Geoffrey Moore is the author of Crossing the Chasm and Inside the Tornado, two best-selling books that explain how new technologies become mainstream. Mark Roberti, founder and editor of RFID Journal, often cites Moore’s technology-adoption life cycle, to put the state of radio frequency identification into perspective. Here, Roberti and Moore discuss RFID’s road to widespread adoption.
Mark Roberti: It’s been nearly nine years since Wal-Mart asked its top 100 suppliers to tag pallets and cases. At the time, everyone thought RFID would be ubiquitous within a few years. Is RFID’s path to adoption normal for a new technology?
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Geoffrey Moore: What Wal-Mart did in the early days of RFID was classic “visionary” work, the first stage in the technology-adoption life-cycle model. Next comes the “chasm” period, in which early adopters conduct projects while the rest of the world is in a wait-and-see mode. RFID has crossed the chasm and entered the third stage—niche markets have endorsed certain applications to solve specific problems. That means RFID is not going away. But some new technologies remain in this third “bowling alley” stage forever, in which they are valuable but never become mass-market. So the question is, will RFID enter the “tornado” and become a mainstream technology?
Roberti: RFID is highly complex, involving vagaries of radio waves, changes to operational practices, the integration of data and so on. In addition, we don’t have a whole product. In most cases, companies have to buy tags, readers and software from separate companies, and these products are not integrated. Does that suggest RFID will be in the bowling alley forever?
Moore: As long as it has those characteristics, yes. One interesting aspect of RFID technology is that it has a high-volume component and a high-complexity component. The RFID industry invested heavily to drive down the cost of the tag, to encourage higher levels of adoption. But it hasn’t paid off, because there’s no mass market yet. It first has to invest in making solutions more efficient and easier to use for the niche markets. It’s important to stay within the boundaries of the current market and not jump out ahead of the adoption curve.
The right business model depends on what phase of adoption the technology is in. In the early adopter phase, by far the most successful business model is the project model, in which the vendor makes money on each project. When you are in the niche bowling alley phase, the most successful business model is a solutions model, but each solution requires quite a bit of customization. The solution gets standardized around a use case within a specific vertical industry. Within that use case, you have a very reliable whole product that comes from one company or, at minimum, a small group of coordinated partners who deploy the solution over and over to the point where there is very little invention each time a new customer is added.
When you get into the tornado phase of the market, you want to have products that are so interoperable and so standardized that, frankly, anyone can assemble them off the shelf. When you get to the mainstream, the whole product is a commodity. People are putting them together in much more integrated, all-in-one packages. It is a function of standardization and volume. In the bowling alley phase, there is not enough volume to justify the effort of standardizing the whole product, and there is too much variability across too many use cases that require you to have too many different deployments.
The solution model is halfway between a project and a product. The product model always wants to get to the tornado. The services model will access the market wherever it is. Prior to the tornado, the margin goes to the service provider—the person who understands the problem and can assemble the technology to solve it—rather than the product provider.
Roberti: Is the technology-adoption life cycle an organic process that will evolve at its own pace, regardless of what vendors do, or are there things vendors can do to speed up adoption?
Moore: Very much the latter, but they have to be appropriate actions. Given the current phase of the market, I would suggest RFID companies get deeper and deeper into the issues driving adoption. Is it about theft of apparel? Stocking levels? Improving customer loyalty? What problems are we trying to solve, and what are the economic implications of solving those problems? Vendors need to continually fine-tune what is basically a general-purpose technology to deliver very specific niche business objectives. When you do that, you are creating the budget for the customer to buy more product. At some point, the market shifts and companies decide they just have to have this product.
Roberti: Any last thoughts on RFID’s road to adoption?
Moore: The industry got out in front of its headlights and overinvested in a phenomenon that just wasn’t ready to take off yet—and that, by the way, happens all the time. The RFID industry, in general, has underperformed, because it was impatient and tried to drive toward a tornado too quickly. It is easy to see that in hindsight.
There are real problems to be solved, and in the current market’s state of adoption, end users want to give RFID companies money, but not for tags and readers. They want to give them money for solutions to their problems. If the RFID industry responds to that, it will be successful. On the other hand, if vendor companies say they just want to sell tags or readers, they will need to be very patient before a tornado-like stage is reached. Vendors need to focus on problem solving to be successful.