P&G's Decision To Pull Back From Wal-Mart RFID Trial Quite Understandable

Say what you will about RFID, but it is the picture-perfect companion for hyperbole. Any development is either instant death for RFID or the magic trend that will make item-level RFID universal by late Friday morning.

It's therefore not surprising that so much has been made of the decision by Procter & Gamble (P&G) to abandon its tagged promotional displays at Wal-Mart. On the one hand, this can be seen as a setback for such tagging projects. P&G touted the effectiveness of its display tagging project often.

Given P&G's reputation for ROI worship, many assumed the company pulled the plug because RFID was failing the test.

What is closer to the truth is that the test failed, not the technology. And to the extent that Wal-Mart was as much a player in this trial as P&G, it could also be said that the test didn't fail, the tester did.

In December 2007, John Fontanella, one of the industry's better RFID analysts who sadly passed away last year, made a prediction that precisely called what would derail the tagged display trial: lack of human trust to use the RFID-generated data.

Fontanella's argument had been that field managers, for example, would trust their own instincts and experience over any CRM-generated recommendations. If the data isn't being used, there's no physical way it can help the bottom line. But whose fault is that? The technology deployment? The managers who didn't insist that the recommendations at least be tried? The IT director who didn't make a strong enough case for its use?

IT directors tend to be much better at selling up—to their CIOs, CFOs, CEOs and board members—than convincingly selling down to their staffs and field personnel throughout the chain. Although it's the upselling that gets the trial funded and approved, neglecting the downselling will just as surely guarantee its failure.

A Two-Way Street

In the P&G case, the problem seems to have been that Wal-Mart wasn't collaborating as much as P&G wanted. For example, one part of the value of tagging displays is that it could be instantly determined which stores had forgotten to put the display out. The tagging allows a call to be made to the behind-schedule store. But if the display request gets ignored and stays in a crate on the loading dock, is it really fair to blame the RFID tag?

Let's get practical. Any partnership between the $84 billion consumer goods giant and the $401 billion retail empire is going to be tricky, from an ego standpoint. P&G is used to partnering with companies that are smaller than it is. Aligning itself with a player that is almost five times larger has got to feel weird. P&G is used to having its partners regard mild suggestions as edicts from on high.

Wal-Mart is used to working at its own pace. Is that much of the lack of responsiveness referenced? Is some of this reaction perhaps a little bit parental? "Wally, if you can't take proper care of your RFID-tagged displays, maybe I shouldn't buy you any more until you've shown me you're more responsible."

The serious concern is that some in the industry will interpret this setback as an indictment of the technology. Thus far, there is no evidence that RFID itself was in any way at fault.