Product Life Cycle and the Limitations of Frameworks

So I’m going to start with something I got from a class I took on product development 5 weeks ago. It’s taken me this long to get around to posting about it because I’ve been turning this idea over in my head. I guess most people are aware (conciously or subconsciously) of the idea of a product lifecycle. It’s been around since the 60’s and the basic premise is that products, most often thought of as an item, like a piece of clothing, have a lifecycle and at any given point in time, the product will be in somewhere on that lifecycle timeline.

Intially, Products are introduced and whoever is selling them is focused on creating awareness in the marketplace (in Australia recently: cider as an alternative to beer & wine). Assuming you’ve got a good product and a willing market you should experience growth, you’re trying to expand your distribution, competitors enter the marketplace, you start to focus on why your product is better, to differentiate from the other offerings. Then comes maturity, you’re a recognised brand in the marketplace, you have your niche or segment and you’re trying to defend your market share and remind people why they should be buying your product (they’re already aware of the product category and they know what your point of difference is) and eventually you fall into decline. Competitors turn your points of differentiation into points of parity, the markets shrinks because the trend has moved on (ie: basketball in Australia now, as opposed to the early 90’s) and you start looking for ways to invigorate your product or find a new product.

In pretty much all cases, companies are selling a product to make a profit and the model allows for that as well, showing that during the introduction phase you’re making a loss while you try and build awareness. During the growth phase you start to make a profit but at a lower rate as you reinvest to build your market and then you hit high profitability during maturity which peters out as it becomes unprofitable to manufacture and service your declining market. One way companies deal with this is releasing new products which then may make the model a self fulfilling prophecy because the new product superseeds the old and so you see that product go into decline.

But there’s something else, right now you’re probably looking at the diagram above and wondering why it just doesn’t look quite right. As a whole, the idea makes sense but as soon as you actually start to apply it in practice, things go wrong. For starters, there’s other factors affecting the sale of a product such as how your Brand is perceived and the timing of the product entering the market.  If the product you are launching is a brand new concept then you need to educate the marketplace about what it does (ie: the original iPad) or you might be trying to emphasize the differences in the functionality of your product where the product is understood (ie: car manufacturers)

The model above shows four relatively equal periods of time for each of the phases but that will almost certainly not be the case. Some products live really successfully in the maturity phase for a long time, others never get there (fashion clothing for example: grows and is gone).

Then there’s the industry factors: maybe you work in tech where the turnover cycle for a product (say a mobile phone) is a sales cycle of 12 months (3 months growing and being the latest tech, 6 months as the “Free on a $59 plan” phone and eventually in decline a pre-paid handset). Or you might have a business based around getting the product up and running, creating the niche, and then selling it off to a bigger player in the marketplace (a pretty common model for tech start-ups). Some people even create businesses around supporting the products that other people have dropped because of this idea that a product in decline is not worth it. For instance, SAAB closed it’s doors earlier this year which has a flow on effect to a bunch of secondary industries including auto mechanics. Now that SAAB owners can’t get their cars serviced through the manufacturer there’s a whole new market opening up, for a product that’s on the decline, but that still needs to be serviced and probably can be quite profitably. I guess the smart mechanics got out there and setup an agreement with the local SAAB dealership that went along the line of “you love the cars, your customers love the cars, give us the details of your servicing list and we’ll keep them happy.” Chris Anderson covers it pretty comprehensively in his now lightly defunct blog ‘The Long Tail’ which has a bunch of fascinating related examples like netflix where as their library of titles grew, they saw significant shift in consumption patterns away from the top 50 releases into less popular titles, servicing the long tail of the declining market.

These models and frameworks are designed for people like me, may not have experience in the area but need to apply some sort of structure to make sense of what they are seeing, the model is not much more than a pretty picture but credit where it’s due, it introduces the concept simply. I guess my observation for studies so far is that MBA students are always looking for a model or a framework to apply, the key points that you can take away from a lecture and the rule of thumb but these things only work if you check that things make sense in the context of the situation. Worse, in applying an ill-fitting model you actually limit your opportunities because you rule out servicing the declining market of SAAB’s or you go in with the mindset that a product is designed to be replaced every 18 months to keep consumers purchasing. Frameworks don’t replace the process of thinking and sometimes that gets lost in a formal education system.

Positioning

So this weeks lecture was on positioning, which is the final step in the STP (Segmentation, Targeting, Positioning) process.

In my previous post I talked about segmenting the market, putting your customers into categories. Off the back of that, you make a decision about which customers you want to target (the health conscious breakfast market with a vitamin enhanced juice for example). Positioning delves deeper into that side of things ie: what strategy are you going to use to sell to the segment you’ve targeted.

