Category Archives: Product Life Cycle

The End of Maintenance

Service used to be a distinguishing characteristic for a company. You wanted to be known as a great service company. If you were good at it, service was also a pretty profitable way to augment both the top and bottom lines. But that was before customers figured out that they could make do with lower levels of service. Excellent service is now too expensive, and barely acceptable service has become good enough. There are many forces at work in the market, and I think they all point toward the end of maintenance as a viable service or business.

Almost all products come with some sort of maintenance agreement to start. It is normally referred to as the manufacturer’s warranty. This is the period of time after the purchase of the product that the manufacturer guarantees that the product will work. The length of this guarantee can vary and depends on several things.

The age of the technology involved, the stability of the market, the relative dominance of the consumer or the vendor in the market, and the speed with which new technologies or substitutable products are introduced, can all be factors effecting the length of the product guarantee.

Automobiles are a baseline technology that has been around for more than one hundred years. They may be becoming more complex, but their basic components still include engines, seats, wheels and the other basics. One manufacturer’s automobile is readily substitutable for another. Warranties on cars can now extend up to ten years. Manufacturers are now guaranteeing car operation for a decade. Research shows that few people actually own a specific car that long but the guarantee is there.

On the other end of the spectrum telephone companies used to require a twenty-year support guaranty from its suppliers for the products they purchased. It wasn’t initially expected that technology would change at the rate it has evolved to. High reliability and long product life cycles were the norm. Now the carriers can no longer pass along the cost of that type of product and its support to the consumers, so now much shorter product support guarantees are acceptable.

Apple has decided that the warranty on the iPhone will be one year. They have also decided that it is a limited warranty, meaning only certain service repairs will be covered, and that they may repair or replace a broken iPhone with potentially refurbished model or parts. They are Apple. If you want one of their iPhones this is what you get.

So, if the article is about maintenance, why am I spending so much time talking about warranty?

The answer is simple. Once your product comes off warranty you have basically two options for service: You can get a maintenance or extended warranty type contract, or you can hope that your product won’t break, and if it does break you can hope there will be someone out there that can fix it.

Or the third alternative will be that you can go out and buy another, or the next generation of product and then make use of the new product warranty.

I think it is safe to say that business used to be all about the best service possible. It then modified that perception and position by saying it was all about the best service at a reasonable price. It seems it is now more along the lines of the cheapest price for the lowest minimally acceptable service.

Products were engineered to the highest levels of reliability. They were not expected to break. When the product came off warranty customers were expected to purchase post warranty maintenance contracts, just in case something ever did go wrong, they would get the best support possible. Since the products were engineered so well, they didn’t break very often. Maintenance contracts were very profitable for most manufacturers.

It seems that something strange started to affect both ends of this arrangement. Manufacturers could not afford to make such reliable products in the new market. They didn’t have the time required to create them. And if they did, customers were not really interested in paying for them versus slightly less reliable, but much less expensive competitors.

There is a wireless carrier that has recognized this shift in preferences. They have a tag line that asks: “Our network reliability is within one percent of our competitor’s. Why would you pay them twice as much for only a one percent difference in reliability?”

On the other side of the relationship, customers decided that maybe reliability, while nice, wasn’t worth the premium they were paying for it. They started to examine their costs. One that obviously pops up is the high cost of maintenance. The drive started to reduce this cost.

Customers started looking a competitively provided maintenance solutions. Competitors realized that if products were reliable, they could sell maintenance cheaper than the manufacturer with relatively little risk, and still make money. In turn customers demanded that if the manufacturer was going to provide maintenance they would need to match or even better these competitive maintenance price levels.

The race to the bottom was now on.

The speed with which new products were introduced was increased. It would seem that the life cycle of products became ever shorter. Products were developed, introduced and then superseded by the next newer and improved version at an accelerated rate.

The reliability of new products diminished in accordance with the lower prices. As the life cycle, and more importantly the life expectancy of products reduced, they were no longer engineered to last a long time. It seems that they are now engineered to last only slightly longer than their warranty periods. After that, all bets are off.

Customers were more willing to accept reduced maintenance capabilities if they came at commensurately lower prices. It has often been said that we have evolved into a disposable society. What was once retained and repaired is now discarded and replaced. After all, with the new and improved version either already out, or on the cusp of availability, why would you want to repair the old one, when you can get the new one for close to, or possibly only slightly more than the repair price?

Why would you want to repair the old one, when you can get a new and improved one?

When a car comes off warranty it is six to ten years old. At this point in time it will be significantly depreciated in value. Chances are if it needs a repair it will be a significant investment verses the actual residual value of the older car. Probably better to get a new one.

