the tipping point, I can't say (though I will provide some insights in the next issue of our digital magazine). But I can say that both potential users and providers of RFID technologies will be caught unprepared for the rapid acceleration in adoption.
As a journalist, I've seen it happen before. In the late 1990s, I was an editor at Information Week, a leading IT trade publication in the United States. As late as 1999, CEOs of major corporations were dismissing the Internet as something meaningful for business. Some said they couldn't trust their supply chain to a public network that could go down at any time. Others said no one would come home from working on a computer all day and then shop online.
Things changed quickly—and dramatically. By 2000, General Electric and other companies were trumpeting their use of the Internet. Analysts began to ask CEOs about their Internet strategy on quarterly calls with investors. Suddenly, millions of dollars were being poured into websites. In many cases, the sites were poorly built because the most experienced and sophisticated developers had already been hired. Millions of dollars were wasted.
The same thing will happen with RFID. CEOs who are now dismissing RFID as useless—amazingly, many still do—will be taken by surprise when the technology takes off, and will have to scramble to catch up. They will wind up hiring second- or third-rate systems integrators who have also jumped into the game late and know little about RFID. Projects will be bungled, and will require cost additional dollars to fix.
RFID vendors will also be caught by surprise. Many companies have been burned by investing too much too early in anticipation of growth that never occurred. Now, many are holding back on investing in capacity, because they are concerned that the growth won't materialize. When it does come, there will be a scramble to try to meet demand. Some companies will be outflanked by more nimble competitors and lose market.
What should companies do? My advice to potential users of RFID, particularly in apparel retail, is to begin exploring the technology now. Get a pilot going and identify reliable providers of RFID hardware, software and services. That way, you will have an understanding of the technology, some internal expertise and some outside companies with which you can work. Don't wait until your competitors announce major rollouts before you begin thinking about using RFID.
RFID vendors have more difficult decisions to make. They have to manage their burn rate, and if they invest too much in capacity and it doesn't materialize, they will face a cash flow crisis. I would advocate increasing marketing budgets in select markets that are seeing growth. Building brand is going to be important as adoption accelerates. Continue investing in product improvements and partner to create a whole product.
Spending limited marketing dollars wisely can help create brand awareness in a particular market, so when a company—say, a medical device manufacturer—wants to use RFID, it thinks of your tags or software. Right now, very few RFID companies have much brand awareness, so the market is wide open for any company to become the "gorilla" (the dominant player) in a particular industry.
Targeted marketing can lead to sales, which can be reinvested in either capacity or more marketing. There's another benefit as well: If you need to raise funds, venture capitalists are more likely to invest in a company that has brand awareness in a target market.
RFID Journal has been investing in preparation for growth. We built a custom content-management system for our news and events sites, and moved all of our sites to a cloud-based architecture. If traffic had ramped up with our old, server-based system, the site would have crashed quickly. Now, we can handle any spikes in traffic. We are planning new non-English sites, but will need to manage our investments in the same way vendors need to manage theirs. So I understand the challenges. The important thing is to recognize that growth is coming and that it will be rapid, and to try to be prepared.
Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.