Product life cycle–managing evolution and winning competition

The product life cycle refers to the evolution of products from the beginning of development to removing a product from the market. Understanding the product life cycle and its management is crucial because so many genuinely new products fail at the first phase of their life cycles. It’s alarming that more than 75 percent of innovative products retire without generating profitable revenue. The innovator loses the most because failure occurs only after investing substantial money and time into research, development, production, and launching. On the other hand, a few innovators have been extracting astronomical economic value from the market through limited number of products. Surprisingly, most rare, highly profitable products did not start producing profit from the introduction stage. The underlying success of their magical performance has been due to product life cycle management.

Irrespective of their greatness, innovators fail to extract profit from the market during the introductory stage. For example, from selling a little over 1 million units, even Apple could not profit from iPhone 1. On the other hand, Tesla kept losing money in electrical vehicle Innovation for over 20 years. Moreover, despite a spike in the introductory stage, Palm could not sustain the success of Palm Pilot personal digital assistant (PDA). Most importantly, growing market power accumulation opportunities through software, connectivity, and scientific discoveries-centric economies of scale, scope, and positive externalities have been demanding winning the innovation race. However, such winning effects do not happen all of a sudden. Instead, they need to be created through the evolution of the product life cycle.

Key takeaways

• Product life cycle stages—there are five stages of product life cycle: (i) development, (ii) introduction, (iii) growth, (iv) maturity, and (v) decline.
• Reinvention starts the product life cycle—reinventing matured products to meet consumer preferences better by leveraging technology possibilities begins the product life cycle.
• Creating product life cycle—it does not naturally exist—managed evolution of the formation of new products to be translated into product life cycle.
• Managing evolution—The product life cycle is the outcome of managing the evolution of embryonic beginning through incremental advancement and sibling creation.  
• Resonating technology and consumer preferences—both the length and breadth of the product life cycle depend on evolution through making resonance between technology possibilities and unfolding consumer preferences.
• Sustaining product in the competition—the urgency of sustaining innovation in the competition space drives the evolution of the product life cycle.
• Winning the competition—profiting from evolution demands winning the competition.
• Pursuing Creative Destruction—to overcome decline and profit from it, the focus should be on pursuing creative destruction.

Defining product life cycle

The product life cycle refers to the evolution of a product through five stages: (i) development, (ii) introduction, (iii) growth, (iv) maturity, and (v) decline. The evolution through these phases occurs due to creating scale, scope, and positive externality effects through leveraging technology possibilities and consumer preferences. By the way, after reaching maturity, the product itself does not decline. Instead, due to the reinvention through the change of technology core, demand for matured products declined. The following section provides further clarity about product life cycle phases or stages.

Product life cycle phases

1. Development

Often, product development is a reinvention effort to offer better alternatives to existing mature ones. For example, the iPod was a reinvention of the Walkman, and the iPhone was a reinvention of the smartphone. Creating siblings of an existing product for market segment-specific offerings also leads to developing new products. For example, like the iPhone, many products have evolved as a family of products.   In rare cases, unique products are developed. For example, MRI and X-ray machines and Microwave Ovens were utterly new products—having no predecessors. Invariably, emerging technologies drive the development of new products for taking customer experiences to the next orbit in Getting jobs done.

2. Introduction

A product is introduced to the market after a long development time. During the introduction phase, innovators make substantial investments in advertisement to make target customers aware of the product and its benefits. Although there is often little-to-no competition, newly introduced products face the barriers of alternatives. For example, in the 1980s, digital cameras faced the barrier of matured film counterparts. Similarly, the iPhone 1 faced the barrier posed by high-end handsets produced by Nokia, and Research in Motion (RIM). Irrespective of their greatness, invariably, all newly introduced products suffer from loss-making revenue due to low willingness to pay and the high cost of introduction.

3. Growth

Although advertisement and promotion create demand, the foremost growth push shows up from the evolution, releasing successive better versions. Innovators take into cognizance of customer feedback and leverage technology advancement to release better versions, creating a scale effect. Besides, externalities like infrastructure and standards also play a positive role in driving growth. For example, the 2^nd version of the iPhone with 3G features got a boost from expanding the 3G mobile network. Similarly, the market for electric vehicles has been growing due to the advancement of the battery pack and the expansion of charging station networks. Besides, positive externalities due to the growth of 3^rd party products and network effects also contribute to the growth. For example, the growth of demand for smartphones was partially due to the availability of Apps through the app store.

