Listen Up, Laggards!

By Samuel Greengard

It's time to get up to speed on RFID, before your competitors leave you in the dust.

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Several years ago, being an RFID laggard could be considered a safe, even smart move. After all, RFID was an expensive new technology that didn’t always work so well. Let other aerospace and energy companies, hospitals, manufacturers, logistics providers and retailers figure out where and how to use it—and whether it was possible to achieve a return on investment.

Well, early adopters in each of those industries did exactly that. They worked with RFID providers and standards organizations and, as a result, the technology has improved, prices have dropped and standards have coalesced. Just as important, companies in each industry have developed solid business cases for employing RFID, and many have shared information documenting the benefits, including cost savings, improved efficiencies, better inventory control, safer operations and more satisfied customers.

Illustration: iStockphoto

To be sure, RFID is still not a plug-and-play technology. Any reliable RFID provider or systems integrator will advise companies considering RFID to first conduct testing to demonstrate proof of concept and then pilot the technology. That’s one of the critical best practices early adopters have developed for deploying the technology successfully.

And RFID has not yet reached the tipping point in any industry, though that’s likely to occur in apparel retail within the next year or two. The need to compete in an omnichannel world is one of the business cases driving adoption. Retailers now understand that in-store inventory accuracy is key to omnichannel retailing, and RFID is the only efficient way to achieve it. In a recent Tuned In column, Bill Hardgrave, dean of Auburn University’s Harbert College of Business and founder of the RFID Research Center, said: “I firmly believe retailers must adapt to an omnichannel world or they will not survive.”

RFID adoption is making steady gains in most other sectors. Recently, David Johnson, American Woodmark‘s materials technology and projects manager, said custom and office furniture manufacturers “are coming around to RFID” because they understand how the technology can address manufacturing problems by providing visibility into the production process (see Automating Craftsmanship). American Woodmark adopted the technology enterprisewide to better compete in the remodeling and new-home construction markets.

In fact, there’s been a notable shift in this magazine’s Vertical Focus articles, which examine RFID adoption in particular sectors. In the past, each story typically highlighted a few early adopters that were benefiting from RFID and explained the challenges the industry faced in using the technology, including identifying the business case, cost and tag readability. Now the benefit-challenge balance has shifted in diverse industries, including steel manufacturers, mining companies, airports, horticultural firms, and wine and spirits makers. In each sector, the business cases have been identified, and while some deployment challenges still exist, more end users are adopting RFID and seeing a return on their investment.

In some industries, government regulations are driving RFID adoption. Farmers worldwide, for example, are using the technology to identify livestock for disease management and prevention. In the United States, medical device manufacturers and food producers are exploring the technology to meet U.S. Food and Drug Administration (FDA) mandates. The FDA’s Unique Device Identification system requires that most medical devices carry a unique device identifier to facilitate quick and efficient recalls. The Food Safety Modernization Act, which takes effect in January 2017, will require growers to monitor environmental conditions. Other companies are adopting RFID to comply with the Sarbanes-Oxley Act or facilitate state audits. In each case, organizations that adopt RFID to meet these regulations also find internal benefits.

In 2016, being an RFID laggard is no longer a smart or safe move. “In today’s global business environment, technology innovation is the key to success,” states Nandini Bhattacharya, a Frost & Sullivan senior research analyst. “Laggard companies are left behind by their peers. RFID is a critical component because it works in tandem with many other technologies.”

Hardgrave was addressing retailers when he noted: “If you are on the sidelines, I encourage you to consider the reason(s) you have not adopted RFID and address them accordingly.” But clearly, this advice holds true for any laggard company. “It’s impossible to constantly be on the leading edge of technology adoption,” he says, “but it’s also important to stay focused on how it’s possible to innovate and use the technology to achieve maximum value.”

Addressing your RFID laggard status can be a challenge. If you’re still sitting on the sidelines watching your competitors benefit from the technology, here are four strategies to help you get in the game.

Know the Technology Adoption Cycle
First, to understand why it’s no longer smart or safe to be an RFID laggard, it’s essential to know how companies adopt new technologies. When author and technology advisor Geoffrey A. Moore penned his landmark book Crossing the Chasm in 1991, he ushered in a far deeper understanding of the way organizations approach and use information technology.

Although the book focuses on business and IT in a general way, the lessons learned are highly applicable to RFID projects.

