“We’ve just hit something.”
I’m fairly certain that this is not on the list of things you want to hear your pilot say. Even if the plane is on the ground and just beginning to back away from the terminal.
It was late on a Sunday evening and I was on the last flight out of Oakland, heading back home to Southern California for what I thought would be a full day of work on Monday. Except on this Sunday, our flight wasn’t the last flight out – it turned out that we weren’t going anywhere. Our plane clipped the wing of another plane as we pulled away from the boarding ramp. The good news is no one was hurt. Our plane was damaged, and both planes were pulled out of service. The bad news is flights were rescheduled for the following day, and my Monday schedule was blown all to you know where.
OK, I admit, it’s a click-bait title. It wasn’t really a plane crash – it was more of a plane crunch. It actually felt like we’d hit a pothole until we looked out the window and saw a piece of the wing tip laying on the ground, and a half dozen ground crew guys frantically pointing at our plane and at each other.
What followed our “crash” is a good example of a point I’ve been making to whoever will listen for the past few years about the need for agile business processes and systems and the cost of delays in getting to market with new products. Because of this flight delay, I lost a day of billable work. Because I’d left my business electronics at home (this was a pleasure trip), my workweek was reduced by 20%. For the most part, those hours are unrecoverable – they’re just gone – and 20% of my potential revenue for that week is gone along with them. Delays in getting to market with new offerings can have the same kind of impact on your business.
Every product has a lifespan – a finite period of time when it can generate profit for your business. The clock on profitability actually starts ticking at the moment when a customer perceives a need, and it stops ticking when the product becomes obsolete. Most importantly, those start and end points are determined by market forces and not by your product development cycle. When an opportunity arises, you need to be ready to move.
In today’s world, an average product lifecycle is 48 months from launch to obsolescence. A three-month delay in getting to market shortens that lifecycle to 45 months. The math is simple; knocking three months off a 48-month lifecycle reduces the lifecycle by 6.25%. It would seem reasonable then to assume that a three-month delay will reduce your profits over the life of the product by 6.25% due to unrecoverable lost sales for those three months. Except the math isn’t that simple.
Lean Six Sigma Product Development Research tells us that product profitability lifecycles look roughly like a bell curve. There is a ramp-up at the beginning of the cycle as the product is introduced to the market, and a ramp-down at the end of the cycle as the product becomes a commodity and competition and changing customer preferences erode pricing. There is also usually some erosion in average unit pricing (AUP) over the entire lifespan of the product.
In our example, the research tells us it’s most likely that the three months lost will come from the peak of the bell curve – you lose three of the most profitable months of your product lifecycle. So, instead of 6.25%, that three-month delay might cost you 8-10% (or even more) of the lifetime value of your product. And despite your best efforts to make up for lost time, the bulk of those lost sales are unrecoverable.
So what does this all mean? My friend Andrew Dailey at MGI Research likes to say that, “Speed is the new black.” (He says it often enough that he should probably get it trademarked.) And he’s right. The essence of business today is speed and agility. Getting to market quickly requires agile business processes and systems – particularly monetization systems that take control of creating new products and pricing strategies out of the hands of IT and give that control to the business owners that need it. If your billing and monetization systems and processes are creating roadblocks rather than opportunities, it may be time for a change.
My flight delay cost me 20% of my revenue for the week. My billing rate isn’t that high, and a lost day won’t break the bank. Your delay in getting to market with new offerings, on the other hand, could cost you a lot more. It could be the difference between success and failure, between realizing the expected ROI on a new product investment or coming up short.
 If you’re interested in more information, check out the research of Singhal, Hendrics, and Mascitelli among others on the potential effects of product launch delays.