Another growth factor has been leveraging the scope effect by introducing customer segment-specific versions, creating a family of products. However, during the growth phase, competition intensifies. To counter it, innovators must win the incremental advancement race by releasing successive better versions. Although profit is made during the growth phase, not all products succeed. Due to the price-setting capability of the top-performing products, weaker products fail to reach profit and sustain it. Hence, many products prematurely retire before reaching maturity due to losing in the profit-making competition.

4. Maturity

Primarily, due to the maturity of technology core and positive externalities, and growing negative externality factors, the growth of products slows down and reaches saturation. The revenue and unit sale growth end up in getting limited to overall economic and population growth.  At maturity, intensive competition also reduces profitability. However, creating a monopolistic situation has been changing the conventional scenario. Due to the growing reality of winner-takes-it-all, at maturity, only a few producers with Monopolistic market power sustain. For example, as opposed to 85 hard disk makers during the growth phase in the 1980s, there were only three surviving producers in the 2010s.  

5. Decline

Due to the rise of the reinvention wave through the change of matured technology core with emerging one, matured products start losing demand. For example, the rise of electric vehicles has been taking away the market share from gasoline automobiles. Similarly, digital cameras took away the film camera market, and smartphones eroded the demand for feature phones.  

Factors affecting the product life cycle

Significant factors affecting the product life cycle are as follows:

• Consumer preferences in getting jobs done—increasing knowledge about consumer preferences leads to refining existing features and adding new ones, leading to the growth of the product’s appeal.
• Technology—technology progression is a significant driver in advancing the evolution of the product, notably in the growth phase, through feature enhancement and addition, the creation of a family of products, and the formation of positive externalities. 
• Incremental innovation—the growth phase of the product life cycle benefits from gradual advancement, resulting in quality advancement and cost reduction. 
• Competition—competition catches up, taking away profit and market share, resulting in product life cycle management challenge of sustaining the growth. 
• Externalities–positive and negative externalities created through infrastructure, negative consequences, 3^rd party offerings, Network effect, standards, and public policies affect the product life cycles.
• Creative destruction—as mature products fail to keep pace with the growth of the next wave out of reinvention, creative destruction occurs in the demand and jobs of matured products.

Importance of product life cycle

Understanding of product life cycle plays a vital role in performing the following tasks:

• Deciding about further advancement—whether the investment in advertisement, supply chain restructuring, technology acquisition, distribution network, incremental innovation, or recreation depends on the product’s life stages.
• Responding to competition—The competition prediction and strategy for responding to it depends on the product’s life cycle stages.
• Creating scale, scope, and positive externalities—The growth phase offers the opportunity to win the competition by creating scale, scope, and positive externalities.
• Leveraging technology possibilities—leveraging technology possibilities varies across the product’s life cycle stages, from reinvention to incremental innovation. 
• Spinning off siblings—the product life cycle’s growth stage appears suitable for creating customer segment-specific siblings.
• Recreation through self-destruction—At the maturity stage, the option of reinvention through self-destruction to open a new wave of growth should be pursued.

Product life cycle management

Product life cycle management refers to developing, introducing, and monitoring performance and evolving products to turn innovation opportunities into profit. The management of the product life cycle encompasses the following: 

1. assessment of limitations of matured products in taking advantage of unfolding technology possibilities to meet consumers’ latent desires in getting jobs done better;
2. development and introduction of new products; 
3. evolution of introduced products through incremental innovation and family expansion for expanding the market, growing profit,
4. winning competition by outperforming competition to attain market power in a growing market;  
5. reinvention of matured products through a change of technology core for driving a new wave of growth. 

Notably, product life cycle management focuses on increasing the willingness to pay and reducing the cost through more significant insights into consumer preferences and the creation of economies of (i) Scale, (ii) Scope, and (iii) Positive externalities. As there is a race among competitors, winning the competition to attain market power and avoiding Kodak moments becomes the ultimate product life cycle management objective.

A few strategic areas of product life cycle management are:

• Focusing on getting jobs done, and leveraging technology
• Sustaining innovation and winning the competition
• Extending life through fusion, unification, and sibling creation
• Managing technology portfolio and refinement
• Leveraging the changing role of technology in product life cycle evolution
• Developing innovation ecosystem and supply as well as distribution chain
• Recreating through self-destruction for a new wave of growth
• Avoiding innovator’s Dilemma and disruptive innovation

Product life cycle strategy

Product life cycle strategy refers to the strategic approach of leveraging possibilities and countering competition at different stages of the life cycle, as explained below:

• Development—the strategy is to reinvent highly matured products to address their significant limitations and offer additional unique advantages by leveraging technology possibilities. 
• Introduction—making the product accessible to try, facilitating infrastructure and standard development, encouraging positive externalities, and
• Growth—extending the product life cycle and winning the competition to attain the market is the strategic focus during the growth stage of the product life cycle.
• Maturity—minimizing cost, consolidating monopolistic position through complementary assets and scale and network effects, and responding to the undercurrent of reinvention should be the strategic priority.
• Decline—instead of suffering from decision dilemmas and avoiding or slowly responding to the reinvention wave of creative destruction, the strategy should be switching to a new wave and pursuing it.

