Product Life Cycle

The idealized life cycle of an idea, information technology (IT) or otherwise, within an organization is called the P-cycle, so named because each of its stages starts with the letter p: progenitor, pilot, project, program, perspective, and pervasiveness. Successful idea practitioners understand each idea’s life cycle so that they might know where it might move next. There is an internal life cycle (i.e., within a company) as well as an external life cycle (i.e., the product as it is adopted by the public), and these cycles might differ for many environmental reasons.

The P-cycle is somewhat similar to the traditional systems development life cycle (SDLC) because both cycles start with someone’s bright idea—the progenitor. The bright idea may come based on an employee’s or another stakeholder’s idea (McDonald’s popular Big Mac hamburger stemmed from a franchisee’s idea) or might be the result of a company’s research and development (R&D) efforts. After a feasibility study has been performed, the next stage that the idea (or system) enters is pilot. This stage is usually a scaled-down version of the grand idea so that stakeholders can determine if the idea is a good fit for the company and whether it will work. Once the idea’s potential has been proved to be true, we enter the project stage. At this point, a project plan is created and funded, other resources allocated, and work can begin. If successful, the idea (or system) can be implemented and is now referred to as an ongoing program. The program may spawn additional projects that are related to the original idea. The program is usually part of a strategic plan so that its goals can be cascaded down throughout the organization and, thus, used within many departments. Over time, the program is embedded within the corporate psyche and becomes firmly entrenched within the operating methods and controls of the company. At the beginning of this rootedness, the idea can be said to be gaining perspective. By the time everyone in the company uses the idea on a daily basis, we reach the end state for the P-cycle—pervasiveness.

The external P-cycle of an idea is similar to the internal P-cycle. Some IT innovators talk about five stages in the external life cycle of an idea: discovery, wild acceptance, digestion, decline, and hardcore. In other words, when a product is introduced to the public, it first has to be discovered and then accepted. Early adopters buy the product, like it, and tell others about it. Soon, there is a great buzz about the product and others start adopting it. One can say that the product has now been digested by the marketplace. After a time, the product’s use either declines and is replaced or becomes a commodity (i.e., hardcore). We have discussed in earlier chapters the concept of the IT utility, where most of the software we use currently resides.

The P-cycle articulates itself in the product life cycle (PLC). The PLC describes the stages through which a product idea goes from the beginning to the end, as shown in Figure 9.1. The PLC consists of four stages:

1. Introduction is experienced at the beginning of the product’s life, immediately after launch.
2. Growth is the product’s growth in the competitive landscape where there is strong product awareness. The Apple iPod is an example of a product that moved quickly from the introductory stage to the growth stage. Once in the growth stage of its very popular product, Apple introduced a lower-cost version, the iPod Shuffle, to counter moves by competitors. Apple quickly introduced its iPod Nano and upgraded its original iPod product with video capabilities. These moves were a reaction to competitive pressures (i.e., lower-cost competitors and the introduction of cell phones with similar capabilities) and the company’s desire to maintain its first-mover position.
3. Maturation is the product’s maturity in the competitive landscape. While sales will begin to level off, there is still strong product awareness. There is also usually a need to reduce costs in response to pricing pressures. Most PC makers are in this stage of growth. Hewlett-Packard and Dell both have strong product awareness. However, cutthroat competition has forced these manufacturers to reduce their prices and to differentiate themselves in some other way (e.g., customer service, high-end video).
4. Decline is hallmarked by the slippage of sales. Good strategists will use this time to rejuvenate and jump-start the life cycle by introducing new versions of the product or product enhancements. Dell Computers may continually lower its prices, but it also is aggressive in introducing new versions of its PC. Apple is famous for its strategy of introducing new versions of its iPhone product as sales of prior versions decline.

Figure 9.1 The PLC.

