The last eight years or so have seen an important evolution in the RFID market. If we take a look at a typical product evolution, we can understand this in a classic sense.
The Product Solution Life Cycle
Early in a technology lifecycle, product-focused companies often display a slightly introspective focus on research and product feature design. Pure technology R&D focuses on creating patents to protect intellectual property and to secure a defensible competitive position. This cycle of R&D is important to secure longevity. But customers don’t buy pure technology, so utilization concepts, i.e. products, are the goal. In the use case approach, product marketing people provide input into product features based upon customer interest. These often become the primary differentiators and the focus of capital investment: how can the company leverage their inventions to sell products? How can they move them out of the lab and into the markets?
Base technologies go nowhere without product/use cases. In its early entrée into the market, RFID began as the product, if you will. There was a lot of discussion about ‘speed and feeds,’ frequencies, and data size, etc. Given sufficient interest, utility (value the cycle of innovation) continues in the pursuit of product features to stay ahead of the competition and meet on-going needs of customers. The more complex the product, the higher level of expertise required to service it. The challenge then becomes how to sell and service to a widening customer base.
Figure 1 - Product Value Chain
In the early stages of the RFID market, users were often left on their own (with very reluctant support from the technology company) to solve their broader business problems. The users had to build solutions around the products. Users will tolerate this in the early stages if there is enough perceived value coming out of the investment. But they are not particularly comfortable with this role. And they don’t have the technical wherewithal to build out the complete solution. There are too many parts and products to assess, test, trial, pilot implement, integrate and then support.
"Until we focused on solutions, we could not scale. We had no sustaining demand . . . and no profit"
Users want solutions! And product companies need to provide them. There are very few base technologies with patents that are so valuable that they can grow solely as a technology (crystal displays, semiconductors, RFID chips are some examples). Most technologies need to be sold into end markets or through embedded solutions.
As competition intensifies and the hardware matures or becomes commoditized, anyone pursuing this path will ultimately experience the commodity blues! (See Figure 2.) Then the race is on to scale to stay ahead of lowering prices. Companies will find that they need to accelerate penetration of new markets and geographies through partnerships primarily designed to encourage and facilitate sales of their products.
In fact, for mass adoption of technologies (mostly hardware like flat screens, HD, and RFID), we are relying on this phenomenon. If we can’t simultaneously get sector-specific functionality and lower prices, we don’t get a big marketplace.
Scale gives us that needed economic price point for mass adoption. But functionality, or industry solution completeness, allows users to buy big corporate solutions. Price is not everything!
Thus solution-focused organizations emerge offering a deeper value proposition to the customer. Besides the solution, ongoing end-user services are also expected. Pure technology companies can’t provide that customer hand holding. So there are some great partnership opportunities here!
Often, base technology companies enhance their end-market opportunities through promoting solutions marketing and partner enablement with marketing, training, and joint sales to the end markets. Pure technology has to walk the embedded and channel path to success.
Figure 2 - Commodity Blues
Solutions at Last!
When the RFID era started, we recommended that users set up their own labs to test RFID products in their chosen environments. Can you imagine that? CIOs would call us up and read performance reports on ranges and read rates from tags! We have come a long way! And thank goodness! Is that any job for a merchandising manager or CIO? Hardly!
What users want
“Make it easy for me.” “Solve my problem.” “I don’t want to talk to forty companies; I want to talk to one.” These are customers’ requests. I think we’re there, though it has been tough, with some nice guys finishing last. But let’s look at a few companies in order to see this evolution to solutions.
Evolution to Solution
Over the last few years, I have seen Omnitrol on this very journey. They started out as a middleware appliance company. A device was installed in a manufacturing plant to capture tag reads, process them through the workflow and analytics, and then send bits of data to the proper subscribers over the internet. Omnitrol combined the middleware software with the wireless router functionality in one box. In the last few years they have successfully walked the path from a ‘box’ to a solution.
First, in dealing with the various frequencies and methods, Omnitrol captures the entire active and passive signal, by-passing the issue of the “which camp are you in” question from customers. But more importantly, this helps customers by maintaining flexibility down the road, since users often need multi-layer/multi-frequency environments—Wi-Fi and RFID—Active and Passive. Building up from workflow (we have seen software like this from firms like Globe Ranger), the application builder can then model and integrate many of the working components.
The final icing on the solution stack cake is the software for specific industry problems. For example, consider a shoe department solution—a huge labor force, floor space, inventory management and sales problem for retailers. Blending the visibility and location capabilities that RFID does well with software, you can enable more sales associates to spend time on the floor. Rather than having sales people disappearing to look through the stack for shoes and potentially losing a customer, or not locating inventory and losing the sale, a great solution would blend components such as backroom digital signage or voice so that a stock clerk could locate shoes and send them to the retail flow. Or if the sales associate must go into the stock room, this system can shorten the time spent there, and the associate can return quickly with the requested item. The end-of-day mess clean up (getting the right stock back to the right location) is also facilitated by this method.
Synchronizing inventory status over the internet can facilitate multichannel retail, as well. This is what users want!
Get It - Grow It!
Another company that has walked the path is Tyco. Tyco is huge company with so much technology. And over the past decade, they grew a solution. In fact, many of them.
Tyco has developed security solutions in many industries. So Tyco, already with a strong presence in loss control in the retail setting (Sensormatic), can take that next step. Tyco Retail Solution, a group that is now dedicated to growing the solution footprint, is doing just that (with partner technology moving beyond just EAS to UHF RFID) to broaden their offerings into inventory visibility, merchandising applications, and back-to-source tagging.
Here is a quote from one of their customers—Under Armour (great sneakers, by the way)—that really states the case. Says Frank Albany, Under Armour's Director of Loss Prevention, “The Sensormatic Overhead People Counting platform has enabled us to identify important customer trends such as peak shopping hours, traffic counts, sales conversion ratios, tracking and trending sales per staff member and department, as well as help measure advertising effectiveness.1 Its built-in analytics and advanced data capture technology helped us improve store layouts and reduce theft by measuring and evaluating our labor efficiencies, ultimately to drive sales.”
This is a great example of moving from a pure loss prevention solution, and really leveraging their presence with customers to expand their solution offerings.
Conclusion: End to End?
The RFID breakout story, then, may not be about track and trace, though we are big proponents of that. And one day the industry will get there! Following the chain is not a new story, but is implemented mostly by organizations such as the military or NATO that control the end-points.
Controlling the end points is a huge challenge, and it is probably overreaching. Do we really need that for a solution?
In retail and other industries, we do not have this control (except Walmart, if they want to assert it). So the Item Level Initiative, which readers have surely heard about, may ultimately provide increased incentives over time to drive end-to-end.
“Item level RFID technology is well on the road to mass adoption by apparel retailers and could become ubiquitous by the end of next year. That was the message coming out of Tuesday morning's meeting of the Item Level RFID Initiative held during NRF in New York City,” reports John Johnson, Founder of RFID24-7, who attended the meeting. You can read John’s full article here.
So this makes me wonder whether the industry got diverted with track and trace, to some degree, and missed this focus.