Product life cycle management (PLM) exists because product managers, start-up founders, and business owners worth their salt know that there are few jobs as challenging as product management. And no wonder: the statistics on new product launches are scary. Somewhere between 80% to 95% of new product launches fail!
Interestingly, this is similar to the failure rate of TSA agents trying to prevent crazy stuff from getting onto planes. I’m not sure which is scarier.
These crazy numbers are the primary reason large, established organizations prefer to acquire new products by paying a huge premium to buy out a successful start-up. The alternative—attempting to build one from scratch—is much riskier.
For instance, when Google purchased YouTube for USD 1.5 billion back in 2006, everyone said they were paying a crazy amount for YouTube, and that they would never be able to recover their investment, let alone make money from it. Today, YouTube is as big as Netflix.
Homegrown cat videos are giving Big Studio blockbuster movies and TV shows a run for their money! 😉
Building a product from scratch or handling a fledgling product may be super tough, but (surprise, surprise!) managing an established product isn’t any easier.
This is why agile product life cycle management methodologies like The Lean Startup by Eric Ries are part of the required reading list for all product managers. These agile product life cycle management philosophies attempt to move the needle towards the science side of the art vs science product success spectrum.
Here’s what I’ll cover in this article:
- What Is Product Life Cycle Management?
- Product Life Cycle Stages
- The Importance Of Managing The Product Life Cycle
- Integrating Your PLM System With The Rest Of Your Business
- Difference Between The Product Life Cycle And The Project Life Cycle
Let’s take a look at product life cycle management and the history of product life cycle management as well.
What Is Product Life Cycle Management?
Product life cycle management is a comprehensive framework that product companies use to manage a product through the phases of the product life cycle.
PLM is a product management process that encompasses all aspects of a product including managing, planning, design, manufacturing, marketing, resources, and people, as well as the software that goes along with each of these aspects. It is an umbrella term that means different things to different organizations.
Today several software companies offer PLM software products and solutions that help product managers handle decision-making on processes like pricing and marketing strategy. PLM is now synonymous with the PLM software systems that help manage the product life cycle. Let's look at the history of PLM to gain some perspective.
The History Of Product Life Cycle Management
Product life cycle management began in the 1980s as an attempt by the American Motors Corporation (AMC) to compete against its beefier rivals Ford and General Motors, who had larger revenues and bigger budgets. Talk about a David and Goliath story!
The smart folks at the AMC took the following approach:
- Focused their R&D efforts on enhancing the lives of their existing best selling products that were in the maturity phase of the life cycle
- Used computer-aided design (CAD) to speed up product design and development efforts
- Stored all product data and designs centrally (in a PLM software system), allowing for quicker communication, version management, and conflict resolution
You may be thinking — BIG DEAL, my 10-year-old kid can do all this! Your thinking would be correct — today. In 1985, however, all this was bordering on the revolutionary. Remember, it was a time of spandex, hair bands, and boxy computers that filled small rooms and cost tons of money. Personally, I’m ambivalent about sports utility vehicles, but I love Van Halen and Def Leppard — the pre-eminent bands of that era IMO — so it evens out. 😉
The result of all this effort was great for AMC as they ended up kicking competitor butt-er-flies.
They launched new variants of Jeep, created a new market segment for vehicles called sports utility vehicles (SUVs), and finally got bought out by Chrysler who used these new techniques to reduce their development cost structure to 50% of that of the competition. 50% reduction is insane by any standards.
Still, the red queen rules supreme. Toyota came along later and ate everyone’s lunch, and today Elon Musk’s Tesla seems to be the king, with a larger market cap than that of the 6 largest car companies combined!
The Stages Of The Traditional Product Life Cycle
At the heart of product life cycle management resides the product life cycle. A given product moves through the product life cycle during its lifetime. The product life cycle begins after the development stage—when the product is launched into the market—and ends when the product reaches end-of-life and is taken off the shelves, physically or virtually.
By studying the traditional product life cycle, we’re attempting to improve our chances of success at the game of product management. Like every attempt to model reality, the product management life cycle is not perfect. It is, however, a good approximation and more importantly, useful for product managers trying to ride the beast.
The traditional product life cycle consists of 4 stages:
- Introduction Stage
- Growth Stage
- Maturity Stage
- Decline Stage
There are some variants to this which consist of 5 product life cycle stages or even 6 stages, but since we’re discussing the traditional product life cycle, we’re going to stick to 4 stages.
Product Life Cycle Phase 1: Introduction Stage
The introduction phase of the traditional product life cycle begins with the actual launch of a product. The effort involved in researching, designing, and building the product is not tackled here. Introducing a product is a highly specialized, expensive affair and typically no one talks about profit. Instead, the focus is on advertising, sales, and distribution.
This phase is akin to a plane taking off: take-off is among the riskiest parts of air travel, second only to landing. Similarly, getting a launch right is critical for the success of a new product.
The first buyers of a new product are typically early adopters. These are the ones who often want to be seen as having something no one else has: your brand-new product. They are usually willing to put up with some flaws if the basic premise of the product is sound.
