A product’s journey from inception to decline involves several distinct phases. Understanding these phases is crucial for anyone involved in product development. This article outlines these stages and emphasizes the importance of market understanding, continuous improvement, and maintaining a balanced product portfolio.
Understanding the Market and Customer
A successful product starts with a deep understanding of the market and the customer. This involves recognizing what delights and pains the customers experience. A strong product person will hypothesize how to create value for the customer, which can take many forms, not just monetary. Understanding the value exchange between the customer and the business is crucial, as it sets the stage for the product’s journey through its life cycle.
The Four Phases of a Product Life Cycle
- Explore
The first phase involves exploring ideas and generating hypotheses. The product team needs to validate these hypotheses by testing their ideas with minimal risk. This may involve creating prototypes, conducting surveys, or running small-scale tests. The goal is to gather enough data to determine whether the idea is worth pursuing. Several cycles of testing, iterating, and refining might be necessary before the product is ready for the market. - Expand
Once a concept is validated and shows promise, the product enters the expansion phase. Here, the focus shifts to growing the customer base as rapidly as possible. This involves scaling up production, marketing efforts, and distribution channels. The aim is to reach a larger audience and establish a strong market presence. - Exploit
When the product reaches market saturation, it enters the exploitation phase. The goal is to maximize value extraction from the existing products. This could involve upselling, cross-selling, or increasing customer loyalty. Growth slows as the market becomes saturated, so efficiently managing resources and optimizing operations becomes key. - Exit
Eventually, every product faces a decline due to market saturation, competition, or better alternatives. The exit phase involves managing the product’s decline to minimize costs and maximize any remaining value. This could mean winding down production, reducing marketing efforts, and eventually discontinuing the product. Not all products go through this phase; some might continue evolving, while others remain unchanged but still useful.
Continuous Improvement
Almost no product is shipped as a finished product. Continuous improvement is crucial at all phases except exit, as small details can make a significant difference in customer choice and satisfaction. The product person must oversee these improvements, ensuring the product remains relevant and competitive. For internet-based products, updates can happen multiple times a day, while physical products might see slower cycles of improvement.
The Product Portfolio Model: The Four “E”s
This description of product development is fairly accurate, as it acknowledges that the process often involves backtracking and reworking as new information emerges. However, it doesn’t fully capture what a mature company does. When a company has a strong, growing product in the marketplace, it should also be working on the next crucial product or feature. Additionally, mature companies need to trim features and products that aren’t performing.
By turning this linear process into a 2×2 matrix, you can better visualize your product portfolio. A product portfolio is a strategic approach to managing a collection of products or projects within a company. It involves balancing resources and efforts across different initiatives to maximize overall value and achieve business goals.
Like a financial portfolio, you don’t want all your eggs in one basket. It’s better to allocate resources to both high-risk, high-reward activities and low-risk, low-reward activities, ensuring a balanced approach to innovation and stability.
To manage these phases effectively, it’s helpful to use the Four “E”s Portfolio:
- Explore: Generate and validate hypotheses.
- Expand: Grow the customer base rapidly.
- Exploit: Maximize value from the existing customer base.
- Exit: Manage the decline and eventual discontinuation of the product.
Balancing the Portfolio
A nimble company must be aware of where its products are within these phases. If a product is in the exploitation phase, it’s wise to start exploring new ideas for the next successful product or feature. During the expansion phase, focus resources on growth and monetization. By maintaining a balanced portfolio of products in different stages, a company can ensure sustained innovation and market presence. A company might allocate 20% of their resources to exploring, 40% to expanding, 35% to exploiting, and a small portion to guiding failing products to their eventual obsolescence. If there are unexpected changes in their industry, this diversification helps them weather the storm.
The understanding of the product life cycle and the balanced portfolio model significantly impacts the roadmap of a company. A comprehensive roadmap must now accommodate various elements: experiments for validating new hypotheses, committed new products that are in the expansion phase, and ongoing continuous improvement efforts for existing products. This multifaceted approach ensures that the company is always innovating and refining. By balancing high-risk, high-reward projects with more stable, incremental improvements, the roadmap becomes a dynamic tool that guides the company’s strategic direction, aligning short-term actions with long-term goals.
Conclusion
Understanding the life cycle of a product is essential for creating and managing successful products. From exploring new ideas to managing decline, each phase requires a different approach and set of skills. By deeply understanding the market, the customer, and the technology, a strong product person can guide a product through its life cycle, creating value for both the customer and the company. The key to success is continuous improvement and a balanced portfolio of products in various stages of their life cycle.