Positioning relies heavily on your brand. If you are a known brand in the marketplace then consumers are already going to have a bunch of preconceptions about who you are and what you do. When you launch a new product or service, they’re going to assess that new product against what they know about your brand and attribute emotions and beliefs to your product before they’ve even seen it. Likewise, if you’re an unknown brand, you may find it a tough sell if you’re asking people to buy stuff that requires that they trust you (say a car for example, where you want reliability and the assurance that they’ll be around over the next 10 years for servicing and parts). We’ve got a whole unit on brands (which I’m told is really, really good by a lot of the senior students) so I’m not going to get into it too much now but I did want to highlight that it’s an important part of the positioning process. Sort of the background picture on your desktop… something that sets the unconscious mood.

But the thing I found really interesting in Positioning was the idea of Points of Parity and Points of Differentiation. Points of Differentiation (PoD from now on for ease of use) is the one we mostly think of when we’re thinking about products. ‘What does this product offer me that the competition doesn’t’ – like an app store that extends the functionality of your phone to an extent that no single company could match.

But from a product design point of view, that’s starting backwards. Where you need to start is the Points of Parity, namely, what do you need to offer to be considered a ‘product’ in a category. In the example below, that’s the first three circles: the core benefit, the generic and the expected. So for example with mobile phones, the core benefit is that it needs to be able to make & receive calls and be conveniently portable. Every generic product needs a screen for feedback and an address book that stores numbers. Expected benefits are things that might have once been a point of differentiation, but are now just par for the course, things such as customizable ringtones, inbuilt music player and internet access.

Figure 1: Philip Kotler - Five Levels of Marketing

Which now leads us to the two outer rings. Firstly, the augmented product which is the level at which most PoD features occur. This is where an app store like iTunes offers a point of difference to a traditional Nokia or Ericsson. With Windows Mobile and Android both pushing hard into the ap space, it won’t be long before this drops back to the ‘expected product’ ring rather than being a PoD (acknowledging that the ap stores for each system will be different and have their own benefits).

The really interesting one though is the potential product ring. This is where the next set of PoD’s come from, it’s where you leapfrog your competition. One of the things that is really cool about the ap store is it gives Apple (or android or whoever) far more development power than they would have if they were doing all the work themselves. For those of you familiar with Apple products this seceding of control is a big thing for them (they love their end-to-end hardware and software integration and control) but someone there understood that by giving up a little control, they opened up so much potential. There’s stuff put out for phones now that no one could have envisaged 4 years ago when smartphones were just starting to enter the market, augmented reality, micropayment systems, Urbanspoon and yelp.

But to round our the discussion on Points of Differentiation, whatever your killer PoD is, eventually the market will find a way to replicate or offset it. Which is why being the cheapest as your PoD is a really bad idea. Whatever you’re doing, someone can do it cheaper and if you teach customers that the most important thing is price, then the moment someone else is cheaper, you’re market is gone. Which leaves you with a couple of options: Constant innovation (which is good) or making a PoD out of something that’s not easy to copy, like service. In a world where just about anything can be bought out of China (and probably cheaper than you paid for it) finding another way to differentiate means looking at other parts of your product and the most obvious one is service, the way you deliver what you deliver. When I look at the state of Australian manufacturing, I think this model holds true:

There are the innovators – some bring an innovative product to the marketplace and stop, some have a culture of innovation that allows their organizations to exist beyond the first product

There are organizations with differentiators that still apply – ‘yeah you can get it cheaper out of china but who knows what sort of steel they’ll be using or what type of paint but we can guarantee the quality and we’ll have it there in 3 weeks because we only need to truck it down the road’

and there are the organizations with differentiators that no longer apply – ‘yeah you can get it cheaper out of china but who knows what kind of steel they’ll be using or what type of paint… Oh, you’ve got 3 months to procure it and the Chinese are offering 3rd party inspection in their factory for 40% of our price… Oh…’

And the difference between the second and the third type is all on the consumers side, not the suppliers. So I’d get cracking on a new differentiator if I was you… because in the economic climate we’ve got, companies are going to become more concerned consumers.

Some More Reflections on Learning

Bear with me 🙂

After looking at the learning cycle last week I’ve stumbled across the wikipedia page for Learning Styles (en.wikipedia.org/wiki/Learning_styles) and done some reading but I’m hardly an expert so the following discussion may already have been covered by someone elses model and I just haven’t found it yet.

The issue is that I feel like the Kolb et. al. model is missing something.

When I’m learning there are two other elements that are important. The first is the environment, not just the physical space I’m in (although that definitely plays a part) but also the mental space. If I’m pressed for time, or I’ve just screwed something up badly and I know it and just want to get on with fixing the problem then I’m not in the right headspace to reflect, or to try anything new and as such, I don’t learn.

