Microsoft Offers a Lesson for RFID Companies

By Mark Roberti

The mistakes that the software firm made in missing the boat on MP3 players, smartphones and tablets is a cautionary tale for auto-identification giants.

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George Santayana, the famous Spanish philosopher, poet and novelist, famously said, in his 1905 book The Life of Reason: “Those who cannot remember the past are condemned to repeat it.” This has led to many similar quotes, to which I would like to add another: “Those technology companies that are wed to the past are condemned to failure.”

Throughout history, we see examples of businesses that remain married to old technologies when new ones are quickly replacing them. Makers of gasoline-powered excavators, for example, did not see that smaller, less expensive hydraulic excavators introduced after the Second World War were a threat to their business. Within 20 years, all providers of gasoline-powered excavators were out of business.

Microsoft is a shining high-tech example of a company that has often remained wedded to yesterday’s technology for too long. Its revenue was tied mainly to the Windows PC operating systems and the Microsoft Office productivity software. As a result, it failed to recognize that computing was shifting to smartphones and tablets.

In the RFID industry, there are some large players who also make bar-code and electronic article surveillance (EAS) technology. Both of these are yesterday’s technologies. That is not to say they will not be around for many more years. They will, perhaps even for decades. But they are in the late stages of the technology-adoption lifecycle. Growth has peaked for both and will likely remain flat or decline going forward, just as revenue from PCs has been declining.

But there is still a lot of money in EAS and bar-code technologies. That means the challenge for the companies that make them lies in how to maximize revenue from these mature technologies while developing the products and positioning themselves to take advantage of the growth that lies ahead for the RFID industry.

The challenge facing the CEO of any successful technology firm is to determine how to put significant R&D and marketing dollars into something that is bringing in little revenue. This is because doing so means taking away resources from the technology that is bringing in a lot of revenue, even if growth is slowing.

There is only one CEO who did do this: Steve Jobs, the founder of Apple, who is much admired but rarely emulated. Apple was making a fortune selling iPods. It peddled about 5 million units in 2004, 22 million in 2005 and nearly 40 million in 2006.

But Jobs saw that the iPod was yesterday’s technology. He knew that it could essentially be incorporated into a smartphone, enabling a customer to use a single device for listening to music, making calls and sending e-mail. He had a team working on a tablet focus instead on making a smartphone. Jobs wanted Apple to be the company that disrupted iPod sales, so that it would get the revenue from the next big thing.

This seems obvious now, and a lot of people might say, “Of course, any CEO would do that.” But history shows that one CEO after another failed to do what Jobs did. Consider that Jobs spent $125 million on marketing the iPod when it was launched, taking marketing money away from computers, the company’s core products. He then took marketing money away from the iPod, which was booming, to give it to the unproven iPhone.

There are very few CEOs who would take R&D and marketing dollars away from a core product and give it to one that might be the next big thing. That’s because they don’t know for sure it will be the next big thing. Jobs’ decisions seem obvious in hindsight because we know that the iPhone became a huge success. But when he made those decisions, there was no guarantee it would be such a hit.

I know that RFID will be huge, and that some company will sell billions of dollars’ worth of readers, while another will sell billions’ worth of tags. The question to ask yourself, if you are the CEO of a large auto-ID company, is this: “Do I have the conviction of Steve Jobs?”

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.