When you buy your iPhone you get a year maintenance. Hopefully it will last just a little longer than that, but it doesn’t matter. The iPhone was released in 2007. There has been a new iteration of the iPhone released every year since then. And people line up every year in advance of the release to get some of the first new ones. Why would you want to fix your old iPhone when the cost of the repair represents a significant portion of the cost of just getting the next generational model?

This same approach is now finding its way into business as well. The demand for reduced maintenance costs by customers and the shorter product life cycles driven by competition are combining to eventually squeeze maintenance out of existence as a viable business for manufacturers.

It will probably become what would be called a “break – fix” type of environment. Customers will look for a warranty on a new product that is commensurate with its expected life cycle. They will probably have an extra one or two around as spares. If one breaks they will implement a spare and then do the cost benefit analysis of either getting the broken one repaired, or just buying a new one from the next generation of products.

It may take time for this apocalyptic vision of maintenance to come to pass, but I do think it is coming. The economics on both the vendor and consumer sides of the value equation are pushing it in this direction. Vendors won’t be able to afford the multiple generations of maintenance staff required by rapid product development and introduction. And customers will not be will to pay the costs of even reduced maintenance contracts if newer and more capable replacement products are rapidly and relatively inexpensively available.

I think we are heading to the point where the warranty and the life expectancy of a product are going to be very close to the same length. Any incremental life that can be squeezed out of any product beyond the warranty period will be looked at as an incremental unexpected benefit. Once the warranty expires, the break-watch will begin. If and when the product should happen to break (remember products will no longer be over engineered to last significant periods) the fix – replace decision will be made.

If it makes sense to repair it, it will be repaired. If it doesn’t make sense to repair it, it will be replaced. I just don’t think that we will see products continue to be under maintenance contracts in the future. Business probably needs to start planning for that eventuality now.

Swiss Army Knives

I remember when I was a kid that one of the things that I really, really wanted was a Swiss Army Knife. I liked the idea of having a one size fits all kind of knife. If I wanted to whittle something I would have a small knife blade that I could fold out and whittle with. Likewise if I wanted to saw something I could fold out the saw blade and start sawing. The fact that it was a three inch blade with a non-locking mechanism wouldn’t stop me. If there was a two by four that needed some sawing on it I would be ready.

The same could be said for cork screw despite the fact that it would be more than a decade before I would be old enough to drink wine, however if my mom needed any help I would stand ready. There were also blade and Phillips head screw drivers for all the things I would build or repair while in the wilderness, awls for working the leather I would take with me camping, tweezers for removing all the splinters I would amass while roughing it and even a smaller back-up knife blade in case I broke the first one from too much use while in the woods whittling.

In short I guess it could be said that the Swiss Army Knife could do just about anything. This idea of being able to do just about anything had a significant coolness factor. The kid who had the knife that could do the most things that he would never use it for was obviously the coolest kid.

I have grown older (I don’t know of anyone who would be so foolish as to say that I have grown up) and I no longer have the same affinity for Swiss Army Knives that I did when I was younger. Like most guys I am now preoccupied with the number of functions that my favorite Multi-Tool can perform, that I will never use. The primary difference between then and now is that I can now afford a far more complex Multi-Tool than I could ever afford Swiss Army Knife then.

So what has all this got to do with business? Good question.

Reminiscing about my favorite old Swiss Army Knife got me to thinking about optimization for purpose and use. Those knives (and today’s Multi-Tools) are capable of doing just about everything. The problem is that they are not optimized, or really good at anything. The knife blade can be used to whittle, the screw drivers can drive screws, I wouldn’t know about the awl for working leather as I never had the opportunity to really try it, and the corkscrew will in fact remove a cork from a wine bottle. The problem is that it really doesn’t do any of those things very well. The functions are all there, but they are not optimized for their respective applications.

In business it is not about being able to do everything. It is about being the very best at what you do. You usually don’t ask your Finance and Accounting people to go out and sell your good or service. Marketers normally can’t count well enough to have them keep the business’ books. Sales people aren’t normally any good at anything else other than sales. You don’t ask people to do something that they may be able to do, but that they are not at their best at.

This is the same principle that governs the applicability of Swiss Army Knives in functional applications. Professional mechanics do not use them to work on engines. If they need a screw tightened they go and get the appropriate and specific screw driver that meets their specific need. Have you ever looked in the hardware store at the number of different types of screw drivers that there are? There is a reason for that. Each one is optimized for a specific screw tightening application.

My wife has never ever asked me for, nor asked me to buy her a Swiss Army Knife or Multi-Tool with a cork screw so she could open a bottle of wine. In fact I think she has at least two designer cork screws, one of which has an electric motor, whose sole purpose for existence is to only remove corks from wine bottles as quickly and stylishly as possible. The fact that a Swiss Army Knife or Multi-Tool could do so much more than just opening the wine seems to hold no allure to her.