As a product manager, during the introduction phase, you will be busy:
- Creating awareness in the market and clarifying features and benefits to the marketing and sales teams. In a start-up, that might mean talking to that one person who is the “marketing and sales team.” Be aware that having been up close and personal with a product can cause one to miss simple yet valuable benefits and features.
- Getting more insight into how customers are using your product. You may have spent top dollar on market research and trials during product development. Now it’s time to see if all that time, money, and effort has resulted in a product that customers are willing to buy. Customers will use your product in ways that you never imagined and perceive benefits that were never intended. They may also get irritated by some of your “features.” This is the time for you and your team to uncover all that and to add or modify features to increase sales.
If the new product is a disruptive innovator, then ensuring that it gains maximum traction in the market becomes a critical task. Capturing market share means that copycats find it that much more difficult to gain traction.
Product Life Cycle Phase 2: Growth Stage
Once a product has been successfully introduced into the market and has survived, it reaches the growth phase. This is good news because it means that people want the product and are willing to pay for it! It also means you'll need to ramp up your marketing efforts.
The focus in the growth phase is on rapidly gaining new customers and increasing market share as quickly as possible. Existing users might promote your product by using it or talking about it, which is great because word-of-mouth is the best possible promotion strategy.
The primary challenge in this stage is to orchestrate the marketing strategy, prices, new features, and increase capacity and distribution so that there are no hiccups to acquiring new customers. However, being too cautious means that competitors can grab market share.
Having a high growth rate can cause other challenges. Products have fallen flat simply because the demand was too high, the product was not available on the shelves, or the server infrastructure crashed due to high loads.
Nothing is worse than having an amazing product with great demand and then failing to successfully meet that demand. This happens more frequently than you can imagine, so work hard to avoid this! Apple has been rumored to create artificial shortages to increase customer appetite, but I suggest you wait for your company to reach USD 2 trillion in the market cap before trying this strategy.
As a product manager, during the growth phase, you will need to:
- Grab market share as quickly as possible by pulling out all the stops: new features, advertising, marketing campaigns, adoption, and leveraging available distribution channels
- Ensure that demand does not outstrip supply by a large margin
- Keep an eye on competing products and optimizing the price to ensure your product remains competitive while protecting your profit margins
Product Life Cycle Phase 3: Maturity Stage
The beginning of the maturity phase of the product life cycle is marked by a reduction in the rate of growth. At this stage of the life cycle, sales grow very slowly or reach a plateau. The maturity stage is typically the longest phase for most successful products, and many of the products that you currently use are most likely to be in the maturity phase.
In the maturity phase, the product marketing strategy is focused on differentiation from competing products. Typically, a product manager reduces prices to ensure maximum sales and competitiveness. A market-leading product may experience maximum profitability at this stage while #2 or #3 products typically experience reductions in profit due to price reduction and competition.
A smart product manager will figure out ways to introduce product variants at the end of the maturity stage to increase the length of the maturity phase. A major challenge with the variant strategy is cannibalization – the new variant may eat into the sales of the existing variant.
Often there is no way around this, but a smart marketing strategy with proper differentiation that addresses different market segments or new markets can help reduce or even eliminate cannibalization.
As a product manager, during the maturity phase, you must:
- Maximize profits by reducing costs. This will involve increasing the efficiency of your production, supply chain, and distribution operations.
- Maximize the length of the maturity phase by differentiating the product, adding new features, managing pricing, and keeping competitors at bay.
Product Life Cycle Phase 4: Decline Stage
All products inevitably reach the decline phase of the product life cycle. A market-leading product may last longer than others, but it too will reach market decline. There are multiple reasons for a declining product including:
- Changes in technology
- Market saturation
- Product innovation coming in from around the world
- Changing habits and attitudes of newer generations of consumers
- Planned obsolescence to ensure that customers buy newer models as replacements. There is a lot of debate around whether this approach is ethical, and the impact it has on our planet.
The start of the decline phase is marked by a reduction in sales figures. There is often no way to alter the destiny of the product without dramatically altering the product’s features or market segment. To deal with decline, companies typically have multiple product offerings in various stages of the product life cycle to ensure that revenues don’t decline.
Here are some of the ways to address decline:
- Address a different market segment or market altogether (international markets are a great way to do this)
- Add new features to make it a new-ish product
- Reduce prices, clear out the existing inventory, then put the product in end-of-life and discontinue it
Supporting existing products that are at end-of-life or end-of-support can be challenging and add to costs. Helping existing customers that are still using such products to upgrade by offering discounts is a good strategy to wind down the older product and cut down on support costs.
As a product manager, during the decline phase, you will need to:
- Figure out ways in which you can pivot the product to a new market segment or even a new market altogether
- Manage the end-of-life stage of the product and ensure that you meet all legal commitments while keeping costs to a minimum
- Upsell existing customers to newer products/variants
The Importance Of Managing The Product Life Cycle
Having a deep understanding of the various stages of the product life cycle is important when it comes to developing new products. Knowing the stages helps in computing the feasibility and viability of a new product.
