“Watch the product life cycle but more important watch the market life cycle.”
In yesterday’s blog “What must I do today?” and an earlier post entitled “The television analogy” I spoke of the parallels between the television and the telecommunications industry. I have a few diagrams / tables to elaborate today.
The standard product life-cycle graph is defined to look something like the following:
Canny product teams try to identify a new product to take over just as the first product is tapering, as shown in the following with a set of 4 sequential product releases over a long period of time:
The interesting part of this story is that instead of describing individual products, we can use the following sequential phases to loosely show the revenue life-cycle of industries instead, as shown in Figure 2 above.
- Phase 1 – Technology
- Phase 2 – Service
- Phase 3 – Application
- Phase 4 – Content
The table below uses the television industry, which has already been through the four phases, as an indicator for the future of the telecommunications industry in general. It also contrasts an even newer industry, Big Data, for comparison:
|1 – Technology
|2 – Services
|3 – Applications
|4 – Content
|Television equipment manufacturers (eg TV sets)
|Television stations to distribute television signals
|Television production companies to provide a framework for content creation
|Television directors, writers, actors, etc to create the shows (content)
|Telephone handsets and transmission technologies (eg cabling)
|Carriers and ISPs to carry voice/video/data signals
|OTT application providers like YouTube and Skype
|Content creators using apps like YouTube to generate a following like Psy (Mr Gangnam Style)
|Technology providers (eg Hadoop, etc)
|Big data infrastructure providers (eg integrators and XaaS providers)
|Big-data based applications like Twitter, LinkedIn, etc
|Content creators using apps to create and/or identify data that has great value
In each case, stage 1 starts with brilliant innovators generating profits from products initially but then competition tends to provide alternatives and profits subside (eventually). Then stage 2 ramps up by providing services wrapped around the technology. Stage 3 then leverages the services and provides the frameworks to support Stage 4, the content creation. Generally Stage 4 supports the long tail of innovation (ie many more contributors / participants) but most of the profits are made by the small number of people that add value to the largest audience. The example used in “The TV analogy” was the massive salary per episode commanded by the cast of Seinfeld in its last season as opposed to the vast number of other actors.
Obviously there are different products within these phases that are outliers that don’t follow the overall trend, like the injection of smart-phones into an otherwise declining Telco hardware cycle. Similarly the telecommunications industry has a huge number of sub-sectors that are at different stages of their respective life-cycles (eg Internet telephony compared with analog telephony) but the general trend holds true.
So what does all this mean to the OSS industry? Well, in the past OSS have primarily supported the technology and services because that’s where the revenues were, but now we have to consider adding functionality / benefits that support the application and content providers as that’s where the revenues / profits / margins are shifting.