BCG Matrix and product life cycle

Based on growth and market share, Boston Consulting Group has developed a product management framework by placing products in four categories: (i) question mark, (ii) star, (iii) cash cow, and (iv) dog or pet. It appears that a product evolves in its life cycle through these categories, as explained below:

• Question mark—at the early stage of the introduction phase, every new product suffers from a big question about its ability to grow and generate profit. In reality, a large portion of newly introduced products die or exit during the introduction stage of the life cycle. 
• Star—during the initial phase of the life cycle, most products do not survive, and only a few show signs of high growth, qualifying for the title of Star. 
• Cash cow—in the race of competition in the growth phase of the life cycle, a small set of Stars succeed in winning large market share and attaining stable profitability. These products are called Cash Cow.   
• Dog—At the late maturity stage, Cash cows start rapidly losing market share and profitability, resulting in Dogs, soon exiting from the market.

Examples of Product life cycles—management lessons

The investigation of highly successful ten product life cycle examples unveils common reoccurring patterns. These patterns are highly beneficial to understanding and management of product life cycles. Reoccurring patterns defining the characteristics of the product life cycle are as follows:

Development stage:

1. The maturity of current products and unfolding consumer preferences create the latent demand for new products.
2. Emerging technology possibilities offer the opportunities to reinvent matured products or create siblings of existing products to meet customer segment-specific requirements.
3. Profiting possibilities from new products are fraught with pervasive uncertainties about consumer preferences, technology capability, competition response, scope and runway length of evolution, and externalities like infrastructure. Hence, most competitors avoid being the first company to see and seize an opportunity; instead, they systematically avoid being first. Once pioneers prove that the idea works, they follow suit through carbon copies or incremental advancement.

Introduction stage:

• Introducing a new product seldom creates resonance, leading to a sudden rise in sales. Invariably, irrespective of greatness, the introduction of new products begins the journey at a loss. Furthermore, new products do not have a classical human-like life cycle by birth–a natural high-growth phase after introduction or infancy. Instead of taking off the ground, newly introduced products tend to go underground following an infinitely descending curve.

Growth stage:

• The evolution of products creating resonance between consumer preferences and technology possibilities creates the growth phase of the product life cycle—building the market. Hence, the focus should be empathy, Passion for Perfection, and technology sourcing, refinement, and fusion to complement conventional market development strategy. Of course, distribution and retail network development help diffusion of products to consumers’ hands.
• The conventional marketing strategy of alluring non-buying customers to existing products to drive growth has minimal implications. Instead, the strategy of evolving products by leveraging technology possibilities and unfolding consumer preferences has far more significant consequences in expanding the length and breadth of the product life cycle.
• Evolution occurs through incremental advancement and sibling innovation, creating Economies of Scale, scope, and positive externalities. Besides, the product life cycle could be extended through the fusion of functionality of other products and extending the technology core through supplements.
• The race of evolution in the growth phase of the product life cycle offers the opportunity to monopolize the market by gaining market power. To turn the entry into profitable revenue, the race should be won, as the winner can set the price to profit from and compel others to take a lower price and incur a loss.

Maturity stage:

• Due to the saturation of underlying technology cores, the evolution of products reaches the maturity phase, slowing down profitability. In some cases, monopoly may also surface at the maturity.

Declining stage:

The decline in sales of matured products occurs due to the rise of the reinvention wave as a better alternative. Due to decision dilemmas, incumbent firms profiting from matured products often avoid pursuing a reinvention wave, leading to suffering from Disruptive innovation.

There have been three significant factors affecting the product life cycle: (i) unfolding consumer preferences, (ii) technology possibilities, and (iii) competition. Although there have been four product life cycle stages, not all products go through all those phases. Many products end their life cycle in the development phase. Even all the products that leave the laboratory and get introduced in the market will not succeed in graduating to enter the growth stage. Filtering or death of products takes place in all the stages. In rare cases, innovators succeed in evolving their products, winning the competition, and recreating to overcome the decline. Instead of a natural gift, the product life cycle is created through meticulous evolution efforts. Hence, managing the product life cycle is highly important to profit from possibilities.