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The answer depends on the pace of change influencing the product lifecycle of your business. Industries experiencing slow change can simply adapt with the times. In industries that are experiencing rapid change, businesses must transform; they need revolution, not evolution if they are to survive. The one thing we can be sure of is that this pace of change is ever increasing and what’s more, it is unavoidable and affecting ever more industries, businesses, charities and government organisations.
In 1965 American economist and professor at Harvard Business School, Theodore Levitt, wrote an article in Harvard Business Review explaining how the product lifecycle works. Most successful products/services go through a predictable sequence of growth stages that mirror all natural life. Innovators that invent and introduce a new product or service and see it survive into the growth phase tend to win the lion’s share of the profits. Competitors bringing rival products to the race during maturity are largely taking a share of the inventor’s market before it inevitably heads into decline.
Levitt’s frustration at the lack of use of this concept in business becomes wonderfully apparent when he claims “In a recent survey I took of executives I found none who used the concept in any strategic way whatever, and pitifully few who used it in any kind of tactical way. It has remained—as have so many fascinating theories in economics, physics, and sex—a remarkably durable but almost totally unemployed and seemingly unemployable piece of professional baggage”
While over the past 60 years the Product Life Cycle diagram has remained unchanged. The one often overlooked evolution is that the x-axis, ie the time it takes for a product or service to go through its lifecycle, is shortening dramatically. What used to take years or decades can now take months.
In answer to the question What is Digital Transformation? we said “Digital Transformation is how an organisation becomes built to continually change, innovate and reinvent rather than simply enhance or support the traditional methods of its industry. The word ‘digital’ is a synonym for the pace of change occurring in today’s world, driven by the rapid adoption of technology.”
In today’s digital economy, the accelerated pace of change we are currently experiencing, is squashing the time it takes to introduce a new concept, test it, verify if it has growth potential, maximise the profits from that product or service then watch it reach competitive maturity and eventually fade into the sunset.
Some industries are affected more than others and successful branding does not bring immunity. Coca-Cola has been a household staple since 1886 yet in 2016 Fortune reported a massive slump in consumption in the USA, principally because consumers have become increasingly skeptical of artificial sweeteners. Even iconic brands need to reinvent.
Take the music business for example. Vinyl records lasted for around 100 years. Cassette tapes were dominant for around 50 years. CDs lasted 25 years. MP3 music downloads launched around 15 years ago and now we’re streaming. The interesting thing about this is that the rate of change of the business model is not linear, it’s logarithmic. Yet when we stand on our perch at this moment in time and look back, we perceive the change to be a reasonably linear process.
Coca-Cola, while an innovator in its own right, didn’t foresee that this slump was inevitable. The music industry has loathed the changes in their business model and resisted every transition believing the old model was adequate. As Levitt points out, the length and slope of the market development stage depends on the product’s complexity, its degree of newness, its fit with customer needs, and the presence of competitive substitutes. In the global digital economy it’s easier to innovate, test, source, purchase, hire, outsource, co-create and deliver goods and services than could have been conceived when Levitt wrote his HBR article over 50 years ago.
On the PLC graph, the function of time is collapsing. Businesses that don’t transform, become digital innovators and leverage technology in order to remain relevant will die. It’s not enough to simply adopt technology at the maturity stage of a product lifecycle; by then we’re in a cost driven race to the bottom – the profits have been milked from the system. To become a true digital innovator, a business needs to deliberately innovate and create new products and services. Some will fail, others will succeed. Social media and digital content creates massive waves of opportunity for those that do. Customers are accustomed now more than ever to trying something new and the breadth and speed at which communications travel only increases the size of those opportunities and the potential rate of adoption of new products and services.
Businesses that don’t digitally transform will be washed away with the pace of change; it will happen with remarkable speed and it will come with no warning.
The leadership challenge, regardless of organisational size, is to actively create a culture of deliberate innovation and to invest in reinventing while maintaining business as usual. The risk in not actively seeking to digitally transform now is that if we wait until business as usual becomes difficult to maintain it could be too late.
Ionology provides a variety of Digital Transformation training courses for businesses and individuals interested in developing their skills and expertise.
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