PLC - Product Life Cycle
Summarized by Sam Mishra, MBA (MIT Sloan)
Product Life Cycle (PLC) as a concept was first introduced into management literature by Ted Levitt in 1965. Since then, the world has changed, and Geoffrey Moore of Silicon Valley came up with a book called “Crossing the Chasm” where he introduced the concept of a majority of new high-tech products falling into the chasm.
PLC divides the product lifecycle into four stages based on time: introductory, growth,maturity, and decline. On the other hand, Moore’s chasm is based on a now well-accepted concept called technology adoption which categorizes users of technology into five categories: innovators, early adopters, early majority, late majority, and laggard.
I would like to posit here that Moore's categories map to the stages of the PLC quite well: innovators and early adopters map to the introductory stage, early majority respond to the growth stage, late majority come into play during the maturity stage, and the laggards are buying when the product has moved past maturity into the final decline stage. In other words, tt can be argued that this chasm, if it exists, will not let the product move to the growth stage from the introductory stage, in the classic PLC diagram below, because the product will fall into the chasm between the early adopters and the early majority.
So, the PLC framework, if used for new product introduction strategies, should be used in conjunction with the concept of user adoption; this specially holds true for high-tech product cases involving technology adoption.
Nevertheless, the PLC mapping is a useful framework to adopt for product cases in general, especially for established products, because as per the PLC curve above, the products sales will grow during the growth stage, will keep growing into the maturity stage, and then decline with time.
Before the product sales and profits enter the decline stage, or at the beginning of the maturity stage, the company can take measures to extend the life cycle of the maturing product by introducing new products into the product mix, by stretching the product line vertically and horizontally, by making the product compatible with the latest technologies, etc.
For example, enterprise software companies with maturing ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) software products, which were on-premise (deployable at the client’s premises) are now extending the PLC of these solutions by introducing new ERP and CRM product lines which are on-demand (web based, need not be deployed at client sites, client can use the product on-demand through the Internet).
For an illustration of how pharmaceutical companies extend the PLC of their prescription drugs at patent expiry by creating OTC (over the counter) drugs, please check the biotech case in our Solved Cases section.