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Exit
At some point, your team will become aware of when your product begins to exhibit characteristics of decline, such as declining revenue or profitability, or new generations of technology becoming prevalent in the market. The conditions are not always obvious, so it requires careful tracking of your internal and external metrics, as well as an impartial and objective team assessment. More than one product has been retained long past its "sell by" date for emotional, not economic, reasons!
The exit process involves a careful examination of your original roadmap and the options available to you. As part of the analysis, build a financial model to assess the remaining value that can be realized through the different alternatives. Your model will help you to define your alternatives, clarify assumptions, and estimate outcomes. This information combined with your financial and strategic objectives and insight from employees, customers, and partners will help you to make a prudent decision.
In most cases, the options available to your product during exit are sell, harvest, or discontinue:
Sell
Sell part of or the entire product to another company. This alternative should be a consideration if you find a willing suitor that places a high value on your product because of synergies with its business. Also, this option allows you to recover a "salvage value" without subjecting your company to any future market risks.
Harvest
In this scenario you allow your product to undergo its natural "end of life" process with minimal or no additional investment. This alternative is attractive if you have an entrenched and passionate user base that is willing to continue purchasing your product because of preference or high switching costs. If chosen, you would ideally allow for the last product to be purchased naturally and, if possible, migrate your user base to a newer product offering. One consideration for deciding to harvest a product is that the ongoing contact with customers provides you with a valuable source of information for subsequent products.
Discontinue
If there are no sales or it is unprofitable to continue selling your product and there is no remaining strategic value in doing so, you should discontinue selling your product. In this case, you will transition any remaining customers to your next generation product. It is important to ensure that the process is implemented wisely so as not to damage relationships with existing customers and partners. It is possible that this elimination or "pruning" could also have positive effects in that it streamlines your product line-up and allows your resources to be optimally deployed.
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The Evolution core capability carries your product through its full lifecycle and enables you to manage your total return-on-investment equation to make product innovation a profitable undertaking. By following the model described in this article, you will implement best practices and avoid common value-limiting pitfalls, and so maximize the long-term value of your products and services.
Resources
Kahn, Kenneth B. The PDMA Handbook of New Product Development
This comprehensive handbook contains two relevant chapters on lifecycle management. The chapters' authors point out that many companies underemphasize and underfund lifecycle management activities after new product introduction. This source introduces important strategies for revitalizing languishing products.
Moon, Youngme. "Break Free from the Product Life Cycle" Harvard Business Revenue, May 2005 (subscription required)
Moon's article suggests that companies should adopt a unique mindset to avoid uniformity in lifecycle management. By positioning and repositioning their products in unexpected ways, company can accelerate growth or revitalize mature products.
Moore, Geoffrey A. Inside the Tornado: Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets
Geoffrey Moore's follow-up to Crossing the Chasm, suggests a course of action for each lifecycle stage beyond the chasm. The tornado refers to the increase in activity and pressure related to reaching the mainstream market. Moore's insight is the distinction of what is required in each stage of the lifecycle in terms of products, positioning, competition and leadership.
About the author
Michael Lurie is the CEO and founder of the Agile Strategy Institute, a research, education and consulting organization, and the creator of its original core body of knowledge. He is also the founder of the Agile Strategy Alliance, a non-profit professional association for executives, board members and advisors interested in learning and practicing agile strategy.