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Product Life Cycle Ken Homa © K.E. Homa 2000
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Time Introduction Growth Maturity Decline Product Life Cycle
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Typical pattern, highly varied …broadly representative …product, brand, geography …not necessarily predictive …instructive, not definitive …conceptually based: diffusion, tech adoption
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Diffusion Models
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Innovators (First in) …Motivated by market knowledge Imitators (Followers) …Motivated by interpersonal influences
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Simplified Diffusion Model Initial Innovators Initial Potential Innovation Rate Initial Buyers
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Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Buyers
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Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Imitators Imitation Rate New Buyers
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Simplified Diffusion Model Total Market Potential New Innovators Remaining Potential Already Bought Innovation Rate New Imitators Imitation Rate New Buyers
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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
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Illustrative Penetration Pattern ASSUMPTIONS Market Potential = 1000 Innovation Rate = 10% Imitation Rate = 33%
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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
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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
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Product Life Cycle Typical pattern, conceptually based Cash flow critical …Mature ‘lend’, growing ‘borrow’ …Direct link to portfolio strategy
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Introduction Decline Maturity Growth Sales Product Life Cycle
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Introduction Decline Maturity Growth Sales Loss Profit Product Life Cycle Loss
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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
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Business Portfolio => Cash Flow Growth Businesses Mature Businesses Intro Businesses Declining Businesses External Financing CASH
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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
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Product Life Cycle Typical pattern, diffusion based Cash flow critical, portfolio linked Manageable …
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Introduction Growth Maturity Decline PLC Management
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Introduction Growth Maturity Decline PLC Management Faster
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Introduction Growth Maturity Decline PLC Management Faster Higher
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Introduction Growth Maturity Decline PLC Management Faster Longer Higher
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Introduction Growth Maturity Decline PLC Management Faster More profitably … Longer Higher
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Introduction Growth Maturity Decline PLC Management Faster Longer Higher Tactical differentiation Competitive positioning Strategic regeneration Crossing the Chasm
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Managing the PLC Tactical differentiation Competitive positioning Strategic regeneration Crossing the Chasm
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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 ?
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Industry Weak Competitor Product Life Cycle Competitive Positioning Strong Competitor First Mover, or Predatory Follower Last In …
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Product Life Cycle Regeneration “Natural” Evolution
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Product Life Cycle Regeneration “Natural” Evolution “Induced” Regeneration
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Mkt A Mkt B Mkt C Mkt D Product Life Cycle Regeneration
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Mkt A Mkt B Mkt C Mkt D Product Life Cycle Regeneration
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Product Life Cycle Regeneration - Intel 386
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Product Life Cycle Regeneration - Intel 386 486
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Product Life Cycle Regeneration - Intel 386 486 Pentium
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Product Life Cycle Regeneration - Intel 386 486 Pentium
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Innovator’s Dilemma Established Technology
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Innovator’s Dilemma Established Technology Disruptive Technology
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Innovator’s Dilemma Established Technology Disruptive Technology
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Innovator’s Dilemma Established Technology Disruptive Technology
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Innovator’s Dilemma Established Technology Disruptive Technology Why upstarts and not established players?
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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
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“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”
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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
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