Rethinking Product Lifecycles

To Fight Commoditization

Thomas Emrich

Managing Director at ValMark Group

(401) 450-2841

tlemrich@valmarkgroup.net

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: tlemrich@valmarkgroup.net