Industry Life Cycles for Startups


lifecycle-product-overview

In a recent report on Stryker, a leading medical device manufacturer, its marketing team reported that it was entering the year “on the cusp of new product cycles” and it sales grew 18% by the 4th Q and experienced 11.7% international growth. And the term, life cycle, hit my memory cells that recalled my first year marketing class.

Virtually all companies, including startups, need to concern themselves about these cycles. Businesses, old and new, face increasing competition.  Verizon, a 100 year plus old PSTN provider, sees its revenues declining just this last Q in 2016.  It struggles to look for new products to prop up its revenues.  Dropbox, a new generational digital company, is facing competition from Amazon, Google which build and manage data centers that will undercut Dropbox’s pricing. Unless Dropbox finds new products, it will also suffer revenue declines.

On the other hand, Stryker follows the textbook marketing lesson – -always get new products when the lifecycle or competition reduces the market share and product pricing. That is why Stryker is enjoying double digit growth. And, when I myself work on 3-5 year business plans, I have to think, how can I expand the list of products before initial revenues from my first product get hit? Then one has to consider the speed at which potential competitors can enter the same market. That is what Dropbox confronts today.

What is the industry life cycle?  The graph is self explanatory. And one adds the other product must be timed when the product sales dip or, to use a mathematical term, when the second derivative reaches zero.

Then, one includes a new product or a product extension.  In a medical device project I am currently drafting, I consider the new product extensions or lines to begin to be introduced within 24 months of the first product. The company must diversify products to reduce the risks to loss in its revenues when competition enters.

Somehow, in Silicon Valley, many entrepreneurs and patent attorneys all believe that their products don’t require immediate extensions or innovations since the patents provide them with a virtual monopoly. In a perfect world that would be true.  But today’s world is filled with many patent lawyers, many competitors, and fast moving markets that contribute to a new innovation paranoia – to paraphrase Grove’s oft quoted remark on survival. Even Intel with its treasure troves of patents, knows that competitive concerns are paramount to financial success – even with patents. It builds huge new factories for innovative products to compete. Innovation and new product cycles are key.

So, if the company is a startup or an established company, innovation must be introduced every few years. It needs to be thought early, even when putting together an initial business plan. Investors do not want the one trick pony.  And that is what you want to avoid being – a short demonstration of one product line.

Advertisements

About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
This entry was posted in competition, Entrepreneurship, Management and Capital. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s