Voyantic

Avoiding the Next RFID Hype Rounds by Learning from the Past
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Omni-channel retail, pharma serialization, internet of things, M2M, NFC – the world never runs out of buzz words that get us all worked up and excited. Then come the budgeting rounds and so many again overestimate the next year revenue growth, setting the sails towards the next disappointment. What is so difficult about it - how to see the forest from the trees?

I would keep my nose directed forward but also take care to learn from the past. Read on to grasp some of the past mistakes.

As we look back at the strange days of the tremendous RFID hype in 2004-2007, one can only shrug and shiver. Can you remember the factors that drove up the inflated expectations curve 10 years ago? I was a rookie in the RFID business in 2004 and couldn’t really tell which were major and minor industry drivers. Now the following themes become highlighted as I try to make sense of the past.

Royalty-free ISO Standard Makes Your Day

In 2004, the Class 1 Gen2 was ratified by EPCglobal. As no patent constraints had been found, the EPC Gen2 standard was also declared royalty-free by EPCglobal. The significance of Gen2 was manifested in 2006 as the International Standards Organization ISO approved it as a part of the 18000-6 standard. The Class 1 Gen2 fixed many shortcomings of the original Class 1 and 18000-6B standards, and this clearly global standard certainly paved the way for smoother ride for the industry.

Do NOT use this switch!

Wal-Mart really flipped the hype boost to overdrive with their announcements early 2004 for top 100 suppliers to tag pallets and cases by January 2005. This drove the whole RFID industry, and those around it, practically insane. If Wal-Mart was doing this, wouldn’t this drag the other retailers to do the same? Also venture capitalists woke up and became fully alarmed not to miss the train. Money started pouring in RFID companies that were set to make millions in the Wal-Mart ecosystem alone, had short or non-existent revenue history, a few patents perhaps and definitely a bullish burn rate. It was a roller-coaster ride during which marketing agencies, lawyers and event organizers must have made big dollars.

Go Only with a Solid Standard

By 2007 nothing much had happened. I am guessing one central cause for Wal-Mart not getting ROI in their RFID expedition was the timing related to standards - the transition from Class 1 to Class 1 Gen2 took a long time and effort for the technology vendors, which also had other worries to handle. As Wal-Mart gradually began to pull back on RFID and Nasdaq started to slide, it was clear that most RFID companies were firmly headed towards the biggest hangover of all times. RFID hype had peaked, and bursted, too.

Healthy Competition, or Something Lurking Behind the Scenes

One thing the investor money really managed to get done was to destroy the profit margins in UHF RFID. Even the few healthy looking companies in RFID were nearly pushed over the edge by their revenue-hungry-investor-backed competitors that sold their goods probably at below-zero profit. As technology was still immature and quality standards non-existent, the door was open for low-quality and no-quality vendors that gradually ate off the left-over positive karma around RFID. End users learned to be cautious and consider quality aspects as well, which now at the later time has turned into competitive advantage for companies that have quality processes well established.

2008 to 2010 were terrible times for everyone. I can imagine how so many sales funnels had steadily forward surfing high-rise edges. As the pressure eased off just slightly, then came December of 2011 and Round Rock. That horrid battle took long and was mostly fought behind the scenes. I actually feel lucky for not knowing all the details, but the dispute really did plenty of harm! Among other casualties the Impinj IPO was scrapped in 2012, but at the same time Smartrac was awake and managed to execute some great acquisitions. The one universal splendid outcome from the Round Rock was the fact that RFID companies really learned to co-operate in the name of a greater common good.

Less Hype, More Industry Collaboration

There may be a time to go solo - but not now

We arrive at the present day – RFID hype is long gone, technology has matured and studies clearly show how the RFID adoption is streamlining processes, bringing ROI and making the world a better place. Omni-channel retail, lean manufacturing, passive sensors and expanding industry collaboration, such as the RAIN Alliance and GS1, are some of the drivers that bring more and more business to the technology vendors and solution providers.

Looking ahead, the RFID market growth looks set to continue at double digits rate. I do not see any unjustified hype in the horizon as of now. If only the RFID industry would be able to avoid the next pitfalls, such as new patent disputes, proprietary national protocols and especially the IoT hype. In general I feel optimistic over all this, however, having been an entrepreneur for over 10 years, I won’t be surprised as…

Do let me know if your crystal ball reflects the future any differently, and with more clarity! Send me an email and let’s talk more!

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