Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

RFID as a Disruptive Innovation

Academic journal article Journal of Theoretical and Applied Electronic Commerce Research

RFID as a Disruptive Innovation

Article excerpt

Abstract

The first part of the paper discusses Wal-Mart's adoption of RFID through the theoretical lens of the Resources, Processes, and Values (RPV) innovation theory. This part makes a theoretical argument that Wal-Mart adopted RFID as a sustaining innovation - an incremental improvement in supply chain identification technology. The second part reviews a representative sample of IS literature in order to investigate whether IS researchers have been influenced by Wal-Mart's perspective on RFID. The literature review suggests that many IS researchers have also adopted Wal-Mart's perspective on RFID. The third part argues that RFID technology has a potential to become a disruptive technology with a profound impact on business and society. Given this possibility, both researchers and practitioners are provided with two frameworks ("object oriented approach" and "visionary approach") which can help them to adopt a more forward-looking perspective in relation to RFID. The object oriented approach starts from the basic capabilities offered by RFID technology and attempts to determine how these capabilities can be used to create a new RFID application. The visionary approach starts by assuming that RFID technology has reached its peak in terms of breadth of adoption and then tries to determine opportunities offered in this situation.

Key words: RFID, Future, Innovation, Resources, Processes, Values, Sustaining, Disruptive, New business models, New value propositions, Information superhighway

1 Introduction

In June 2003 Wal-Mart mandated its top suppliers to use RFID tags on the pallet level [48]. Wal-Mart adopted RFID in a way consistent with its business model of a discount retailer. Discount model commanded Wal-Mart to adopt RFID as an improvement over barcodes - the company's existing supply chain identification technology. RFID has the potential to save billions of dollars for Wal-Mart and other retailers through improvements in supply chain efficiency [5], [49], [54], [65]. Since Wal-Mart has been the major driving force behind the recent explosion in RFID adoption, many companies and researchers have adopted Wal-Mart's perspective on the technology.

Improving supply chain efficiency of retailers and other "logistics intensive" organizations [71] may only be a shortterm impact of RFID. Many experts believe that in the future RFID may have a more profound impact on business and society. For example, Paul Saffo, research director for the Institute for the Future, believes that we are standing at an early stage of a new media revolution [43]. Similarly, Accenture [1], a leading technology consultancy, believes that the intelligent interaction of RFID-enabled devices "is potentially as revolutionary as the Internet and World Wide Web".

Although there is a growing realization of the potential of RFID, there is no guarantee that RFID will actually leave the supply chain identification domain. Predicting future can be a daunting task, especially in the turbulent domain of information technology. Therefore, this paper is not an attempt to predict the future of RIFD. Similarly to [39], this paper rather attempts to look "at past and present trends and use these trends for providing a road map of future possibilities" [p. 41]. Being aware of this possible future can help both researchers and practitioners to anticipate possible opportunities and threats associated with RFID.

This paper consists of three major parts. The first part discusses Wal-Mart's adoption of RFID through the theoretical lens of the Resources, Processes, and Values (RPV) theory. This part attempts to make a theoretical argument that Wal-Mart adopted RFID as a sustaining innovation - in line with the company's existing resources, processes, and values. Because of Wal-Mart's high bargaining power over its suppliers [45], Wal-Mart was able to push RFID adoption onto the suppliers. Moreover, Wal-Mart passed its vision in relation to RFID (with RFID being envisioned as a more efficient and effective replacement for barcodes) to the public. …

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