Nothing lasts forever: Why your core products may need estate planning.
By Jonathan DeVito
Key points for this article:
➠A product’s lifespan is the amount of time that a product is relevant and/or viable.
➠In general, product lifespans are shorter than ever. For example, the Rolodex was a successful product for much of the latter half of the 20th century while the hey day of BlackBerry devices spanned just over a decade during the 2000s and 2010s.
➠To stay ahead of the curve, businesses need to actively scout opportunities to add and remove products from their portfolios.
Products are living shorter than ever. It might be time for some estate planning.
People might be living longer than ever, but products seem to have shorter lifespans than ever.
There’s countless examples of this phenomenon, but let’s compare the Rolodex and the BlackBerry.
The Rolodex, a device for storing business cards and/or contact information cards, was invented in 1956 by Danish Engineer Hildaur Neilsen. By the 1980s, the Rolodex had become a staple of contact management and arguably maintained that status until digital (email, social media) alternatives were created. All in all, the Rolodex was a relevant product for much of the latter half of the 20th century.
Now let’s look at the BlackBerry. The Inter@active Pager, was launched by Research In Motion (rebranded to BlackBerry in 2013) in 1996, but many believe emergence of the “BlackBerry” as a line of game-changing products didn’t begin until the introduction of the BlackBerry 6210 in 2002. During the early 2000s, Research in Motion became a multibillion dollar business and BlackBerry devices were considered to be so addictive that many called it “Crackberry”.
In 2011, over 50 million BlackBerry devices were sold. By 2016, sales had dropped to 200,000 units (see article). Today, BlackBerry devices have generally been displaced by other technologies (typically with large touch screens and without physical keypads), most notably iPhone (iOS) and Android devices.
What does this all mean? It means that in light of shortening product life cycles, nothing can be taken for granted. It’s more important than ever for businesses to take a proactive approach to managing their product portfolios. Continuously reviewing the portfolio so that new products can be added and failing or obsolete products can be removed are essential activities.
Here are some important suggestions for managing your product portfolio.
Embrace change. It can be painful, but it’s often necessary.
Perhaps the most cited example of why embracing change is important is Kodak.
The decline of Kodak, the one time print film giant, coincides with the rise of digital photography. Despite being an early pioneer of digital photography (as far back as the 1970s), Kodak never fully embraced that the market was moving from print film to digital images.
A good example (see article) of Kodak’s half-hearted attempt to venture into digital was Ofoto. Ofoto, an online photo sharing site, was acquired by Kodak in 2001. However, instead of focusing on digital images, Ofoto ultimately attemped to get more people to print images. In fact, the company threatened to delete images stored on its website unless customers began using paid services (such as ordering prints). In March 2012 it was announced that Kodak was selling Ofoto (by then renamed Kodak Gallery) for slightly less than $24m. About a month later Facebook agreed to acquire Instagram for approximately $1bn.
The bottom line: Nothing lasts forever. Although change isn’t always fun, the consequences of clinging outdated products or business models can lead to serious repercussions.
Balance portfolio diversity and focus.
Across many industries, technology has rapidly decreased the time and cost required for companies to develop new products. This doesn’t necessarily mean that any business at any time can be displaced by an upstart, but it does mean that it is easier for competitors to pose a threat.
One way to stay ahead is to case a wide net. Increasing the size of your product portfolio can give you a better chance of having winning products that keep you ahead of the competition. Increased breadth is also a hedge against being a one trick pony: if you only have one product one you might find yourself in a situation where you have nowhere to run. For further reading on the value of a broad product portfolio check out this article by Bharat Anand, a professor at Harvard Business School.
However, breadth of product portfolios should be balanced with focus. According to this article from the Stanford GSB too many choices can actually negatively impact brand performance. A study highlighted in the article showed that after two years of studying yogurt brands at grocery stores in Sioux Falls, only 3 out of 13 would have benefited from line extensions. In fact, researchers concluded that some major yogurt brands should actually consider contracting their product lines.
In terms of strategy, overemphasizing breadth can also lead to a lack of strategic focus. The term that someone can be “a jack of all trades, master of none” exists for a reason and chasing shiny objects can have a paralyzing effect on the direction of a business. For more information on how to pick what ideas to pursue (and what ideas not to pursue), check out our article on validation.
There is sliding scale to striking the right balance between breadth and focus. Having enough options to explore while maintaining a focused, cohesive strategy are key.
Recognize that not every product needs to be a breadwinner.
Before giving a product its last rites, make sure that you have taken a 360 degree approach to assessing its value. Direct revenue and profit generation are probably the most common metrics for measuring success, but they don’t have to be the only ones.
For example, some of you may remember the McDonald’s $1 double cheeseburger. The $1 double cheeseburger likely wasn’t the most profitable item on the menu. However, if a double cheeseburger is going to entice a customer to visit a restaurant who then buys a fountain drink at over 90% margin, then perhaps it makes sense to keep the double cheeseburger on the menu.
The main point is that you shouldn’t be afraid to discontinue a failing product, but don’t throw the baby out with the bathwater either.
Recognizing that your leading products may not be viable in the long run may be unsettling, but shortening product lifespans is probably a trend that’s here to stay for most industries. Offense may be the best defense. Businesses that choose to actively manage their product mixes and are not afraid to reshuffle their decks will be best positioned to succeed.
About the author:
Jonathan DeVito is the Founder of PIVITAS. He works with a diverse group of clients to help them develop actionable product and pricing strategies.
Image source: BrAt82/Shutterstock.com.