Using lifecycle concepts to foster and manage innovation

All products and services have a lifecycle stretching from their conception and launch, progressing through various phases of growth and decline in sales, to ultimate decline and withdrawal.

Diagram - traditional view of a product or service lifecycle showing relative volume of sales against time, over the four key stereotypical stages from take-off to decline.

Not a single product or service has to conform to this stereotypical lifecycle and there is huge opportunity for businesses to build value by understanding how they can manage the lifecycles of individual, or portfolios of products and services.

Diagram - showing how 'managed decline' can add sales or value toward the end of a lifecycle.

Many businesses thrive on acquiring what are perceived as tired brands from other companies and injecting new life into them. Sometimes they fail (Babysham?) and other times they enjoy spectacular success (Burberry?).

Sometimes businesses take elements of an old, declining or dead product or service, then adapt and re-launch it to kick off an entirely new product or service lifecycle (Laker Airways > Virgin Atlantic; Leyland Mini > BMW Mini) Some businesses are also, of necessity locked into a continuing 'innovation roadmap', whereby, on a regular basis they have to re-invent their core product, to reinvigorate sales and maintain competitiveness (Microsoft, Canon, Sony, Philips, etc.) Such businesses have to continually battle with the conflicting needs of costs management and revenue maximisation and their 'innovation roadmaps' are often business-critical secrets.

Diagram - different types of product or service enjoy different types of typical lifecycle.

By segmenting accessible markets, by customer type or geography, so as to view the market as a number of sub-markets, it is also possible to manage a given product or service's lifecycle in different ways in different sub-markets, so as to extract maximum value from the original innovation. This happens a lot in the fashion, pharmaceutical and auto industries, with, for example, countries such as Brazil and India still manufacturing vehicles that were considered out of date in Europe decades ago. It can also happen on a regional level, with, for example, novel food franchises, rolling out from key sites in launch cities and finding an extended lifecycle elsewhere (Wimpy - could this brand re ready for reinvention and revival?)

Segmenting in this way is also applied to great effect for costs management, particularly in the film and music industries. New blockbuster films are generally released, territory by territory, so as to get maximum impact from the media circus that precedes them. As the last geographically defined segment is targeted this way, the marketing people can then switch their attention to home-based customer-segments and the launch of the DVD or download.

Lifecycle analysis offers massive potential to find added value in seemingly tired products or services, through processes such as repackaging, updating, and retargeting (BMW Mini; Chopper Bike; Butlins Holidays, etc.) or by augmenting an existing offer with another that takes the original product to another level (Sony Walkman Telephones; Hotels becoming 'Spa Hotels', etc.)

Not all good innovation is however successful and a major trap 'The Chasm' has been identified by Geoffrey Moore (See for example his book, Crossing the Chasm, Marketing and Selling High Tech Products to Mainstream Customers) Innovative businesses are potentially at threat of destroying themselves by anticipating income growth based upon a forward projection of early sales growth, when in fact, even if they have a good innovation, they may have to prepare for temporary financial setbacks caused by drops in sales against trend.

Diagram - Lifecycle model showing potential 'chasms'

There may be crucial gaps in the smooth uptake of novel products and services, due to the fact that different groups of customers do not necessarily follow each others' lead. In the above model, the stereotypical customer groups are named as: 'innovators', 'early adopters', early majority', 'late majority' and 'laggards'. 

A basic understanding of lifecycle analysis can be used to both help stimulate innovative ideas in workshop settings and in the appraisal of prospective marketing campaigns, buy-outs, investments, mergers and acquisitions.

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