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More Free Advice for RFID Vendors
What to do if you are a startup and don't have the resources to become an RFID gorilla.
So, no sooner did I post my blog, Free Advice for RFID Vendors, than I received an e-mail from a guy I've known for years, who started a small company to sell radio frequency identification solutions. "Great advice if you are Motorola or Avery Dennison," he wrote, "but what if you are a little guy without the resources to build brand recognition and market share, and to position your company to become the gorilla?"
That's an awesome question.
Based on my understanding of Geoffrey Moore's theory of technology adoption (see The (RFID) World According to Moore, Moore Has Spoken—Were RFID Vendors Listening? and Geoffrey Moore Discusses RFID Adoption Strategies), if you can't be a gorilla, you can still do very well, either by finding and exploiting a niche in the main market, or by becoming the dominant player in a niche market. For those of you familiar with enterprise IT applications, think of Ariba and FreeMarkets. While SAP and Oracle were dominating the market for enterprise resource-planning software, these two companies found niches in the enterprise software market that made them very profitable.
Ariba offered a way for a company's employees to order pencils, paper and other supplies via a Web browser, automating what had previously been a labor-intensive task. FreeMarkets developed a system to conduct reverse auctions online, whereby suppliers bid lower and lower to win contracts for everything from computers to wood pallets, leveraging Internet connectivity to bring more competition to the corporate contract-bidding process.
A good RFID example of this strategy would be Omni-ID, a company focused on high-performance tags, particularly those that work well around metal. If you want millions of generic RFID labels, Omni-ID won't supply them. But if you need tags designed to track servers in your IT department, in which a generic label won't work, Omni-ID can meet your needs. There are many applications for specialized tags, so Omni-ID has a great opportunity (it's not alone in going after this niche, so it has to compete to become the gorilla in this particular portion of the market).
Last year, at RFID Journal LIVE! 2009, a company called VRF Holdings showed off an interactive markdown tag that enables a retailer to change the prices on items dynamically. While Avery Dennison, UPM Raflatac or some other company might be the big provider of RFID tags for apparel—the "gorilla," in Moore's terminology—VRF could build a very successful niche in providing markdown tags.
Similarly, AeroScout, Awarepoint and Ekahau are among the companies that could become the gorillas providing asset-tracking solutions to health-care providers. But Resurgent Health and Medical has introduced a line of automated hand-washing systems that utilize RFID tags and interrogators to identify each person using the hand-washing system—and records how long they use it. That firm could wind up dominating the market for these systems, and enjoy healthy growth—no pun intended—for years to come.
What if you manufacture standard passive ultrahigh-frequency (UHF) tags or readers, and you aren't a big player like Avery Dennison or Motorola? I think Moore would say there will be a few "monkeys" that offer mainstream products and compete for the market share not captured by the gorilla. And if RFID really takes off, that could be a good-size chunk of business. But as hardware gets commoditized, it will be tough for small companies to compete with larger firms exploiting the economies of scale. So the best strategy would still be to focus on a niche—perhaps readers designed for specific applications, such as being put on conveyors, or for use in a particular industry, such as oil and gas.
In my view, the key is for smaller players to understand the problems that customers and potential customers have, and to develop targeted, easy-to-deploy systems that deliver a strong return on investment. Too often, RFID companies want to sell technology, and they don't really understand the problems businesses have, or how RFID can solve them. I've seen this myself. I received a call the other day from a person considering getting into providing RFID technology to events organizers. "Should I choose HF [high-frequency] or UHF technology?" he asked. I told him he should step back and think about what value he can provide to events organizers with RFID, and then select the technology that can collect the data able to deliver that benefit.
When a powerful new technology is adopted, there is a lot of opportunity created, beyond the riches the gorillas will reap. Think about the adoption of the Internet. Cisco sells the vast majority of routers that make up the underlying Internet infrastructure. But there were many companies that built successful businesses—for chips that go in routers, for network management software, for servers and so forth.
The fact that one company might become a gorilla in a particular area of the RFID market does not mean there isn't a huge amount of opportunity for everyone else. My advice for those without deep pockets is to find a niche and exploit it. Solve a problem for customers in that particular niche, and then build your brand and market share until you dominate that niche. Smaller companies often have the resources to build brand and market share in a niche, but they need to be smart about their marketing—they have to find ways to target the niche they are going after.
Successful strategies are usually rewarded when a gorilla in a mainstream area buys the niche gorilla at a nice premium.
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 or the Editor's Note archive.
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