Jan 30, 2012The economic downturn that followed the 2008 financial crisis caused some companies to put radio frequency identification projects on hold. This had a negative impact on solutions providers. But some of these firms are also struggling because they have adopted strategies inappropriate to the current state of RFID adoption.
Geoffrey Moore, author of Crossing the Chasm, Inside the Tornado and other seminal books on technology adoption, suggests that providers of new technology must adopt different business models based on the current state of adoption. During the early market, companies must be project-focused—that is, they must be systems integrators and make money on every deployment.
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After the market crosses the chasm and adoption picks up in specific industries (what Moore calls the bowling-alley phase), businesses need to offer what he calls solutions—that is, they must offer products, but each deployment must be highly customized. As adoption ramps up, they must then turn their solutions into out-of-the-box products that they can ship as fast as customers want to buy them.
In some industries, RFID adoption is nearing the bowling-alley phase. Adoption is picking up in health care (primarily active RFID-based real-time location systems), retail (mainly passive ultrahigh-frequency technology) and a few other areas. RFID is still in the early market, in which each deployment in these sectors is a customized project. But some vendors have abandoned their project strategy too quickly, and have jumped into creating solutions or products for which the market is not yet ready.
This is not unique to radio frequency identification. It happens all the time. Before I launched RFID Journal, I covered Internet marketplaces for The Industry Standard, a dotcom weekly. Most of the marketplaces we covered crashed and burned. One reason is that they expected to create complete supply chain solutions when the market needed a project-based approach to revamping supply chains based on the ability to leverage Internet data.
The RFID market is close to an inflection point. The challenge for RFID vendors is to understand the state of the market, and to not get too far out in front of it. Some vendors will not be able to hang on until adoption picks up, and will thus go under. Some might be able to stick it out with additional financing until the market picks up again. And, of course, there are those taking the appropriate strategy for the current phase of RFID adoption—they might emerge as the strongest players, even if they are relatively unknown at present.
The challenge for end users is to evaluate companies carefully, to ensure that they have the financial strength necessary to complete a project and stick around to support it. The last thing you want is to choose a solution from a company, only to find that you now own it and have to support it alone, since that firm failed to employ the correct strategy at the proper time.
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.