You will be better able to answer these questions:
- Is it worth building this product?
- Will it survive in the market?
- If it does survive, when can we expect to make money off of it?
Typically, in an agile product life cycle, a product manager can run a series of small experiments to get answers to these questions. Here are some reasons why the product life cycle is important.
Related Read: Why Is Product Management Important?
Estimation, Planning, And Forecasting
Once you’ve decided that a product is feasible and that it is worth going ahead with, then comes the next stage: product planning and forecasting. This is where in-depth knowledge of the product life cycle can assist in making plans and preparing forecasts for revenue, margins, market size, and customer base.
There is a school of thought that says that all this planning is in vain since no one has a clue about whether a product will succeed. However, the very act of working on a product roadmap by planning, estimation, and forecasting forces a product manager to think hard, ask difficult questions, and examine hidden assumptions that are unaddressed. Forewarned is forearmed.
Additionally, I don’t know of a single executive leadership team in any organization that has approved large product budgets relying only on the product manager’s say-so and hunches, so it is a necessary exercise anyway.
Personally, I always prefer an appointment with my dentist to a budget approval process, but if you come across such an executive team, be sure to let me know! I’ve taken a large sip of my elixir of immortality, just in case.
Marketing Planning And Approach
Different stages of the product life cycle require specific marketing approaches. For instance, in the introduction phase, customers have no clue about the product, so marketing needs to introduce the product to potential customers and educate them about its benefits.
During the maturity phase of the product, marketing primarily relies on product differentiation to promote sales. When products approach end-of-life, discounts and rebates are often offered which attract customers who would not otherwise have bought that product.
Communication Between Teams
Product management requires a multidisciplinary approach including design, engineering, marketing, sales, and support just to name a few. Working with multiple teams invariably brings about the challenge of communication and coordination.
The benefit of the product management life cycle is that it allows all teams to work with a unified paradigm so that it is easier to coordinate for success.
Concurrent Product Development
All products reach the end-of-life phase. Therefore, it is important for companies to have a pipeline of concurrent products to ensure that they maintain or increase levels of revenue and market share.
At the same time, it is important to ensure that new products do not cannibalize existing ones. The product management life cycle helps to synchronize product development to optimize the life of each product in its product portfolio.
Integrating Your PLM System With The Rest Of Your Business
No PLM software can operate in isolation, in a silo. While a PLM system is perhaps the keystone of a product company, the other pillars — enterprise resource planning (ERP), customer relationship management (CRM), computer-aided design (CAD), supply chain, communications, and storage infrastructure — need to be tightly integrated with the PLM system to make it a globally optimal system.
To take a simple example, even if your PLM system is top-notch, if it is not integrated with your suppliers and ERP, it will be hard to get the product to market on time.
Likewise, without a solid CRM system in place, it will be hard to provide the kind of service levels that get customers to recommend your product. Bad word-of-mouth can deep-six a product faster than you can say customer relationship management.
The details of how to integrate multiple complex systems like PLM, ERP, and CRM requires several books worth of content so we will only discuss an overview:
SCENARIO 1: You already own systems like ERP and CRM from different vendors with different platforms like Windows or Linux. Even if you're happy with each system, getting them together can sometimes be like trying to herd cats. Your best bet here is to get a good systems integrator to get all these systems to talk to each other.
SCENARIO 2: You're a successful start-up growing rapidly and have a green field in front of you. There is an opportunity to start on the right foot and save a ton of headache down the line by ensuring that the parts you set up fit well like a jigsaw puzzle. Typically market-leading products (ERP, CRM, etc.) in each category will be from different vendors so there are difficult decisions and trade-offs to be considered. Is interoperability more important than functionality?
The long and the short of it is that integrating these large, complex, and diverse software systems is difficult and there is no “one-size-fits-all” approach or solution. Even the best industry standards may not be a good fit for your specific organizational scenario. Keep your eyes open and ask a lot of tough questions.
The Difference Between The Product Life Cycle And The Project Life Cycle
There is often confusion about the difference between the product life cycle and the project life cycle. I’ll attempt to clear some of the confusion around this topic:
- A project is defined as an endeavor undertaken to create a service, product, or result. The project life cycle has a definite beginning and end with a clearly defined scope and resources.
- The objectives of the project life cycle and the product life cycle are quite different. A project is used to achieve a pre-defined outcome that may or may not be a product.
- The product life cycle may use many projects to achieve its goals, but the reverse is usually not true.
Life After Product Life Cycle Management
Like the proverbial product cycle that keeps going, thanks to an overlap between mature products and those in development, a product manager’s job is never done. PLM and the product life cycle are a necessary part of a product manager’s toolkit, especially since they help generate a semblance of order out of the chaos of the market.
What has your experience been with PLM systems and processes? What is your opinion of the utility of the product life cycle? In what way did it help you? Let me know in the comments below!
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Check This Out: An Updated Approach To The Product Life Cycle