Xerox Corporation has long been a leader in office copiers. Its emphasis on manufacturing efficiency enabled the company to reduce the price of its copiers and, thus, reduce the cost to the customer. However, this class of product is straddling the maturation-decline boundary. By reengineering their product, they were able to make key components more accessible and replaceable and, hence, easier to repair in the field. This move enables service technicians to more quickly complete service calls. Therefore, Xerox can be said to have incorporated the design-for-manufacturing approach with the design-for-service mind-set, a current trend in maturing industries with declining products. Interestingly, the design-for-service mind-set has global implications. With a bit of advance planning, a product designed in this manner might need only some minor adjustments to be marketable in different countries.

How long the PLC takes and the length of each stage varies by product. The cycle may vary from 90 days to 100 years or more. However, there are some definite knowns:

1. PLCs are getting shorter.
2. The first mover makes the (initial) profits.
3. Fads move quickly through the life cycle.

As the product moves to market maturity, the firm must have a competitive advantage. Types of competitive advantage are

1. Quality
2. Low-cost producer
3. Promotional success.

Product Life-Cycle Management

We can define PLC management as a solution that offers essential requirements and skills a company require to manage the life cycle of their product from its development stage until its withdrawal. The PLC management is a significant part of any organization whether small or large and whether the product is for external or internal consumption.

All of the products and services offered or consumed internally by any organization have definite life cycles. The life cycle of a product/service can be split into different phases in order to understand the changes the product or service made in the market. Strategic planning is used to analyze the market trends and the success of a product. As the market is so flexible, the life cycle of the product varies. Every company is on the hunt to develop successful and innovative products to boost their growth, profitability, and performance. It is proved that the success of a new product entirely depends on the product development phase including the cost-effectiveness and the market demand.

The life cycle of a product or service passes through different phases as we mentioned previously. It is a very complex procedure and it needs special skills and tools to measure up the market. The responsibility of the PLC management is to manage the life cycle of the product from the business perspective. PLC includes four different stages as follows:

1. Launching of a product is one of the initial stages of the PLC. Trends, cost, sales survey, demand for the product, and so on, are evaluated in this stage.
2. It is in the second stage where the cost-effectiveness and need for sales increase are evaluated. As the demand and competition increase in the market, public awareness and the newer strategies are discussed and analyzed.
3. In the third stage of the PLC, competitive offerings and the competing products have to be analyzed and examined closely. Product and market analysis are so vital in this stage.
4. Declination of product from the market is the fourth stage of the PLC. As the profit of the product reduces, the company will have no other option to cut costs except the withdrawal of product.

PLC management was first introduced in the fields of medical devices, aerospace, nuclear industries, and the military as quality and safety are the top priorities in these fields. But now almost all industries, including electronics, packaged goods, industrial machinery, and so on, practice PLC management. Effective PLC management will enable the company to ascertain the suitable time to introduce and withdraw a product by analyzing the marketing strategies of competitors and the methodologies they use to develop a new product.

PLM systems enable marketing managers to better communicate and share information. In doing so, effective communication not only reduces costs but also increases efficiency. Errors in product design and marketing can be corrected through effective teamwork facilitated by PLC management-oriented teams.

Product Development Process

New product development is a specialty in and of itself. There are several key steps necessary to develop a new product or to reposition an existing product, and Table 9.1 highlights these steps.

The following methodology can be used to bring a product or service to market:

1. Prior to ever developing a product, a market analysis should be done to see what is “out there” as well as what you think the market would actually want and/or need within a window of opportunity. Here, the goal is value creation and capture, the tenets of which are pervasive throughout the entire methodology. Value creation and capture involve a range of activities by which products and services are developed and delivered to the marketplace.
2. Assess strengths and weaknesses of competitors in the marketplace. Assess possible phantom competitors. These are companies not in the current marketplace that have the potential to enter the market. For example, Amazon.com was originally just a seller of books. When they entered the e-store business by selling hardware, it was an unexpected move that produced additional competition for an entrenched industry.
3. Product conceptualization. This is where you create the idea for the actual product and then execute that idea.
4. Financial analysis. Most companies utilize break-even analysis by first preparing a spreadsheet of anticipated costs (e.g., development, marketing, support). This will enable you to calculate when you will ultimately achieve profitability. This analysis also enables you to “play” with the projected cost of the product although you are often constrained by what the market will bear as well as what competitors charge for their product. Interestingly, sometimes the “innovation” is in the cost of the product as much as it in the feature-set. During the Y2K panic, my company developed a set of analytical tools for programmers needing to find references to dates in their program code. There were many other tools out there. We created a tool that did about 90% of what the other tools did but priced it about 50% lower. We did quite well. The innovation of this product, then, was in the price.
5. Alternatives. Consider other methods of moving a product to market through external means, including seeking venture capital, working with partners, and even suppliers.

