Competitive Intelligence: Key Life Cycles in Mature Markets
To analyze mature markets in your competitive intelligence efforts, you need to become somewhat of a biologist and study the life cycles of products, technologies, and demand. Each provides a different perspective and different level of insight into possible changes in the future of the market.
Product life cycles
Understanding product life cycles is critical to knowing when you need to introduce new products. If all your products are in the maturity or decline stage and you have nothing new in the works, your company needs to seriously ramp up its R&D efforts.
A product’s life cycle typically lasts from about 18 months (in markets with a competitive index of 4 to 5) to seven years or so (in markets with a competitive index of 1 to 2). The cycle progresses through several stages:
Product introduction: Sales start out slow and steady.
Growth: Sales grow steadily and fairly steeply.
Maturity: Sales level off.
Decline: Sales drop as the product becomes obsolete and consumers move on to other products that pique their interest.
Consider two aspects of a product’s life cycle: total length (in months or years) and which stage the product is in at any given time. If you calculated the competitive index for a market sector, you can use that index to estimate the duration of product life cycles for any given market sector.
|Competitive Index||Product Life-Cycle Duration (Estimate)|
|< 2||6–7 years or more|
Technology life cycles
Although you may not be able to predict the duration of a particular technology’s life cycle, you need to be aware that every technology eventually becomes obsolete. Constantly monitor the market for any emerging technologies that may replace current technologies.
Consider how music playback technology has changed over the years. Vinyl records had an 80-year history of being used to store and play back audio, but audio CDs (which have only been around since 1982) are already being challenged by MP3s. And many technologies change significantly faster than audio playback has, so be sure to stay in tune with existing and emerging technologies that affect your sector.
Demand life cycles
Like product life cycles, demand life cycles are predictable and tend to be more generic in nature; for example, replacing people with technology. The demand life cycle is generic because it doesn’t specify a certain technology. In fact, thousands of technology and product life cycles will occur over the duration of that particular demand life cycle.
Another good example of a demand life cycle is the demand for a natural resource such as coal. Heating or cooling a house requires energy from some outside resource, such as coal, heating oil, natural gas, or electricity, which is often produced by burning coal. However, the demand could drop drastically if other forms of renewable energy become commercially viable, such as
Zero-point or free energy: Energy that certain elements or combinations of elements produce while at rest. Think of it in terms of having a battery that never needs to be charged.
Solar energy: Some companies are developing roofing materials that have built-in solar cells, making it much easier, cheaper, and more attractive to add solar energy panels to a home.
Hydrogen energy: Researchers are working on ways to make hydrogen fuel cells that are economical and safe. Although most of the research seems to be going on in the auto industry, hydrogen is also being considered for powering homes.
When cheap, clean, renewable energy resources become available, the demand for coal and other fossil fuels is likely to drop.
When a demand life cycle is approaching its final decline phase, the results to companies that depend on the demand for that solution may be catastrophic. Early warning, early planning, and great intelligence are the best ways to lessen the impact of a downward demand cycle.