Wal-Mart: Tech King?

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Trying to identify the supreme technology company of the past 25 years is no easy task. It could be Microsoft (Nasdaq: MSFT), whose ubiquitous operating system and marketing savvy guided the adoption of desktop computing. I could easily make a case for Intel (Nasdaq: INTC), whose pursuit of faster microprocessors drove computing costs down to where all of us can have a PC on our desk. I could list many others.

But although these companies played major roles in the advancement of technology throughout the past quarter-century, another company combined myriad technological resources to change the entire paradigm of American business: Wal-Mart (NYSE: WMT). In my opinion, Wal-Mart stands out as the world's premier technology company and arguably the most important company of the past 25 years. Its relentless pursuit of efficiency through technology changed the face of retail shopping, turning traditional business theory on its head.

Wal-Mart's tremendous efficiency is driven by the innovative use of technology. The gigantic retailer was one of the first companies to recognize the importance of technology in controlling the flow of information among manufacturers, distributors, and retailers. Adopting UPC (Universal Product Code) technology in the early 1980s was the first step toward dominating this information flow, through which Wal-Mart has developed an unrivaled information database that tracks every item it sells throughout the value chain, giving it tremendous power over suppliers. Using this information allows it to wring cost savings from these vendors, savings that it then passes on to the consumer in the form of lower prices.

Like any great competitor, Wal-Mart is always looking for more efficient ways of doing business, and the company believes it has found one with Radio Frequency Identification, or RFID, technology. The company made adoption of RFID by January 2005 a requirement for its top 100 suppliers, though I suppose every vendor will eventually have to use it.

Wal-Mart created the model of the dominating retailer and changed the industry dynamic from one in which manufacturers pushed product downstream to retailers, to one in which the retailer pulls product from manufacturers and distributors only when needed. Other industry leaders have adopted this same business model, with Dell (Nasdaq: DELL) being the most successful example.

Operational efficiency is defined by Wal-Mart, whose use of technology has forced everyone in its industry to improve or die (think Montgomery Ward). Some claim it's Wal-Mart's scale that gives it power over the supply chain, and I don't disagree. Yet Wal-Mart was smart before it was huge, and the company's size is simply a result of intelligent process innovation through technology.

Want to read more about Wal-Mart? Check out:

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Fool contributor Chris Mallon shops at Wal-Mart and owns shares of Microsoft. The Motley Fool has a disclosure policy .