Good Strategy for a Bad Economy

By Mark Roberti

Former GE CEO Jack Welch says a bad economic climate is the best time to invest in new technologies.


As 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.

I’m not talking about using just one frequency and one protocol for all applications. That’s unlikely to work, any more than deploying one type of computer for every use in your company would. I’m referring to the building of an infrastructure that might include active and passive systems, ultrahigh-frequency (UHF) and high-frequency (HF), with each type of RFID system delivering more than one benefit. And all of these systems would be integrated on the back end so data could be used regardless of which system it came from.

As an industry, we have not done a very good job of promoting RFID as infrastructure. But it’s important to think of the technology in this way if you want to maximize your long-term ROI, keep your total cost of ownership low and get the most benefits from using RFID. I recommend companies develop an RFID strategy that supports their overall corporate strategy.

If you are the low-cost producer in your industry, you need to develop an RFID infrastructure that will let you take as much cost out of your processes as possible. And if you are a high-end clothing retailer, you should develop an infrastructure that will allow you to continually improve your customers’ shopping experience. Putting each new application into this strategic framework will enable companies to choose the right RFID and back-end systems for the long term.

So by all means, continue searching for small projects that can save your company money now—but don’t lose sight of the bigger picture. In seizing those short-term opportunities, make sure you’re building an infrastructure that you can add to over time, and that you gain additional benefits from. That way, by the time the next economic downturn comes along, you’ll have a strategic edge on your competitors, ensuring that the impact of that downturn will be a lot harder on them than on you.

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 click here.