[03/23/06] Dr. Peter Harrop
In any rapidly emerging market sector, there are those that make bold initiatives but miss their targets and there are those that quietly create profitable businesses. For those in trouble, the investment may become strategic. Post hoc rationalisation may be the order of the day. And the success stories may be kept quiet for fear of exciting competition. So it is with RFID, where many companies are reviewing their strategies after disappointment while others are succeeding. However, as far as the press and the analysts are concerned, profit is a taboo subject. Best not to annoy the clients by predicting that some approaches are almost certainly doomed to failure.
Laws of the marketplace apply
IDTechEx has recently researched the subject and it has taken a different view. Using many, well proven, "Laws of the marketplace" it finds that there is nothing peculiar about RFID. It is important to know where you are on the V curve of profitability versus sales for your market sector, what your experience curve teaches about the future, how your position versus competitors relates to your market sector growth and so on. Some examples of the position on the market growth/ competition matrix of the participants in certain RFID sectors are shown below. The purpose is to show which are potentially cash cows (mature market, dominant share), cash traps (mature markets, poor share), question marks (fast growing markets, poor share) and stars (fast growing markets, dominant share) and manage these businesses optimally with this in view.
Position of RFID suppliers to certain sectors, following the methodology of Boston Consulting Group
RTLS=Real Time Locating Systems; Source IDTechEx www.idtechex.com
Useful templates include
What are you doing, that customers value and will pay for, but the competition either cannot or will not do?
The lower cost competitor should enjoy higher and more stable profitability
The most profitable companies long term are not run solely for profit. Certain types of investor therefore mean trouble.
80% of success is down to product positioning and only 20% to efficiency and luck.
These excellent guidelines originate from the Boston Consulting Group, the Strategic Management Institute and other analysts. With these principles in view, IDTechEx has looked closely at over 20 consistently profitable company activities in RFID at profitability in the industry in general and at its detailed market forecasts for the next ten years. We have made the following conclusions.
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