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The World Just Changed
Gillette's plan to purchase 500 million RFID tags from Alien Technology forces vendors and end users to confront a new reality.
Nov 18, 2002—Nov. 18, 2002 - On Nov. 15, we reported exclusively that The Gillette Company plans to buy half a billion RFID tags from Alien Technology (see Gillette to Purchase 500 Million EPC Tags). It is not only the most important news that RFID Journal has broken; it's the most important news this industry has ever seen.
The RFID industry has been roiled for a couple of years now by the Auto-ID Center's vision of a 5-cent tag. Many potential users of RFID have told vendors they want to wait for the 5-cent tag. Many vendors have said that there will never be a 5-cent tag or that it won't be possible to create one for many, many years. Customers were confused, vendors were angry, and the Auto-ID Center continued working to make its vision a reality.
We now have some clarity in the market. I don't know what Gillette is going to pay for the Alien tags. I'm not even sure whether that information will be included in the official announcement when it's made. But I feel confident in saying the price won't be much more than 10 cents per tag. I base that on comments that folks at Alien made to me months ago about their production costs. I also base it on the fact that Innovision Research & Technology told me recently that they paid just 10 cents per unit for 30 million tags for a Star Wars toy they created for Hasbro.
My guess is that the Gillette news will only make things tougher for established RFID vendors. Imagine you are Karl Benz in 1908, and you are selling your cars for $1,550. Along comes this upstart named Henry Ford selling his Model T for about $290 (without extras). Ford went from 10 percent market share in the U.S. when he was selling high-priced cars before 1908 to 48 percent just six years after introducing the Model T.
I'm sure Karl Benz, if he was aware of Ford's plans to build a sub-$300 car, scoffed at the crazy American, just as many RFID vendors have scoffed at the Auto-ID Center and Alien. But the time for denial, finger pointing and recriminations is over. The world has changed. Vendors need to accept that and adopt new strategies for delivering value to customers. Ford put a lot of car companies out of business, but Benz and others adapted and survived.
Gillette's decision makes it clear to end users that the Auto-ID Center's technology is real, works and is a viable option when implementing RFID. That clears up some of the confusion, but it should also create some anxiety. Gillette is well ahead of many of its competitors in terms of evaluating the benefits of RFID, understanding how it can be used and implementing it.
And Gillette is not alone. Several other major multi-nationals that belong to the Auto-ID Center will likely place orders for RFID tags within the next couple of months, as they ramp up pilots. In other words, your company is probably at least a year behind. That's not a huge problem at this early stage. The question is, Do you fall further behind or begin to catch up?
The way I see it, the Gillette announcement is the starter's gun signaling the beginning of the race to get a competitive edge from using RFID. These races usually start out like a marathon, with everyone content to get a feel for the pace being set by others. CEO's remain largely oblivious, while those in the upper ranks of management comfort themselves with the knowledge that their closest competitors aren't doing much either.
Then, Business Week and Fortune hail a couple of leading CEOs for their vision and the tremendous shareholder value they have created by adopting a new technology. The stock price soars. The CEOs that have been asleep wake up and suddenly force their company to start sprinting to catch up.
That's no way to win a marathon, and it's no way to implement technology. In our Special Report Low-Cost RFID: The Way Forward, we suggest that senior executives identify the core areas where RFID will provide the most benefit, implement a system that provides a solid return on investment and then build out from that basic infrastructure. The time to start identifying those core areas and learning about RFID's benefits and limitations is now. The next stage in the evolution of information technology has begun. Only those that can adapt will thrive in the new environment.
Mark Roberti is the Editor of RFID Journal. If you would like to comment on this article or submit your own, send e-mail to firstname.lastname@example.org.
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