RFID as a commodity? Absolutely.

by Gary Hartley on 2011-12-19

Commodities are things we buy, use and consume with regard for availability and price, not for differences between brands and sources of supply. By definition, commodities of the same type have little or no qualitative differentiation.

We think of commodities mainly in terms of life’s basics – oil, aluminum, bananas, powdered milk and so on. But of course, manufactured goods and items of technology become commodities, too, as they become more ubiquitous in use and available to much the same standard from multiple sources. The transistor radio became a commodity in the 1960s. So has the cellular phone over the past decade.

We love commodities but we also disparage them.  When things become “commoditized”, we tend to think of them as lacking innovation and as being of lower value.  They may continue being extremely useful but we think about them less – and generally, we expect to pay less for them. Commodities are boring.

So no producer or supplier wants their things to become commodities, right?  Wrong. It can actually be an extremely positive development for whatever becomes commoditized and whoever takes it to market.  And commoditization is generally of great benefit to the wider economy.

I, for one, cannot wait until RFID (radio frequency identification) technology falls – or should that be “rises” – into the commodities basket.

Indeed, I predict that RFID will become as commonplace and taken-for-granted as the transistor or cellphone. At that point, we will have mass availability and use of RFID tags and readers at prices that enable organisations (perhaps even individuals) to apply the technology to an ever-widening range of purposes. The benefits will spread and grow, even if they increasingly go un-noticed by most people.  Who in business today thinks much about their cellphone even if they would never go anywhere without it?  (In fact, the smartphone is rapidly becoming the next technology commodity in this space!)

It is the diffusion of intellectual property involved in design and production that turns a technology into a commodity – that and basic utility to human beings. Standardisation plays a big part as well: The emergence of a widely recognised best form of design, manufacture and/or practice will enable more producers and suppliers to enter the market at lower cost. It also simplifies choice for technology users and enables them to more easily secure benefits.

What about innovation?  Wouldn’t commoditization mean RFID losing its power innovative technology with great advantages in efficiency gain and competitive edge?  On the contrary! The more RFID is standardised and adopted – and this holds for most technologies – the more prospect of people finding new and innovative uses for it. The design and manufacture of hardware and software can certainly be clever and innovative, but what will always matter most is how these items are put to work out in the real world.

In this regard, commoditization tends to be completely misunderstood. First, commodities come about largely through innovation, and then standardisation, of design, production and supply. Second, the prevalence of a particular commodity will fuel further innovation either through discoveries that arise from use of that commodity or through the ceaseless drive for differentiation in products and technologies (or a combination of both). Commodity markets tend to be more competitive – and this gets reflected in commodity pricing – and differentiation occurs as producers and suppliers strive for advantage with new, better offerings. In short, we have nothing to fear from the very process of commoditisation in any market.

Would the late and great Steve Jobs worry about commoditization of the ipad or iphone?  I think not, even if he did not want to see it happen to his own creations too quickly. He would certainly see no worry in commoditization of RFID because of the greater potential thereafter for the next technology to emerge. What will follow RFID? Who knows. What matters now is that we keep moving forward with the technology known today, and with its great potential for standardisation and mass uptake.

By Gary Hartley of GS1 New Zealand