This optimization for purpose and use should be applied throughout the business. Products should focus on being the best at what they are used for. Look at the screw driver example I used before. I’ll also illustrate this precept by using a hi-tech example from my past. I worked for a company that essentially made a chassis that would house a variety of application specific boards and blades (sounds like a Swiss Army Knife). Each blade was optimized for a specific application, and there were a lot of them to choose from.

Customers said that the number of different application blades could be confusing and suggested that the company undertake the development of a “universal” blade that would enable the customers to do several different applications instead of the usually capable and provisioned one. The universal blade came out … and it was a failure.

The resulting universal blade was much more complex, much more expensive and less functional on every application that it addressed even though it addressed far more applications than the single blade – single application counterparts. In short it could do just about everything, but it couldn’t do anything as well as each of the specific application blades could do it, and due to its complexity it was much more expensive to boot. Less optimized and more expensive is not a good business proposition for success.

The same would go for business processes. Processes are supposed to be a simplified, streamlined, consistent way of doing things that will optimize your efficiency. However when you try to create the “universal” process, much like the universal application blade, they end up not being optimized for anything and hence reduce efficiency in everything.

As an example, suppose you are addressing two markets, the North and South Poles. On the surface both are similar in that they are cold and have snow. But the North Pole is populated by Santa’s elves and they are primarily interested in candy and toys. The South Pole is populated by penguins who are primarily interested in fish and not being eaten by sea lions.

If you were to create a global process that addresses the needs of both the North Pole and South Pole markets it would have to take into account the specific and disparate needs associated with serving both elves and penguins. By the very nature of your markets at least half (and probably more) of your process would not be applicable to one or the other market. If you were to complicate things further by adding third market, say the Himalayas (again cold with snow) you would then have to add the processes associated with serving the populations of Sherpa and Yetis in the area. As we all know Sherpa are primarily interested in climbing and Yeti are primarily interested in leaving foot prints and not being seen.

Sherpa and Yeti, elves and penguins all live in similar markets (cold and snow) but I don’t think that a universal process can be put together to efficiently address each of these markets’ specific needs. It would seem to be much more efficient to create and optimize a process for use in each specific area.

Business is about addressing specific markets and even more specifically, specific customers and their specific needs. The better that you can do that, the better your chances of success both with that customer and in that market. Swiss Army knives and Multi-Tools are cool, but people, and customers, who have a specific need are not looking for all the other functionality that comes with the more complicated or diverse solution. When you start to hear the siren song of the universal product or the universal process it may be best to emulate Odysseus and find a way to maintain your direction and focus on the optimization for purpose and use that your customer really wants, and that has been the cornerstone of business success.

Momentum

When I was an undergraduate I studied Physics. Don’t ask me why. I am not sure I know.


This study of hard science taught me a couple of concepts that also seem to apply to business. The first of these concepts was that of Momentum.


A simple scientific definition of momentum is the tendency of a body at rest to remain at rest, and a body in motion to continue in motion. The way to change momentum is to apply a force.


In business in many cases it seems to be easier or less risky to continue to do what has been done before, or to continue moving in the direction that things have been moving before, instead of doing something new. This is momentum. In a business’ momentum is the reason that marketing programs continue beyond their designated times (and stop affecting customer or competitor behaviors), and why products linger for longer than they should (and attract more and more costs associated with continuing to sustain them verses the revenue they generate) and why you are still getting reports on the value of your yellow pages adds instead of information on the number of hits on your web site.


In looking at a business it is always good to look at what type of work that is being done. Why are certain things being done or continuing to be done, and others not. Invariably the answer tends to be “momentum”. Things are being done a certain way because that’s how they were being done before. There was no external action or force that was applied to change things, so they just continued on in the same way.


The market (and the world) continually changes. Businesses must continually take action to meet this change. The most obvious example of this is the development and introduction of new products and services to meet this change. However, momentum usually rears its head in the form of using older or “tried and true” processes and methods of doing the associated work.


Just like product life cycles dictate that older products need to eventually be discontinued in order to make room for new ones, the processes and work within a business must also be continually reviewed. In this way outdated processes and what is usually referred to as “busy work” can be discontinued to free up the resources to do new things and create new processes to meet the changing market. Without this type of work review, the momentum (the tendency to continue motion in the direction it had been going) of business will eventually have moved it to the point where work is being done that no longer serves the purpose and provides the value it once did.


A good leader must be the force that is applied to a business that changes its momentum. Stop doing work that no longer needs to be done, and start doing the new things that the changing environment requires.