Harvard on RFID, Wal-Mart & Disruptive Technologies

Here's an eWeek interview of Harvard Business School professor Clayton Christensen (who) handicaps the race for business advantage via technology. A portion of it talks directly to what Wal-Mart is doing. Please note, however, the professor's take on the advantages of bar coding over RFID...

Do you see any companies that are using IT to be disruptive?
That's how Wal-Mart has disrupted the full-service department stores. They manage the flow of inventory so that their turns are high... In retailing, the way you make money is you have a gross margin, times inventory turns. So if the department stores turn their inventory over three times a year. In order to earn an adequate return, their gross margins have to be about 40 percent... If you turn your inventory over six times per year, then your gross margins can be 20 percent and you'll earn an adequate return. It's key in the retail business to have that. I think they made very good investments that way.

They've been trying to push RFID [radio-frequency identification]. Is that disruptive?
It is. However, the prediction would be that Wal-Mart, although they aggressively seek RFID-compatible suppliers, will probably be one of the last companies to adopt RFID.
The only way it would make sense would be if RFID performs better in terms of cost and reliability and accuracy than bar coding. They are the world's state-of-the-art practitioner of bar coding. They've got billions of dollars every hour staked upon the accuracy of that system. My models would predict that where you see RFID take root will be where bar coding is impossible or very cumbersome, and then, adding those new applications, RFID will get better and better until ultimately it's good enough so that a complex operation like Wal-Mart could adopt it.