How the Bar Code Took Over the World

Bloomberg Businessweek :Drake Bennett and Jim Aley on December 17, 2012

In 1948 a supermarket executive showed up at the Drexel Institute of Technology, in Philadelphia, with a request: He wanted the engineers there to design a technology that could encode information about his products. 

Two graduate students, Bernard Silver and N. Joseph Woodland, took him up on it. Woodland became obsessed and dropped out of school to concentrate on the problem. That winter he was sitting on Miami Beach, dragging his fingers in the sand, when he had his Eureka moment: a series of lines of different widths could be deciphered like elongated versions of the dots and dashes of Morse Code. In other words, a bar code.

This undated family photo taken in the 1950s shows bar code co-inventor N. Joseph Woodland. AP Photo/Courtesy the Woodland Famly

Woodland died last week, at a time when his technology has become so prevalent that it is almost invisible. Boxes of cereal, cans of soup, books, and magazines all have universal product codes. Anything you buy in a supermarket or department store does, too. The next time someone sends you a gift from Amazon.com (AMZN), take a look at the box that UPS (UPS) delivers. The sticker on it has multiple bar codes, all having to do with tracking the package as it makes its way through the bar-coded distribution system. You no longer just scan at the checkout, either. If you still shop for electronics atBest Buy (BBY) stores, chances are you’re “showrooming”—using one of the many smartphone apps that scan codes and check prices against those at other chains, both online and off.

The bar code was a feat of technology, for sure. But it wasn’t a sure thing: The proposed system started off as one option among many in a stand-off among competing interests. So what enabled the bar code to take over the world? How might today’s emerging technologies (we’re looking at you, mobile payments) achieve similar dominance?

Like other successful standards, the bar code had three essential ingredients, all of which are necessary—but not, on their own, sufficient:

A simplicity that overcomes habit. Until the late 1970s, every clerk in every supermarket in America tapped numbers onto a register keypad. The process was rife with errors; Many of us remember our parents poring over grocery receipts before leaving the store. Errors and all, it was the way retail functioned. Only a simple technology with obvious benefits could overcome that inertia. Bar codes are simple and iconic—people have even had them tattooed onto their bodies.

A governing body to knock heads and work out details. If every supermarket and potato-chip maker had chosen its own product-information technology, chaos would have ensued. Instead, a consortium of retailers and manufacturers got together and chose the UPC, an IBM (IBM) design that Woodland, who worked there, helped develop.

An extravagant, surprising, and often expensive effort to “seed the market.” The classic example here comes from the world of credit cards: The Fresno Drop of 1958. Back than, only the wealthy had credit cards. The middle class paid cash, or perhaps paid over time via an installment plan. As Joe Nocera recounts in his classic “A Piece of the Action: How the Middle Class Joined the Money Class”, a manager at Bank of America (BAC), realizing that the only way people would use credit cards is if everyone they knew did, too, had cards sent to every home in Fresno—60,000 in all. For UPC, the seeding of the market was a bit more mundane: the rise of Wal-Mart (WMT), which used the codes to create its legendarily efficient distribution system.

Half a century after the Fresno Drop and Woodland’s epiphany on the beach, there’s a similar battle brewing over mobile payment technologies. Consumers spend trillions of dollars around the world with credit cards.Google (GOOG), Apple (AAPL), banks, credit-card companies—everyone is scrambling to come up with ways to get a piece of that action.

One of the more interesting is Square, a startup in San Francisco launched by Twitter co-founder Jack Dorsey. Let’s see the ingredients. 
Simplicity? Check: It’s a small plastic square that plugs into an iPhone or iPad. A splashy move to dominate the market? Last month Square announced a deal to be in 7,000 Starbucks (SBUX) across the U.S. Strong consortium or governing body? A tangle of competing alliances is more like it. Two out of three, so far, for Square.

Bennett is a staff writer for Bloomberg Businessweek in New York.Aley is an editor for Bloomberg Businessweek.