Moving products into the marketplace has a number of management determinants, including (a) use of multi-functional teams, (b) transfer of professionals, (c) early market test, (d) senior sponsors, (e) stronger managerial accountability, (f) total quality management, and (g) simultaneous engineering.

Most companies subscribe to most of these determinants (i.e., a through f). The Defense Advanced Research Project Agency (DARPA) defines the remaining determinant, simultaneous (a.k.a. concurrent) engineering, as

The technique was also used successfully by Ford in the 1980s, when the company was developing the Saturn model of automobile.

Continuous Innovation

A recent Women in the Enterprise of Science and Technology (WEST; http://www.westorg.org/) panel discussed several strategies for increasing innovation:

1. Culture is the number one job for leaders. Leaders bring people around a core set of ideas and ask foundation questions such as: What motivates us as an organization and why are we here? What are our core values and what do we stand for? Who are we striving to serve? Culture is dynamic, not static. However, as an organization grows, there is a need to impose greater formality in how work is accomplished.
2. Failure is a part of success. Innovation has long been equated with increased risk because innovative ideas do not follow the typical path. Leaders need to ask themselves whether they ennoble or criticize failure. The answer to this question greatly influences how employees experience the work culture and their propensity to think creatively.
3. Innovation is the promise of something. Steve Jobs did not just communicate his ideas. He painted a compelling picture of what can be. Innovation is about stretching our thinking and combining things that may be familiar in new and unexpected ways. A leader asking “what if” inspires employees.
4. Creating safety is important. It has been found that people relate more to their struggles, failures, and humiliations than their successes. This is a result of negative evaluation that only serves to force an employee to continually self-sensor. Leadership must play a pivotal role in creating a safe culture by modeling authenticity and candor.
5. Reaching out and listening are critical. One method for creating safety is by being a leader who genuinely wants to hear it all—the good and the bad. Leaders model inclusion by listening deeply, building on ideas, and rewarding employees for their input. This mosaic of ideas drawn from diverse perspectives leads to more creative, innovative outcomes.
6. Broadly sharing credit. Today’s successes are usually the result of team effort. One way to engender innovation is by broadly sharing credit.

Other techniques for generating innovation include

1. Brainstorming: This technique is perhaps the most familiar of all the techniques discussed here. It is used to generate a large quantity of ideas in a short period of time. My company often brings in consulting experts, partners, and others to brainstorm along with us.
2. Blue slip: Ideas are individually generated and recorded on a 3″ × 5″ sheet of blue paper. Done anonymously to make people feel more at ease, people readily share ideas. Since each idea is on a separate piece of blue paper, the sorting and grouping of like ideas is facilitated.
3. Extrapolation: A technique or approach, already used by the organization, is stretched to apply to a new problem.
4. Progressive abstraction technique: By moving through progressively higher levels of abstraction, it is possible to generate alternative problem definitions from an original problem. When a problem is enlarged in a systematic way, it is possible to generate many new definitions that can then be evaluated for their usefulness and feasibility. Once an appropriate level of abstraction is reached, possible solutions are more easily identified.
5. 5Ws and H technique: This is the traditional journalistic approach of who-what-where-when-why-how. Use of this technique serves to expand a person’s view of the problem and to assist in making sure that all related aspects of the problem have been addressed and considered.
6. Force field analysis technique: The name of this technique comes from its ability to identify forces contributing to, or hindering, a solution to a problem. This technique stimulates creative thinking in three ways: (a) it defines direction, (b) it identifies strengths that can be maximized, and (c) it identifies weaknesses that can be minimized.
7. Problem reversal: Reversing a problem statement often provides a different framework for analysis. For example, in attempting to come up with ways to improve productivity, try considering the opposite, how to decrease productivity.
8. Associations/Image technique: Most of us have played the game, at one time or another, where a person names a person, place, or thing and asks for the first thing that pops into the second person’s mind.
9. Wishful thinking: This technique enables people to loosen analytical parameters to consider a larger set of alternatives than they might ordinarily consider. By permitting a degree of fantasy into the process, the result just might be a new and unique approach.

