Avoiding the RFID Death Spiral

Many solution providers are making decisions that will hasten their own demise. Here's how to avoid that grim fate.
Published: January 30, 2013

I have been covering the radio frequency identification industry for 11 years now, during which time I have seen many RFID solution providers come and go. There has never been a shortage of entrepreneurs with clever ideas about how they could make money by offering a better way to track and manage stuff. Unfortunately, most companies don’t want to invest money in an untried RFID solution.

I could go into a long, detailed history of the ups and downs of the RFID industry. Suffice it to say we have arrived at a point at which the technology is maturing, and some end users are investing. But the vast majority of end users still have not been sold on RFID’s benefits. Large RFID providers that have advertised their products are getting some steady business, but smaller firms with limited marketing budgets are struggling. In fact, more than a few are disappearing.

What I see, as we report on RFID providers from Argentina to Zimbabwe, is smaller RFID firms entering a kind of death spiral. I’m not prone to hyperbole, so let me explain the term “death spiral.” The term is applied to loans given to companies in desperate need of cash. In the investment world, the loan, counterintuitively, leads to the company’s death, since everyone else realizes, from the nature of the loan, that the firm is in trouble. Shareholders thus sell their stock, and the company winds up going out of business.

When I say RFID solution providers are entering a death spiral, here is what I mean: These firms are struggling to obtain new customers. Instead of following a rational approach to the market, they take desperate steps—they try to market to a mass audience uninterested in RFID, in the hope that some will become customers. They chase a lot of leads that turn out to be dead ends, and when those leads yield little or no new business, they are forced to close up shop.

The best way to avoid going into a death spiral is to have a strategy and stick to it with discipline (that sounds easy, but very few small companies do it). What strategy should you adopt? Anyone who regularly reads my blogs and opinion columns already knows the answer: Adopt the strategies that Geoffrey Moore spelled out in his seminal books, Crossing the Chasm and Inside the Tornado. Moore says you should focus on businesspeople with a compelling need to buy your solution, and leverage one pragmatist to convince other pragmatists to invest in it. You should then keep doing that until you build critical mass.

This approach seems sensible, but I would estimate that there are fewer than 10 RFID companies out of the more than 1,000 I follow that are doing so. That doesn’t mean the other 990 are in a death spiral, but there are a lot of companies out there fighting for their lives. It is unfortunate that they tie their own hands behind their backs by pursing counterproductive strategies.

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.