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The Next Big Thing™

Posted on Thursday 29 July 2004

It’s certainly not a secret that for the past 20 years I’ve put my money (read “derived my income from”) where my mouth is. (The skeptics among you will ask why I waited until I was 30, but the answer to that one lies in another post, or long series of posts.) I have an apparently incurable penchant for going off in pursuit of the latest high-tech craze and diving in with both feet, both hands and the not insubstantial rest of me.

Vis: I left the warm arms of Mother Xerox in 1983 for the Wild West of the personal computer retail business. Apple IIs and IIIs, and eventually the Lisa and the first Macs. One of the products that we carried in our stores in those days were “car phones.” I remember that mine was equipped with an adapter so I could use the modem in my Compaq luggable in the car, if I could only find a battery that would power the darn thing.

I went to work in the email business in 1986. I remember saying at the time that computers were the perfect communications tool to augment the telephone. I also remember negotiating a big reseller agreement with one of our MCI Mail agents; the sticking point was that I didn’t want them to use their price advantage to send what I called “junk” email. Nobody had yet coined the term “spam” but I was concerned that it could become a problem.

After seven years in the email business I jumped to wireless data, which nobody had heard of in 1993 yet today we nearly take for granted. I still have the first iteration of what became the BlackBerry (the ‘BullFrog’) on my office shelf.

Hence (forgive me if this seem immodest) I think I’ve got a fairly good track record of figuring out what the Next Big Thing is going to be, at least in the technology world. I’m not talking about the neat little niche things, like GPS or home automation, but the really big things. The technologies which become ubiquitous. The bits of the digital universe that we take for granted in a few short years. The stuff that we can’t imagine how we lived without.

So what do I think is The Next Big Thing? My money is quite literally on RFID. Radio Frequency Identification. Bar codes on steroids, if you will.

Bar codes work when a laser scans a series of lines or a series of black and white squares printed on a product; the lines reflect the laser back to a lens in a particular pattern (in technical terms, the bar code modulates the laser). The pattern is converted to a number by the reader and the number is handed off to a computer for subsequent processing. In the most widely recognized application, a scanner at a store reads the bar code and the data about the product and its price are retrieved from an inventory system and piped to the cash register checkout terminal.

But bar codes are not perfect. They only work when the code is held close to the scanner/reader. Only one code can be read at a time. They are reasonably easy to mangle, either by accident or by fraud. The good news about bar codes is that they are incredibly cheap to produce and the infrastructure to support them is widely deployed. And we, the consuming public, understand them.

RFID works by using small, inexpensive computer chips (called tags) attached to an object to modulate a radio signal. The modulated signal can contain much more information than is conveyed by a bar code; where a bar code might contain 10 numbers today’s RFID tags typically hold 96 bits of data. There are proposals in the industry for tags which contain several times more information; one analyst told me recently that some consumer product companies are planning to outfit each individual soft drink can with a unique ID number. The other big advantage for radio is that it works in a circular pattern around the antenna. Instead of having to hold each individual item in front of the bar code scanner at the grocery store you’ll be able to wheel your whole cart down the checkout lane and have its contents read at once.

There are already some RFID applications in common use. ExxonMobile’s Speed Pass is essentially an RFID tag with a key ring attached. Wave your tag in front of the reader on the gas pump and the fill up will be charged to your credit card. State transportation authorities have packaged RFID tags as electronic toll collectors; SmartTag in Virginia, EZPass on I-95, etc. The Metro system in Washington uses RFID cards for quicker fare collection on the tube and some buses and requires commuters who park in Metro’s garages to use SmartTrip cards instead of cash. Legoland in Denmark gives kids an RFID-equipped bracelet to where while their visiting; parents can quickly find their kids anywhere on the property should they wander off. Veterinarians can implant an RFID tag under the skin of an expensive pet so the pet’s identity can be proven if it is stolen. Building managers use RFID cards as unduplicable keys to secure areas. And just last week Siemens announced that it would trial RFID in hospitals to verify the identity of patients. Instead of relying solely on the printed tag on the standard bracelet, the hospital will issue a new bracelet with an embedded RFID tag.

But these are just the tip of the iceberg, merely a few early-stage examples. The first really big payoff from RFID will likely be to the product supply chain. From tracking raw materials to managing manufacturing production lines to streamlining product transportation to helping retailers better manage their inventory, both on shelves and in the back of the house, RFID could have an ROI measured in months.

Prepared food which included an RFID tag on its package could tell the oven the exact cooking instructions. RFID packaging could help eliminate counterfeit goods; the first likely market for this will be pharmaceuticals. An RFID tag worn as a pendant could help keep track of Alzheimer’s patients or alert medical staff to an unconscious patient’s allergies. Buildings could be made more energy efficient by only supplying power, light and heating and cooling to those areas which are actually occupied.

OK, so that’s the good news. The applications could be plentiful and the potential benefits broad. But every silver lining has its cloud. RFID has several.

First and foremost, the technology itself doesn’t work very well. I was speaking with a VP at a large consumer products company who said that their testing showed that under ideal conditions they could correctly read 90% of the tags on a pallet full of powered laundry soap. 90% by itself is not acceptable performance, but the successful read rate drops to under 10% under actual warehouse conditions.

Second, there are security issues to be dealt with. I’m sure that WalMart, an aggressive early adopter of RFID, doesn’t want its competitors to walk down its aisles and take inventory, or to know when a particular number of items actually arrived in a given store. Similarly, shippers of high-value merchandize, such as pharmaceuticals, liquor and tobacco don’t want specific containers or trailers to be easily scanned for contents except by authorized personnel in the supply chain.

Third, there are privacy issues to settle, and they are not insignificant. For example, it is technically possible for the Maryland Transportation Authority to note the times at which I drive through the EZPass transponders at the Fort McHenry Tunnel in Baltimore and at the toll plaza north of the Susquehanna River; the distance is fixed, and by comparing the times my EZPass was read the MTA could easily determine if I were speeding. They won’t, of course, for two reasons: the sheer quantity of data would overwhelm them, and Maryland law doesn’t currently recognize EZPass as a valid means of determining whether a car was speeding. There are those who worry that an RFID tag embedded in a piece of clothing or other consumer goods would allow their personal purchases to be tracked and their home or business inventoried by someone driving by on the street. While that fear is technically unfounded today and those making the claims can come across wild-eyed paranoiacs, there are some valid points to consider when discussing the effects of RFID on privacy rights.

Fourth, there is much work to be done on the standards and interoperability fronts. For the supply chain to realize its greatest benefits tags will have to be readable in multiple countries. For example, television sets sold in Canada were likely assembled in Mexico from components manufactured in Korea and China; the sets then were likely trucked across the US. The radio spectrum set aside for RFID varies at least from region to region, if not from country to country. And presently, not all tags can be read by all readers. There is a fair amount of standards work going on in this area, but progress is slow.

But from where I sit, these clouds present opportunities. The team who figures out how to protect my privacy while allowing the retail to reap the RFID benefits will be well rewarded. The outfit that noodles the answer to the security questions will have a good shot at a large market share. And the company who comes up with a way to boost read rates while controlling costs will have built a better RFID mousetrap.

I’m telling you. It’s The Next Big Thing.


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