To promote innovation also requires the successful management of conflict between team members. Organizations tend to exhibit distinct, unit-wide, conflict-resolution styles with some styles leading to better outcomes according to a study by Leslie et al. (2015). The three styles are dominating, collaborative, and avoidant. Digital Equipment Corp. (now defunct) typifies the dominating culture, where organizational members collectively seek competition and victory and try to outwit others. Southwest Airlines and Hewlett-Packard typify the collaborative conflict culture, where resolution is reached through dialogue, teamwork, and negotiation. In conflict-avoidant cultures, employees suppress their differences and withdraw from situations that put them in opposition to colleagues, often agreeing with others’ points of view for the sake of harmony. These styles usually emanate from the top down and are perpetuated by hiring practices.

The study found that collaborative cultures ranked at the top in such measures as employee satisfaction, low burnout, and productivity. On the flip side, dominating cultures scored lowest in these measures. In terms of creativity and innovation, the study found that conflict-avoidant cultures discouraged the discussions necessary for generating creative ideas and solutions.

The S-curve, a quantitative trend extrapolation technique used in forecasting, has long been used in the technology industry. Many argue that this analysis is actually more useful to see where you have been rather than where you should go. The S-curve, which describes a sigmoid function, is most often used to compare two competitive products in two dimensions: usually time and performance.

An excellent example of an S-curve can be found by examining the ubiquitous automobile. In 1900, the automobile was first introduced to the public and became the plaything of the rich. Between 1900 and 1914, the automobile went through the lower curve of the cycle, or the innovation phase, at the end of which Henry Ford introduced the assembly line. Between 1914 and 1928, the automobile went through its growth phase. It was during this phase that the automobile caught on and was adopted by the general public. By 1928, the automobile was in its maturity phase (the top part of the S-curve), and Ford was seeing leaner, meaner competition.

Essentially, the S-curve is best at defining at what point a new rival has the potential for gaining market share from an established company. Many companies, particularly smaller companies competing with larger, more dominant rivals, use the S-curve to determine if, when, and where they might gain entry to a marketplace. Attackers enjoy important advantages over established rivals: undivided focus, ability to attack talent, freedom from tyranny of those service markets who want your product to stay as is, little bureaucracy, and no need to protect investments in unrelated skills or assets.

The S-curve can unleash unparalleled creativity when the time is realized for the company to make its entry into the marketplace: It is at this point that the product needs to be exposed in a way that effectively competes with the established giant. This stage often translates to reverse engineering the competitive product and determining which features to adopt into your own product and then, essentially, one-upping them by adding new and novel features and/or services.

For a company who is a defender of an established technology, the S-curve predicts at what point their leadership position might decline, as shown in Figure 9.2. Avoiding this point should become the chief focus. Some companies (e.g., Microsoft) practice what I like to call “continuous innovation.” They practice numerous innovation-enhancing techniques, such as including operating skunkworks, acquiring small companies that might become rivals (e.g., Hotmail), and leapfrogging the attacker’s technology.

Organizations strive to create an innovative culture where opportunities that meet customer needs and address market trends can become reality.

Figure 9.2 The S-curve. It is theorized that innovations would spread through society in an S-curve, as the early adopters select the technology first, followed by the majority, until a technology or innovation is common.

Companies such as IBM are not only looking for product opportunities (e.g., physical goods such as software) but also have successfully added new services (e.g., nonphysical goods such as support services or consulting) to their palette of offerings over the past 20 years, shaping the evolution of the corporation from a products company to an e-business provider. This change required years of strategic planning to ensure that evolving core competencies were aligned with evolving market trends. This effort was worthwhile for IBM as it might have saved the company from collapsing.

