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RFID and the Road to Recovery

History tells us that businesses that spend wisely on technology projects during recessions weather the economic crisis and come out on top. Here are seven RFID applications that can save you money now—and make you more competitive for years to come.
By Jill Gambon
Feb 01, 2009—With economic uncertainty stretching well into 2009, businesses around the globe are retrenching to ride out the downturn. Lean times demand tighter budgets, and that includes cutting back on technology spending. But businesses that cut too much—or trim the wrong things—run the risk of stifling innovation and hampering their profitability and competitiveness for years to come, according to technology management consultants and economic experts.

Casting a look back at previous recessionary cycles, there are lessons to be learned from companies that continued to invest in technology even while the economy slumped. An October 2008 report by Diamond Management & Technology Consultants studied the performance of more than 400 publicly traded companies with revenues of at least $100 million before, during and after the last recession, which was defined as occurring from 1998 to 2004. Various financial indicators, including return on equity and return on invested capital, were used to measure performance. Each company's investment and expenditure patterns were analyzed as well.

The report's central finding: While most companies reduced spending during the recession, the superior performers avoided the temptation to make across-the-board cutbacks. Instead, they dug deeply into their operational data and analyzed that information to determine where and how they could become more efficient. They made choices regarding which strategies to pursue and what resources, including technologies, they needed to meet their goals and achieve growth. Those choices had a direct impact on the bottom line. The research showed that the top performers created more than $350 billion in market value, while those companies whose performance weakened lost more than $200 billion.

Throughout the downturn, market leaders such as Southwest Airlines and the Progressive Group of Insurance Companies continued to invest in technologies that supported their broader strategic initiatives and delivered long-term value, says John Sviokla, vice chairman of Chicago-based Diamond. "The leaders find a way," he says. "They make the hard choices. They cut things that don't add value." In the companies Diamond studied, several trends emerged among the top performers, including investing in technologies that automate processes and enable customer self-service.

Whether the economy is booming or contracting, smart businesses look at technology as an enabler of two key sources of growth—innovation and enterprise integration, says James I. Cash, Ph.D., an emeritus professor at Harvard Business School who has studied hundreds of companies and their strategic use of technology for competitive advantage during his 27 years at HBS. "You don't stop and start innovation and growth processes," he says. Cash's research shows that during lean economic times, companies have to adjust by funding fewer projects, reducing the time required for ROI analysis, or identifying partners to share risks and costs. During a recession, investing wisely in technology can deliver significant payback when the good times return, he says.

Investing in technology during a downturn while competitors are slashing technology projects not only positions a business for growth, it can give that company a huge long-term advantage because of the high costs of playing catch-up, says Howard Rubin, CEO of Rubin Worldwide, a technology economics research firm based in New York. During a recession, prices of technology hardware and services may be more favorable, and the sooner projects move forward, the more quickly operational improvements kick in. "For the companies that can invest now, it's like double-coupon days," Rubin says. "The upside potential is massive. For companies that kill investments, the cost of catching up is massive. Anyone who has to rush to market has to pay high costs to catch up."
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