The Technology First team at element14 is proud to bring you an excerpt from the latest issue XVII - coming soon to you. Here's an Op-ed by wireless technologies expert Steve Bell as part of our editorial retrospective.
Any new technology has to be assessed from a holistic perspective and its adoption is significantly faster when the business model has been fine-tuned to meet changing customer and consumer needs.
RFID and NFC technologies, although related to each other, can seem somewhat disconnected to the mainstream shifts occurring in the Mobile Internet world and their resultant impacts on consumers’ digital lives. RFID is part of a broader category of technology called Internet of Things (IoT) which combines machine to machine connectivity, automation, information systems, networking systems, sensors , controllers and tags - all linked together via cloud computing and the Internet. These billions of nodes that passively or actively send status updates, give instructions or relay conditions require little or no supervision and can be thought of as “unattended” devices, and yet are active participants in a multitude of business processes that comprise the Cloud of Things (CoT).
Mobile Internet devices (PC, tablet, smartphone, iPod, TV) can be thought of as “attended” because they require interaction or demand user attention. In the Mobile Cloud people use these devices every day to enable communications, entertainment, productivity, search and social networking. They are, to a greater extent than any other technology, changing human behaviours and consequently business models, as companies struggle to satisfy consumers’ shifting needs and find new ways to engage with them.
What is unique about NFC is that it is the first technology to sit at the intersection of the Cloud of Things and the Mobile Cloud. Over the next five years it will undoubtedly act as a catalyst for change, bringing together the attended and unattended worlds, and impacting human behaviour as well as business models and systems.
Opportunity Abounds for RFID and NFC
RFID and NFC are related technologies although RFID has been in existence for longer. The two core differentiators of RFID and NFC are proximity and type of transaction as highlighted in this diagram. It is NFC’s close proximity and interactive two-way “tap like” transaction capability that is enabling the explosion in mobile wallet and banking applications. RFID, on the other hand, is a low cost, passive one-way application, ideal for such things as inventory and traffic management.
The combination of Mobile Cloud and tap technology facilitates “anywhere, anytime, anyhow” transactions and seems set to transform consumers’ online and offline relationships with retail and service businesses. Wired Magazine recently ran an advert for Lexus which contained an NFC tag that, when a smartphone with NFC was waved over it, started an application that demonstrated the car’s features. No app to download, no scanning with QR/barcode readers – just fast, user friendly engagement. It is this simple, out of the box capability that makes the interaction with smartphones and tablets, as well as other consumer devices, so appealing.
Extend this experience to the shopping mall with directories that respond to NFC and can provide incentive coupons, activate Wi-Fi and Bluetooth to connect directly to specific URL’s or target brand websites. Or consider brand campaigns carried out on mass transit systems where products seen promoted on smart display boards or other mechanisms can be instantly ordered. One example is “Strappy” where NFC is incorporated into handles on Japan mass transit, enabling passengers to hold their phones against the strap and shop. In the future, when the products are delivered, the RFID on the product and NFC chip in the package connect with the user’s smartphone and a closed loop occurs to facilitate final payment. At the same time, product registration occurs with the manufacturer, meaning that the loop between point of manufacture and point of sale is infinitely more dynamic and real time.
NFC enabled smartphones and tablets are now being used by assistants on the retail sales floor to connect the store’s RFID based inventory system with the customer’s NFC enabled phone, facilitating a swifter and more satisfactory shopping and payment experience. The change is occurring so rapidly that Nordstrom, a large U.S. retailer, plans to phase out cash registers in 2012 and replace them with smartphones and store-specific purchase and inventory apps.
What is rapidly becoming apparent is that huge amounts of data are being generated and, with the right listening programs and analytical techniques, business intelligence can be significantly improved. The same social business intelligence tools that put together structured and unstructured information from consumers can be used to analyse the large amounts of data generated by sensors, RFID and NFC chips. This is the area of focus for companies like ThingWorx; in the near future the blending of social media information from consumers with location specific data will provide valuable new insights into how better to enable smart homes and cities, and equip devices to enhance a consumer’s digital life.