Drucker (2002) identifies seven sources (four internal to the company and three external) of innovation:

1. Unexpected occurrences (internal): Drucker considers unexpected successes and failures to be excellent sources of innovation because most businesses usually ignore them. IBM’s first accounting machines, ignored by banks but later sold to libraries, is an example.
2. Incongruities (internal): The disconnection between expectations and results often provides opportunities for innovation. The growing market for the steel industry, coupled with falling profits margins, enabled the invention of the mini-mill.
3. Process needs (internal): Modern advertising permitted the newspaper industry to distribute newspapers at a very low cost and dramatically increase reader-ship (process need).
4. Industry and market changes (internal): Deregulation of the telecommunications industry created havoc in the industry but provided ample opportunity for innovation.
5. Demographic changes (external): Japanese businesses surveyed changing demographics and made the determination that the number of people available for blue-collar work is decreasing. They have taken a leadership position in the area of robotics as a result. However, they are not stopping at robotics for manufacturing. Sony’s QRIO robot is an example of the future of robotics.
6. Changes in perception (external): Although people are healthier than ever before, according to Drucker they worry more about their health. This change in perception has been exploited for innovative opportunity. An example is the proliferation of health-related websites.
7. New knowledge (external): The traditional source of innovation: the first car, the first computer, the printing press. This source of information usually leads to more radical innovations than the other six sources mentioned by Drucker. There are two types of innovation based on new knowledge: incremental and disruptive. An example of incremental innovation is the Pentium chip. There have been many iterations of this technology (e.g., Pentium III, Pentium 4, Pentium D, and Pentium Dual-Core). The current iteration, therefore, represents just a slight increment of innovation over its precursor. On the other hand, a radical innovation is something totally new to the world, such as transistor technology. However, technological innovation does have one drawback: it takes much longer to effect. For example, while computing machines were available in the early 1900s, it was not until the late 1960s that they were commonly used in business.

Measuring Product Development

When I worked for the New York Stock Exchange, one of the areas I was in charge of was IT R&D. There were just two measures that we used to track performance: R&D spending and R&D headcount. Of course, our R&D department was charged with developing technologies useful for internal services only. Nowadays, many IT departments are examining ways to make IT into a profitable service center with an eye toward developing products for external use. Toward this end, two additional R&D metrics are useful. The percentage of sales due to new product introduction was first introduced by 3M, but has been proven to be useful across a diversity of industries. A metric associated with new product sales is the number of new products released. One final R&D metric worth mentioning is the number of new patents.

Mascarenhas Hornos da Costa et al. (2014) studied the academic literature on the use of Lean metrics for R&D and discovered that 153 different metrics were commonly used. The most used metrics were certified process, program/project met revenue goals, percentage growth in sales from new products, labor relations climate between R&D personnel, and exploitation of relationships with partners. The researchers also found that companies would like to use the following metrics, although they are not using them at the present time: number and nature of bottlenecks, accuracy of interpretation of customer requirements, rate of successful product development projects, quality/frequency of meeting with customers, and time spent on changes to original product specification.

In Conclusion

IT has evolved toward a manufacturing paradigm. Therefore, it is possible to use traditional manufacturing performance metrics to measure IT product development performance and innovation. There are three different types of measures to consider. One is input measures—e.g., labor hours or person-years per product developed, unit costs for each product developed, value-added per worker, or total factor productivity (labor and capital.) Additionally, how many engineering hours and how long of a lead time a firm requires to introduce a new product from concept to pilot should be considered.

Output measures include design quality, design manufacturability, and the total number of new or replacement products a company completes within a certain period of time. Design quality includes everything about a product that is perceivable by the customer. Design manufacturability refers to the efficiency of the design from the viewpoint of the production department (e.g., programmers.) The total number of new or replacement products is modified by other variables such as project complexity and scope. A final set of measures relate to market performance. Typical measures here are production share or growth in share and profit per unit.