New IT technologies, Moore says, pass through several distinct stages before they gain widespread adoption. In the first stage, technology innovators and early adopters sponsor visionary projects intended to gain a dramatic competitive advantage.

In the second stage, called the “chasm,” vendors offer these solutions to other end users, but the technology meets with resistance because it isn’t complete enough to satisfy all their needs. The technology must cross the chasm for pragmatists (what Everett Rogers, in the original work on technology diffusion, called the “early majority”) to invest in it. To do so, Moore says, vendors must solve a painful and otherwise intractable problem and, within the constraints of that specific problem, bring to market a complete solution.

Based on evidence from logistics, livestock management and luxury consumer goods retail, in 2012, Moore observed: “RFID has crossed the ‘chasm’ period in which early adopters conduct projects while the rest of the world is in a wait-and-see mode. That means RFID is not going away.”

The vast majority of enterprise buying decisions, Moore says, are made by pragmatists or conservatives (Rogers’ “late majority”). Most organizations, he says, position themselves here, to remain competitive without taking undue risks. Pragmatists go when they see the productivity gains outweigh the change-management demands, whereas conservatives postpone until the world simply will not put up with their old-fashioned ways anymore.

“Conservatives don’t trust their own judgment,” Moore says. But, he adds, they can be won over when they see their organization isn’t breaking new ground—that others in their industry are benefiting from the technology. At this stage in the RFID adoption life cycle, conservatives are beginning to learn about the technology—reading case studies and white papers, attending RFID events and/or conducting proofs of concept. They understand the risk of falling too far behind the early adopters and pragmatists.

By focusing solely on technology and not process automation, laggards too often underestimate the time and steps required to move an RFID initiative forward, says Su Doyle, Checkpoint Systems‘ director of RFID applications. While RFID is becoming faster and easier to deploy, it’s important to take the time to integrate the data into core business applications. Establishing committees, identifying organizational goals and opportunities, and building out the IT framework and systems can take weeks or months—all while the current RFID environment continues to shift and advance.

Finding the sweet spot on the technology curve is easier said than done. It requires an eye on your industry, another on the technology, and an understanding of how business conditions are changing. “Some businesses that deployed advanced RFID solutions a few years ago may now face the challenge of spending more money to bring them up to date through upgrades or entirely new hardware, software and systems,” Bhattacharya points out. Conversely, she notes, some laggards may benefit by entering the space with little or no existing baggage or overhead. They may have the luxury of adopting a state-of-the-art solution while avoiding integration problems.

Address Cultural Issues
Of course, an organization can lead in one area and lag in another. Or it can establish itself as a leader in a space and later, due to advances in technology or changing business conditions, find itself trailing the pack. “Organizations that may have been leaders at some point in the past may now be lagging in terms of RFID adoption and use,” Doyle says.

It’s no secret that an organization’s culture can make or break an initiative. Companies that trail peers often have an entrenched “risk-averse” mentality, Moore says. Either they don’t recognize the need to change or they parrot the axiom “If it ain’t broke, don’t fix it.” But in today’s business environment, standing still can easily translate into moving backward. Fear or indifference can lead to inaction and, ultimately, failure. “Although visionary and early adopting cultures tend to move toward a solution voluntarily, pragmatists, conservatives and laggards often require some type of event to galvanize action,” he explains.

Too often, organizations become stuck on short-term goals and capital expenditures and don’t think about how to build a long-term foundation for success. RFID represents a sizable capital expenditure and it demands considerable IT and other resources, so sliding the dial from resistance to an embrace requires someone who can see the value of RFID, serve as a visionary and communicate the value proposition, Hardgrave says. “Company culture can change—and it’s possible to overcome resistance—but it’s a difficult and sometimes frustrating process.” Most organizations, he says, follow a predictable pattern. If they are innovators overall, they will be innovators with RFID. If not, they will lag behind in RFID adoption, or, at least, not benefit as much as they could because they fail to integrate the technology with other IT systems and tools.

One thing that makes it so difficult to change a culture is the fact that “companies that are laggards or late to the game often wind up rewarded because they suffer no strategic or competitive harm,” Hardgrave says. “The process becomes reinforced over time.” But at a certain point, the entire business landscape changes, the model breaks and the company finds itself floundering—or even fighting for survival. “There is a point at which an organization faces a competitive disadvantage that it cannot overcome,” he explains. “They are simply too far behind the curve.”