Rethinking Business Process Models
More and more the physical Internet of Things will be represented in the cloud as digital abstraction where data can be semantically stored, searched, linked and mashed up to provide increased collective awareness and knowledge. The challenges that companies face are twofold. The first is how to organize and facilitate usage and communication of this knowledge. The second is the fear of what to do with the data. In recent research conducted by Connected World Magazine and INEX Advisors it was identified that the biggest reluctance / barrier to implementing this technology is that the knowledge generated becomes a liability and most companies do not know how to handle it. Consequently they are not willing to embrace the cost and process redesign of business structures and systems necessary to exploit the data. Effectively a Catch-22 situation!
Having said this, corporations are caught in a pincer movement. On the one hand, the consumer is embracing digital technology at a rate that will make most companies impotent if they are unwilling to adopt it. On the other hand, the Cloud of Things (CoT) technology will force business process change amongst suppliers, partners and competition, and may even facilitate new competition to enter from other areas. The requirement is to rethink all aspects of business models and processes from the perspective of how CoT technology can impact time, people, data, security, products and return on investment. The ability to see the big picture impact of small technology, both real and abstract, has never been more critical.
The food industry is a good example of how the holistic management of data can be aided by RFID and NFC technology. CDC research highlighted that one in six people get sick from bad food annually. This could be avoided by farmers being able to monitor the condition of RFID tagged livestock, processing plants tracking food sources, smart supermarket shelves and shopping trolleys tracking produce and NFC enabled checkouts monitoring product details against alerts and date marks before allowing electronic payments. Tracking this data will ensure that when outbreaks of food related illness occur, the ability to locate purchasers, alert doctors and pharmacies in geographic specific areas can be done more effectively. Finally, NFC enabled smartphone users picking up RFID tagged remedies from the pharmacy will close the loop and provide data on the number of cases and containment. Elements of this process are already in place but the total solution has yet to be engineered.
Business Model Pain Points Yield Solutions
The vending machine has long been used by machine to machine (M2M) advocates as a perfect example of unattended connectivity. The problem with most approaches has been designing a new product around M2M technology to cut cost and ensure security. Rarely do companies look at the business model holistically but the U.S. company, VendScreen, was one of the few that did.
Instead of coming up with a brand new super vending machine, they targeted a replacement module that sold for $200 and could be retro-fitted, effectively creating a $3 billion market worldwide. This replacement module is an Android device, screen and a 3GSM modem that fits into the space where the coin / note mechanism is usually positioned. This module has an NFC capability for tap payment which gives vending machine owners insight into the 100 million people who use their machines on a daily basis. The module can also monitor the machine in terms of maintenance and stock status (RFID), and dispatch service visits when necessary. Perhaps, however, the most significant aspect of this sales approach is that this simple upgrade enhances the return on investment of the vending machine by allowing it to sell higher value items, no longer constrained by the $1 / £1 limit. It also provides the vending machine company with real time data on high selling items as well as interacting with the user by giving real time product information and promotions.
Although NFC is related to RFID, what gives it the edge is that it sits in a unique and advantageous position - at the intersection of the Cloud of Things and the mobile Cloud - whereas RFID continues to flourish purely in the Internet of Things space. It could be said that NFC is poised to be in the right place at the right time! In other words, it will start to transform relationships, both online and offline, between business and the consumer; it will change human behavioural patterns and force business models to adapt to meet consumer needs.
The challenge for existing businesses will be their ability to keep up with the expectations of consumers as NFC becomes more prevalent. For example, new agile service providers with innovative payment concepts are already emerging to challenge established financial institutions. If small business innovators and entrepreneurs are smart, they will uncover the real “pain points” of existing industry business models and reengineer the process simply, and potentially retroactively, to meet changing customer needs.
Steve Bell is founder and President of KeySo Global LLC, a strategic cosnultancy aimed at helping businesses seize digital technology opportunities.
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