Embedding RFID into Strategy

Guest Column – By Chris Hanebeck

When companies adopt a new technology, they need to consider its impact on the overall performance of the organization. Obviously, a technology which costs more than it generates in value is not suited for widespread adoption; however, cost, time, quality and flexibility are not the only criteria for successful RFID implementations. Namely the ability to change the competitive landscape in an industry is one factor that merits consideration. To establish the impact of RFID technology on strategy, it is necessary to determine how and where new business process capabilities play into core strengths of an organization in innovative and novel ways. This determination requires a structured approach to technology evaluation before its adoption. Management ultimately has to embed technology choices into an organization’s overall strategy. Strategy, in short, defines the competitive position of a company or product in a given market. In our discussion, we will focus on how to integrate the continuous assessment of RFID capabilities into the process of strategy definition for a company.

Strategic Considerations
Strategy is primarily concerned with fitting an organization into an existing industry structure or with changing the industry structure in one’s favor. According to Michael Porter, the essence of strategy lies in choosing the activities a company performs. Successful businesses either choose to perform the same activities differently from competitors or they choose to perform different activities than rivals altogether. Activities in this context are the business processes of a company. Ultimately, the proper execution of processes leads to the occupation of a unique and defensible position from which the company can outperform its rivals. The degree to which this position is defensible depends on what Porter calls trade-offs: the choice to perform a specific activity often prevents other activities from being available as well. In addition, there are synergies that can tie the activities of a company to one another to create a network for value creation, which is harder to imitate than single activities would be. In this sense, it is the synergy between activities that ultimately ensures success.

This theory behind competitive advantage makes logical sense and can be observed in all industries and successful businesses. RFID allows companies to differentiate through both: defining new activities or performing activities differently from rivals. Take sports teams as an example: several European premier league soccer clubs have adopted RFID for their season ticket holders. The initial aim was to deter ticket counterfeits and to create process efficiencies for fans by allowing them easy access to venues, to pay for concessions quickly and also access to VIP areas without the hassle of being held up. In the US the Seattle Seahawks, who deployed a HF-based payment system, found that concession sales increased by 18% based on the ability to process payments substantially faster at stands. In cases like this fans are able to experience RFID-enabled processes as unique and very pleasant. From a strategic perspective, it is important to keep in mind that sports teams face a wide range of rivals. They rarely compete with other local teams in the same sport. Rather, competition for NFL teams, for example, comes in the form of local basketball, baseball or hockey teams as well as, of course, other types of entertainment, such as theater, concerts and even TV. In essence any differentiation that is perceived as valuable by consumers is a strategic capability which makes it easier to draw season ticket holders into the arena by performing the same activities differently.

An example of performing different activities to obtain a competitive advantage would be using RFID-enabled tickets in a raffle where a random scan of a ticket leads to winning a prize. Likewise, sports teams could use kiosks and terminals to provide customized information by reading tags on season tickets when the ticket holder faces a monitor at close range. Sports teams could offer the ability to sell seats for part of a game when season ticket holders want to leave early for example. In these cases RFID technology can have a viable impact on an organizations strategy as well as foster process efficiencies in terms of cost, time, quality and flexibility. Ultimately the determination of how RFID capabilities influence the overall strategy needs to be based on an in-depth assessment of RFID capabilities within the context of a specific organization. There are five steps that should be considered, which are outlined below.

(1) Assess Your Strategy
In this first step management takes a look at the current market position, key competitors and an organizations competencies to determine where differentiation is desirable and how much certain capabilities influence customer perception or the competitive position. In today’s fast changing business environment, this may well be a continuous endeavor and not all aspects of a company’s strategy necessarily need to be documented in writing. An effective way to accelerate a strategy assessment, which is often used by consultants, is to ask executives about how they envision the organization in two or three years from present. One approach, which is particularly helpful and usually leads to diverse results when working with an entire management team, is newspaper article writing: asking each executive to headline and write a one-page article that looks back on the organization from a future date.

