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Rethinking product lifecycle curves to fight commoditization
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Rethinking product lifecycle curves to fight commoditization

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New perspectives on an older framework

New perspectives on an older framework

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    Rethinking product lifecycle curves to fight commoditization Rethinking product lifecycle curves to fight commoditization Presentation Transcript

    • 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 SKU Extended Product Product Line Services Product + 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 Group Phone: (401) 450-2841 Email: tlemrich@valmarkgroup.net