Rethinking product lifecycle curves to fight commoditization
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Transcript of Rethinking product lifecycle curves to fight commoditization
Rethinking Product Lifecycles
To Fight Commoditization
Thomas Emrich
Managing Director at ValMark Group
(401) 450-2841
Relationship Before Task
Tom Emrich, ValMark Group 15+ Years Experience Managing Product Lifecycles In Different Industries
Our Task This Evening
Help these two because, when it comes to product lifecycle management, neither one has it right!
3 Ps
Purpose
•Knowledge sharing
Process
•Open discussion with slides
Product
•Practical ideas and tools you can put to use right away
What Do You See?
What I See
1. The Loneliest Letter
2. A Self-Fulfilling Prophecy
3. A Line That’s Too Thin
4. Too Many Loose Ends
Explore Each
1. The Loneliest Letter
Product lifecycle curves, or S-curves, can not be managed in isolation
Every product curve is enabled or constrained by related S-curves for market demand and technology
If you want to effectively manage product lifecycles, at a minimum, you need to align and manage S-curves in groups of three
Opportunities and threats can lurk on either one
It’s Not Rocket Science
Success requires discipline …
Let’s talk about how Nokia used shifting demand and technology curves to win the day, only to lose it a few years later for similar reasons
A Simple Tool To Get You Started
Share Flow Analysis Tree
Changes in
demand curve
Changes in
tech curve
Changes in
product curve
2. A Self-Fulfilling Prophecy
Is a visit from the
Grim Reaper
inevitable?
Can Renew Product Lifecycles
Make product improvements
Reposition the product
Expand into new geography
Develop new distribution
Target new users and usage
Great Example
Harley-Davidson Product improvements
Laser focus on quality
Reposition the product
Not a motorcycle, but a lifestyle
Target new users and usage
Gangs to Professionals
Transportation to Recreation
1999 – 2007 Revenue
3. A Line That’s Too Thin
What is it – animal, mineral, vegetable?
Line Can Represent Many Things
Core Product SKUExtended Product
Product Line
ServicesProduct + Options
Product + Services
Other Combinations
Manage Line That Matters
Start with positioning strategy… …then scope the width of your line Define it so that the entity (the animal, mineral,
vegetable) is inclusive of your differentiators
Why manage a lifecycle that does not include the source of your competitive advantage?
If the source of your advantage is not product-centric (a real possibility), why manage product lifecycles at all?
Maybe you should manage a different type of lifecycle
Channel
Customer
Other
4. Too Many Loose Ends
Product proliferation results when lifecycles not tied off properly
Increases complexity
Strains inventory systems
Drives supply chain costs
Lowers profitability
Actually decreases sales
Complexity drives customer dissatisfaction
Few Know How To Tackle Problem
Research report from MAPI… …identified four roadblocks
No formal process
Issues with fixed cost allocations
Product manager mindsets
Lack of true cost data
No Formal Process … Borrow This One
Map current architecture
Complete strength
assessments
Identify switching profiles
Pareto elimination
targets
Develop and execute
migration plan
Trim non-value-adding
products
Issues With Fixed Cost Allocations
If this is your reality…
A high fixed cost business in a price sensitive market may decide to sacrifice margin to gain in volume – overcoming the overhead burden
But this business still has options if you look for those opportunities (often easy to find) where customers are willing to substitute one of your products for another
It may take proactive communication and pricing strategies, but the substitution gives you the ability to trim non-value adding products while maintaining volume and working around the fixed cost allocation dilemma
…think substitution
Product Manager Mindsets
We ask managers to be champions and advocates for their assigned products; then are surprised by their reluctance to assess whether or not the product should stay in the portfolio
Many companies get around this by requiring mandatory cuts
Can destroy versus create value
Better approach is to adopt the mindset that all products are guilty until proven innocent
Have Product Managers work to objectively prove innocence
Lack of True Product Cost Data
No simple solution
Options available
Narrow playing field by using Gross Margin ROI and Net Marketing Contribution to initially assess product performance above and below the gross margin line
This analysis is within the capability of most data systems
If a product’s performance puts it in the lower right corner of the 3x3 (see right), it’s probable that the product is guilty and a candidate for elimination
You may decide that this analysis is sufficient to make the decision, notwithstanding other strategic considerations
If you decide to go further and manually build a detailed product cost dB – you will have already gone a long way toward increasing focus and effectiveness
Recap
1. Manage lifecycles in groups not individually
2. Proactively renew targeted lifecycles
3. Define lifecycles the right way and leverage your competitive advantage
4. Periodically rationalize portfolio by viewing all products as guilty until proven innocent
Call To Action
If it’s been a while since you checked the fundamentals of your product management efforts, please contact me at anytime.
After all, a phone call or email doesn’t really cost anything.
I look forward to hearing from you.
Thomas Emrich, Managing Director at ValMark GroupPhone: (401) 450-2841Email: [email protected]