1. Product Life Cycle Ken Homa © K.E. Homa 2000

2. Time Introduction Growth Maturity Decline Product Life Cycle

3. Typical pattern, highly varied …broadly representative …product, brand, geography …not necessarily predictive …instructive, not definitive …conceptually based: diffusion, tech adoption

4. Diffusion Models

5. Innovators (First in) …Motivated by market knowledge Imitators (Followers) …Motivated by interpersonal influences

6. Simplified Diffusion Model Initial Innovators Initial Potential Innovation Rate Initial Buyers

7. Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Buyers

8. Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Imitators Imitation Rate New Buyers

9. Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Imitators Imitation Rate New Buyers

10. Total Market Potential Imitation Rate Already Bought Momentum Factor Total Market Potential Innovation Rate Current Imitation Rate New Buyers Rate Remaining Potential New Buyers Bass Diffusion Model

11. Illustrative Penetration Pattern ASSUMPTIONS Market Potential = 1000 Innovation Rate = 10% Imitation Rate = 33%

12. Illustrative Buying Pattern ASSUMPTIONS Market Potential = 1000 Innovation Rate = 10% Imitation Rate = 33% 0 50 100 150 12345678910 TOTAL BUYERS IMITATORS INNOVATORS Bass Diffusion Model

13. Technology Adoption Life Cycle 34% Early majority Time of adoption of innovations 34% Late majority 16% Laggards 2.5% Innovators Early adopters 13.5% Adapted from Geoffrey Moore, Crossing the Chasm

14. Product Life Cycle Typical pattern, conceptually based Cash flow critical …Mature ‘lend’, growing ‘borrow’ …Direct link to portfolio strategy

15. Introduction Decline Maturity Growth Sales Product Life Cycle

16. Introduction Decline Maturity Growth Sales Loss Profit Product Life Cycle Loss

17. Product Life Cycle Cash Flow Summary Intro- duction GrowthMaturityDecline Net Income Investment Intro- duction GrowthMaturityDecline Intro- duction MaturityDecline Growth Cash Flow from Operations and Investments

18. Business Portfolio => Cash Flow Growth Businesses Mature Businesses Intro Businesses Declining Businesses External Financing CASH

19. Linking PLC & Business Portfolio Low High Low High Relative Business Strength Market Attractiveness Invest/Grow Develop or Withdraw Earn/Protect Harvest/ Divest High Cost Low Cost Competitive Cost Position Cash Flow Position Outflow Inflow Growth Introduction Mature Decline

20. Product Life Cycle Typical pattern, diffusion based Cash flow critical, portfolio linked Manageable …

21. Introduction Growth Maturity Decline PLC Management

22. Introduction Growth Maturity Decline PLC Management Faster

23. Introduction Growth Maturity Decline PLC Management Faster Higher

24. Introduction Growth Maturity Decline PLC Management Faster Longer Higher

25. Introduction Growth Maturity Decline PLC Management Faster More profitably … Longer Higher

26. Introduction Growth Maturity Decline PLC Management Faster Longer Higher Tactical differentiation Competitive positioning Strategic regeneration Crossing the Chasm

27. Managing the PLC Tactical differentiation Competitive positioning Strategic regeneration Crossing the Chasm

28. Differentiated PLC Management Strategy ClassInvestment PolicyStrategic Role Management Focus IntroductionPhased/SelectiveEstablish a profitable position or cut losses Market position 1 st Mover ? GrowthAggressiveProvide future cash flow base Sales/Share Installed base MaturityAs needed to protect profits (cost reduction, line extensions, etc.) Generate current cash needs Profitable Share DeclineHighly RestrictiveMaximize short-term profits; contain losses Profits/Cash Last in ?

29. Industry Weak Competitor Product Life Cycle Competitive Positioning Strong Competitor First Mover, or Predatory Follower Last In …

30. Product Life Cycle Regeneration “Natural” Evolution

31. Product Life Cycle Regeneration “Natural” Evolution “Induced” Regeneration

32. Mkt A Mkt B Mkt C Mkt D Product Life Cycle Regeneration

33. Mkt A Mkt B Mkt C Mkt D Product Life Cycle Regeneration

34. Product Life Cycle Regeneration - Intel 386

35. Product Life Cycle Regeneration - Intel 386 486

36. Product Life Cycle Regeneration - Intel 386 486 Pentium

37. Product Life Cycle Regeneration - Intel 386 486 Pentium

38. Innovator’s Dilemma Established Technology

39. Innovator’s Dilemma Established Technology Disruptive Technology

40. Innovator’s Dilemma Established Technology Disruptive Technology

41. Innovator’s Dilemma Established Technology Disruptive Technology

42. Innovator’s Dilemma Established Technology Disruptive Technology Why upstarts and not established players?

43. Innovator’s Dilemma Established Technology Disruptive Technology Why upstarts and not established players? High dependency on existing customers Initial market too small (relative to current) Uncertain potential, certain consequences

44. “Crossing the Chasm” 34% Early majority Time of adoption of innovations Early adopters 2.5% Innovators 34% Late majority 16% Laggards 13.5% ChasmChasm “Immature” solution No “killer application”

45. Product Life Cycle Typical pattern, highly varied …broadly representative …product, brand,geography …not necessarily predictive …instructive, not definitive …conceptually based: diffusion, tech adoption Cash flow critical …Mature ‘lend’, growing ‘borrow’ …Direct link to portfolio strategy Manageable … …Differentiated tactics …Competitive positioning …Strategic regeneration …Crossing the Chasm