2022 is an exciting time to be a product manager. The maturation of cloud technology, the rise of artificial intelligence/machine learning, and the overflowing coffers of venture capitalists make it a great time to be at the center of new product development. Product managers at firms that IPO’d in 2021 like Snowflake, Doordash, Palantir, Gitlab, FreshWorks, and Coinbase are riding high. Unfortunately, products in the early adopter and early majority stage of the technology adoption life cycle only account for a portion of the product managers working today. An equal, if not greater, number of product managers work on products that are in the late majority and laggard stages of the TALC. These products account for more than half of all software product revenue in 2021. Late majority product management is tough, but some has to do it.

In this article we will talk about:

  • There is a Lot of Revenue and Profits in the Latter Stages of the TALC
  • Is Your Product a Cash Cow or a Dog?
    • Boston Consulting Group Growth-Share Matrix
    • Most Late Majority/Laggard Products are Cash Cows or Dogs?
  • The Challenges of Late Majority Product Management
    • Shrinking Resources
    • Employee Satisfaction
    • Product Management Blocking & Tackling
  • The Late Majority Product Management Manifesto
Technology Adoption Life CYcle

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Technology Adoption Life Cycle

The Technology Adoption Life Cycle is a staple of modern software marketing. The concept was first presented in 1957 in a paper entitled The Diffusion Process by agricultural researchers Beal and Bohlen in 1957. Geoffrey Moore popularized the concept for software businesses in his 1991 book Crossing the Chasm.

 The model breaks technology adopters into five groups:

  • Innovators: Innovators are customers that are prepared to take a risk with new products. They seek innovation and are the first to buy a new product.
  • Early Adopters: Early Adopters refer to individuals or businesses who use a new product, innovation, or technology before others. Early adopters may pay more for the product than later adopters but accept the higher cost to improve efficiency, reduce costs, and increase their market share.
  • Early Majority: The Early Majority are customers who purchase new technology after the innovators, and early adopters have proven the benefits.
  • Late Majority: Late majority is the second to last segment of customers to adopt innovative technology. The Late Majority is typically older, less affluent, and educated than the early segments in the technology adoption lifecycle.
  • Laggards: Laggards are consumers who avoid change and do not adopt new technologies until all traditional alternatives are no longer available. The group is mostly concerned with reliability, low cost, and easy to use

Marc Andreessen, of the famous VC firm Andreessen-Horowitz, famously commented “Any new technology tends to go through a 25-year adoption cycle”. Recent evidence has shown that the time scale of the TALC is being compressed. As pointed out in How Has Technology Adoption Life Cycle Been Shortened in 2021?:

The time to reach 50% saturation (Early Majority) is shrinking rapidly. As Forbes reported:

Time required to reach early majority

Forbes

Academic researchers Gil Appel and Eitan Muller published a paper in 2021 entitled Adoption Patterns over Time: A Replication, In the paper they compared the pace of technology adoption in 1999 versus 2021. They summarized their results in this graph:

Gil Appel and Eitan Mulle TALC in 2021

Adoption Patterns over Time: A Replication

The paper reinforces what people intrinsically know – the pace of technology adoption is increasing.  As CB Insights reported, the amount of time between when a tech company is declared a unicorn and its IPO is shrinking:

Time to reach unicorn in 2021

CB Insights

There is a Lot of Revenue and Profits in the Latter Stages of the TALC

While it is not as sexy and exciting as products in the Early Adopter or Early Majority stages of the TALC, there is a lot of money with the Late Majority and Laggards. As Ben Horowitz, the other half of the Andreessen-Horowitz duo pointed out, there is a lot of value created in the back half of the TALC:

History shows that major technology cycles tend to be around 25 years long with the bulk of the purchases occurring in the last five-to-ten years. This has to do with adoption rates; this period seems about right for the oldest cohorts (less likely to adopt new technologies) to die off and for younger cohorts (quickest to use new technologies) to enter the market.

Let us look at examples of the last two major computing cycles (prior to the Internet).

Ben Horowitz TALC Market Cap Dynamics
Ben Horowitz TALC Market Cap Dynamics
Ben Horowitz TALC Market Cap Dynamics

Debating the Tech Bubble with Steve Blank: Part I

BCG Growth Share matrix

BCG Classics Revisited: The Growth Share Matrix

Is Your Product a Cash Cow or a Dog?

Boston Consulting Group Growth-Share Matrix

In 1970 the Boston Consulting Group introduced the Growth-Share Matrix. The goal was:

“A company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows.… Margins and cash generated are a function of market share.”

—Bruce Henderson,

“The Product Portfolio,” 1970

The quadrants of the Growth-Share Matrix are described as:

Cash cows is where a company has a high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a “mature” market, yet corporations value owning them due to their cash-generating qualities. They are to be “milked” continuously with as little investment as possible since such investment would be wasted in an industry with low growth. Cash “milked” is used to fund stars and question marks, that are expected to become cash cows sometime in the future.