Which brings me to my second element. The Person the other bit of the learning process and the example above is a classic one for me. When things are going well I don’t reflect, I just get on with it (a little bit of “if it ain’t broke, don’t fix it”) alternatively, when things go pear-shaped then  run the risk of not learning either because I’m so busy firefighting that reflecting is passed over in favor of just fixing the problem. So I hypothesize that the other part of the learning equation is being self-aware enough to look at the situation and say:

1. What can I learn here?

2.  Am I actually ready to learn? (right frame of mind, right environment)

Figure 1: A Modified version of the Kolb Learning Cycle

The emphasis on self-awareness, in what we’ve covered so far, leads me to believe that it’s one of the most critical thinking functions we’re going to be expected to develop. Talking to people who are post-MBA about the models (Career Leader or the Belbin Team Roles) the point that they’ve reached is that they can look at a group of people, work out where others fit and then fill the roles around them (Chair, Shaper, Finisher etc.) to get the best performance for the team.

Framing the environment and an awareness of self  are critical to my learning process and it seems reasonable to extend this model to include them. Thoughts?

How we learn

One of the questions that is asked in the introductory unit at Melbourne Business School is ‘How do you learn?’

On the surface it seems like a pretty simple question. You have an experience, observe what happens, reflect, adjust your approach and then try it. This is the basis of a model called ‘The Learning Cycle’ which was defined by David Kolb in the 70’s.

This both intrigued and bothered me a bit. I would consider myself an experiential learner, I don’t do particularly well with theory alone. For example when I was learning matrices in highschool it didn’t make any sense because I couldn’t see an application for it. As soon as I started having to plot things in 3D space and move them around (probably the most useful thing I got out of my 3D modelling subject!) it all fell into place.

But after thinking about it for a while, it wasn’t the model that was bothering me, it was my learning cycle. I agree with the general principal of the 4 steps but the more I thought about it, the more I thought that I don’t do the second step most of the time. Sure, when something goes wrong you take the time (or others take the time on your behalf) to analyze what went wrong and feed it back into the system but when things are going well, who really reflects… especially if you’re stressed or busy, it’s just one less thing to think about which is a bit of a relief. But in doing so we rob ourselves of 2 things:

1. The positive reinforcement of getting stuff right. At the most basic level, if you only reflect on things when you fail then you can end up in a pattern where all you can see is your failures because they’re the only thing you’ve trained yourself to observe. Setting up a system where you can recognize your achievements in private and reward yourself for what you’ve done is a key component of building a robust self image.

2. The chance to reflect and maybe do stuff even a little better. This one is sort of a ‘maybe it applies, maybe it doesn’t’ type scenario but when was the last time you looked at something that you do all the time and actually thought: is there something I could be doing to make this easier/quicker etc. For stuff we do routinely, maybe the routine is preventing us from optimizing that task. I was talking about this with a friend and he mentioned brushing his teeth. Every night he has a shower, then brushes his teeth, recently he started brushing his teeth in the shower. Saves him 2 minutes in the morning, 2 minutes at night, he just gained half an hour to do other stuff. We laughed about it at the time (and the obsessive-compulsive nature of engineers to optimize) but there’s a some sense in what he’s saying.

Maybe it’s time to start looking around and see what kind of feedback you’re giving yourself and what you’re learning (or not learning) from it.

Day 1: Orientation

So, yesterday we had orientation and I met the other 9 students who are doing the combined MMktg/MBA course as well as 150 or so Part Time students. Demographic was fascinating:

• Average Age: 32
• % of Women: 35 (which we were told was low for MBS but higher overall than standard)
• Can’t remember the exact breakdown of industries but it was something like
  • Law: 6%
  • Finance: 24%
  • Engineers (broken up by industry): ~15%
  • Scientists: 14%
  • A couple of educators, architects and a journalist

I’ll try and track down the pie chart because it’s pretty interesting in terms of breakdown.

One of the orientation exercises was a self assessment of the challenges we suspect that we’ll be facing and every P/T student I talked to was concerned about balance. Lots have families and even those that don’t are still in jobs that demand 50, 60 & 70 hours a week. I guess that was one of my reasons for doing the full time course; the opportunity cost is pretty big but the sustained effort of undertaking part time study for 3 or 4 years is a massive commitment. So much changes in your life in a year, I just can’t see the stars and circumstance aligning for me for that length of time so better that I get in, completely immerse myself, get the most out of it that I can and then get on with the next bit.

Time will tell whether full time or part time or one of the thousand other combinations that go to make up the overall experience were the right ones for me but from a macro perspective, this the the right place and the right time for me to do my MBA