(2) Assess the Fit between RFID Capabilities and Strategy
The technological capabilities for RFID are certainly changing rapidly and we still see new and exciting applications emerge regularly. Better tags, better readers and antennae and more sophisticated software continually allow for a growing number of applications. The cost of RFID is an important consideration as well. More affordable technology enables a larger number of business cases. The assessment of RFID capabilities can take place within the explicit context of the strategy (top-down), but it is equally feasible to look at technology itself to determine which of its features might allow for competitive differentiation (bottom-up). This type of assessment is also very interesting when it is conducted for major competitors. A useful approach in this context is scenario planning: determining how RFID technology might evolve over time and defining which strategic capabilities a given technology scenario enables for the organization and /or its competitors.

(3) Prioritize Ideas and Opportunities
Once it is clear how RFID influences an organization’s capabilities, it is possible to define a list of strategic as well as tactical opportunities. For a retailer, for example, these may include several RFID applications in logistics, in-store and backroom inventory management solutions as well as innovative ways to interact with consumers. In our experience the list should contain 25 to 35 opportunities although not all need to be implemented. Naturally these will vary by industry and company. The criteria to evaluate each opportunity includes how the opportunity influences the organizations competitiveness and industry position as well as how economically feasible it is at the present point in time. Technology maturity is also important since there may well be opportunities which need to be implemented later. In detail, the evaluation begins with the mapping of as-is and to-be processes, includes a high-level assessment of the required project investment and also a first return on investment (ROI) or net present value (NPV) calculation. In addition the use of scoring models is a great way to uncover intangible benefits and to aggregate management feedback across the entire team.

(4) Create a RFID Roadmap
The list of prioritized opportunities serves as the main input to a roadmap and places all opportunities that are chosen for implementation on a timeline. The roadmap defines when projects should begin, which resources will be needed and what are the expected outcomes for each project. If there are synergies between projects, e.g. later implementations leveraging the infrastructure created by previous ones, this should also be noted. The explicit inclusion of tangible and possibly intangible project goals is an important component of the roadmap, since it ensures accountability later on. Naturally, roadmaps are only valuable when they are executed. In this sense, an executive sponsor should own and drive the evolution of the roadmap. One important aspect is that it may very well make sense to combine several different or even all relevant information technologies on a company-wide roadmap. There certainly is no reason why RFID should not be fully integrated the company’s technology vision.

(5) Continuously Assess and Revise the Roadmap
When technology capabilities are not mature enough, when the business case is not immediately attainable or when the implementation is not possible for other reasons, opportunities usually go on a reassessment list. As the competitive environment changes or as new RFID capabilities become available, the roadmap can be revisited to reflect these developments. The roadmap requires companies to stay on top of developments in RFID and other technologies and continuously reevaluate their own position in regard to competitive capabilities.

Industry Considerations
One other interesting consideration is that RFID implementations can be used to drive change in an industry. We have observed how forceful this can be when Wal-Mart and the DOD initially announced their respective RFID mandates. While neither mandate has been implemented as quickly as envisioned, their initial announcement changed the RFID industry and has brought widespread attention to the technology. Out of necessity, other retailers have followed with their own RFID initiatives. These strategies are usually referred to as shaping strategies in that one company leverages its own technology vision to shape the industry in its favor. When using a shaping strategy, it is not always necessary to talk about specific RFID technologies. The most effective way to communicate shaping strategies usually is to address business process capabilities and how customers as well as partners may benefit from the vision.

Summary
Embedding RFID into strategy requires a structured approach to technology evaluation and it is not a one-time activity. Given where RFID maturity stands today, it is a valuable and necessary endeavor in our opinion. The ability to link RFID to strategic supply chain initiatives, for example, is something that few organizations today can afford to neglect. Supply chain visibility and near real-time decisions have the potential to change business processes across industries. We also have to ask ourselves how competitors are dealing with these same questions and when they might implement changes to their business which could force all other participants in the industry to follow. Once a competitor has achieved the ability to perform activities differently or to perform different activities while positively influencing customer perceptions, it will be harder to catch up and to match those capabilities. It may thus be smarter to lead than to follow.

Chris Hanebeck has over a decade of experience in international management consulting, strategy development, change management, software implementation and technology innovation. He has successfully completed projects for over 65 clients on three continents, authored over 50 publications, holds US patents on RFID and wireless technology and regularly speaks at major conferences. Chris also teaches MBA courses on supply chain strategy at the University of North Texas. Chris can be reached at hhanebeck@yahoo.com

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