Cultural change is “really difficult” but possible, says Ed Nabrotzky, Omni-ID‘s chief solutions officer. The process, he says, begins with a visionary or group that recognizes the benefits of an RFID initiative and communicates this to senior executives, a CIO and other key decision makers. “The No. 1 selling point for business leaders is ROI,” he says. “You have to establish a use case that is compelling. You have to have a way to sway management to authorize an initiative.”

This, Nabrotzky adds, means research. Are others in your industry using RFID? What have their experiences been? It then means building a business case that delivers a clear view of the opportunities and benefits. “It’s ultimately about how you can make money, cut costs or fundamentally change things for the better,” he says. “If you can provide a solid business case and demonstrate value, you can break through the cultural inertia or resistance.”

Develop a Strategic Plan
While many industries have developed business cases for RFID, you have to understand where and how RFID supports your organization’s goals. Some hospitals, for example, are initially using the technology to manage high-value assets while others are deploying it to improve patient flow or increase hand-washing compliance. Similarly, some automotive companies are first adopting RFID to manage returnable transport items, while others are implementing it in factories to manage tools or track work-in-process.

A good starting point for developing a strategy and a plan, Hardgrave says, is to understand the conditions in which a business competes and how RFID can change the stakes. Although every industry and organization is different and there’s no single template for success, the common denominator is a need to understand what RFID can do, where it makes sense and how it leads to real-world dollar gains. A persuasive business case, Hardgrave says, often revolves around a more automated real-time business model that lets an enterprise update, change, customize or track products in a way that would have been unimaginable only a few years earlier.

Companies must work from a value proposition to a solution, Doyle says. The questions that need to be asked include: “What is the organization attempting to accomplish? How can we improve functions and processes? How can we monetize this particular technology?

If a company can solve multiple business problems and improve things like financial performance, costs and regulatory compliance, it’s possible to move to adoption without a lot of resistance. No longer is RFID viewed as a niche technology or a one-off tool but, rather, a valuable technology that can solve real challenges and help transform the business.”

The strategic plan must also involve building a coalition of support for your RFID initiative. If you’re a department or mid-level manager who understands the benefits of RFID, Nabrotzky says, it’s important to identify an ally who has influence within the organization. “If you have a team that can stand shoulder-to-shoulder and say, ‘This is absolutely the right thing to do and here is why: It saves money, it makes people’s jobs easier, it delivers better customer sales or service’—and you can support this with facts and numbers—it goes a long way toward reducing anxiety and achieving buy-in.”

Information is one of the best ways to build support. Invite potential team members to RFID events, so they can learn from thought leaders and other companies in your industry that have adopted RFID and are willing to share their experiences. This presents an opportunity for your designated ally and others in your organization to ask questions and gain a deeper understanding of business benefits, opportunities and challenges, Nabrotzky says.

In addition, reach out to your business partners that have deployed RFID successfully. They can provide a valuable outside-in perspective along with ideas about how to move forward. “In many cases, business partners are willing to share expertise because an integrated supply chain and more comprehensive tagging earlier in the product life cycle benefits everyone,” Doyle says. In fact, discussing projects that have the potential to yield mutual gains could provide the impetus to put a project into motion.

Lay the Groundwork
“Businesses need to understand that in today’s environment, disruption is the new normal and innovation is critical,” Moore says. “If you don’t transform, you’re going to be put out of existence.”

While your organization may not be ready to fully embrace RFID, the end goal is to move from a risk-averse culture to one that has room for innovation. Organizations frequently benefit from creating incubation zones for testing and experimentation, Moore says. It’s also wise to zone off portions of the business for traditional activities and understand where and how to apply new and innovative technologies. Laggard companies that engage in pilots and test projects learn from initiatives—both successes and failures—and, ultimately, begin to view risk and disruption as opportunity.

The price of RFID technology has dropped to the point at which the risk-reward model has flipped to a far more favorable position for most businesses, Nabrotzky says. “We now have ultralow-cost microtransmitters that operate on tiny power or no power at all that can be embedded into all sorts of devices or put into applications,” he says. “We also have RFID standards firmly in place. So the technology has arrived. It’s now a matter of figuring out how to use it and make it work within an overall framework of information technology.”

As RFID adoption ramps up in most industries, organizations that may have been rewarded for standing on the sidelines can no longer remain spectators. “As long as a market has not been disrupted, it’s not a bad strategy to be a conservative or a laggard,” Moore says. “But when conditions shift, it’s important to be equipped to move forward. Having your head in the sand and avoiding innovation is a sure way to get killed.”