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Good Strategy for a Bad Economy

Former GE CEO Jack Welch says a bad economic climate is the best time to invest in new technologies.
By Mark Roberti
May 19, 2008As I've been watching cable news and reading the business pages of The New York Times, I've been thinking a lot about Jack Welch, the legendary CEO of General Electric. Welch used to say that when the economy headed south, companies should not reduce spending on research and development, or on the use of new technologies. Instead, he maintained, they should increase spending. Why? Because competitors likely would cut back, so it would be a great opportunity for a company to put some space between it and its rivals.

At the moment, it's too early to say how bad this current economic cycle will be; no two economists seem to agree on that point. It's also too soon to determine whether companies will pull back on investing in new technologies. Judging by what I witnessed at last month's RFID Journal LIVE! 2008 event, however, I'd say most companies are not trimming their investments in radio frequency identification—at least, not yet.

That makes sense. Many firms are currently focused on employing RFID to achieve easy wins—improving the tracking of reusable assets, reducing shipping errors, cutting labor costs and so forth. If these projects can deliver a return on investment in less than 12 months—and many can—it makes sense to push ahead and even look for additional opportunities to cut costs quickly with RFID.

But smart companies are not just seeking out the quick wins. They are deploying RFID in line with a corporate RFID strategy that separates them from their competitors. I'm thinking of Wal-Mart/Sam's Club, Airbus, Kimberly-Clark, Procter & Gamble and a few others. These companies are not taking a project-by-project approach—rather, they are plotting an RFID strategy that will enable them to build an infrastructure that can deliver increased benefits over the years.

It's important to have an overarching strategy, because that lets you build an RFID infrastructure with an integrated data management system able to support multiple applications. If you don't take a strategic approach, you could wind up with many different systems that provide some benefits but don't work together, and that don't allow you to build more applications across them as RFID becomes more widely adopted.


Heather Wang 2008-06-02 10:06:16 AM
Good Strategy for a Bad Economy Bill Gates from Microsoft also has made the comment that investment in R&D should go up when the economy softens.

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