Dogs, more charitably called pets, are units with a low market share in a mature, slow-growing industry. These units typically “break-even”, generating barely enough cash to maintain the business’s market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company’s return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off once short-time harvesting has been maximized.

Question marks (also known as a problem child or Wild dogs) are businesses operating with a low market share in a high-growth market. They are a starting point for most businesses. Question marks have the potential to gain market share and become stars, and eventually cash cows when market growth slows. If question marks do not succeed in becoming a market leader, then after perhaps years of cash consumption, they will degenerate into dogs when market growth declines. When the shift from question mark to star is unlikely, the BCG matrix suggests divesting the question mark and repositioning its resources more effectively in the remainder of the corporate portfolio. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

Stars are units with a high market share in a fast-growing industry. They are graduated question marks with a market- or niche-leading trajectory, for example: amongst market share front-runners in a high-growth sector, and/or having a monopolistic or increasingly dominant unique selling proposition with burgeoning/fortuitous proposition drive(s) from novelty, fashion/promotion (e.g. newly prestigious celebrity-branded fragrances), customer loyalty (e.g. greenfield or military/gang enforcement backed, and/or innovative, grey-market/illicit retail of addictive drugs, for instance, the British East India Company’s, late-1700s opium-based Qianlong Emperor embargo-busting, Canton System), goodwill (e.g. monopsonies) and/or gearing (e.g. oligopolies, for instance, Portland cement producers near boomtowns),[citation needed], etc. The hope is that stars become the next cash cows.
Wikipedia

Most Late Majority/Laggard Products are Cash Cows or Dogs

Eventually, all software products move into the Late Majority and Laggard stages of the technology adoption life cycle. Most of them become cash cows – they still generate revenue and profits. They require minimal investment and support. Yet these products still require product management. Someone still needs to plan what improvements should be made to the product. Prioritization decisions have to be made. Releases have to be planned and executed. Customers need to be supported. Customer conferences and events have to be held. Sales need occasional support as well. Software products can have a surprisingly long life span.

Mark IV was one of the first fourth generation languages introduced in 1968 by Informatics General.  It ran on IBM 360/370 mainframes. Mark IV combined a simple programming language with extensive data access to help companies launch new applications quickly. Its main benefit was allowing faster application development on the order of 6 to 10 times faster than doing a system using a 3GL, such as COBOL. When IBM unbundled software from its hardware business in 1969, Mark IV took off. It became the first independent software package to produce over $10 million of revenue in a year. Informatics was acquired by Sterling Software in 1985 (the first hostile takeover in the software industry.) Sterling was subsequently acquired by CA in 2000. Broadcom acquired CA in 2018. Mark IV (subsequently rebranded as CA VISION:Builder) still lives on today – 53 years after it was launched. Version 15.0 introduced four new features and updates to four existing features. It also included updates for z/OS, IMS, VSAM, and DB/2. Mark IV still generates millions of dollars in revenue at 90%+ profit margins.

Fax is one of the oldest communication technologies. It still has legs today. The first fax was sent in 1860. The samurai in Japan were not abolished until 1868. That means there was a five-year period when a samurai could have sent Lincoln a fax warning him about his assassination in 18651865. The online fax market will be over $1 billion this year – 161 years after the first fax. Some technologies just won’t die.

Eventually, even Laggard products move from being cash cows to dogs. In those cases, many companies choose to divest or sell the product instead of just shutting it down. A sale generates some cash, ensures that long-time customers can continue to get support, and some employees can find job security with an acquirer. In my career, I have led five major acquisitions and eleven divestitures. The divestitures helped my employers refocus their energies on their core strategies while generating cash and security for impacted customers and employees.

The Challenges of Late Majority Product Management

Being a product manager for a Late Majority/Laggard product is challenging. Many of the product management practices used by product managers of early-stage products are simply not relevant for products in the Late Majority. By the time a product reaches the late majority, the market problems are well understood and product-market fit has been well established. Generally, the market has been formed and there are multiple competitive solutions available. Some of the unique challenges Late Majority product managers face include:

Shrinking Resources

Late Majority and Laggard products face an ever-increasing reduction in resources. When a product owner leaves or is reassigned, the position is often not replaced and the product manager has to assume the responsibilities the PO had. The same is true for development, QA, DevOps, UX, and TechPubs personnel. Many companies, especially those backed by private equity firms, seek to optimize profitability. One of the easiest ways to do that is by reducing labor costs.

Employee Satisfaction

Late Majority product managers often become the leaders for late-stage product organizations aka a mini-CEO. Employees associated with Late Majority products often become dissatisfied. They feel that they are missing out on the new and exciting technologies and industry developments. They do not like being ‘small fish in a big pond.’ Product managers have to work hard to instill a sense of success, accomplishment, and relevance across the team.

Product Management Blocking & Tackling

Product managers have to ten to the basic blocking and tackling associated with product management. They still need to define user stories and break them down into backlog items. Ceremonies like sprint planning, standups, and retrospectives have to be held. Tradeoffs between functional and non-functional requirements must be made.

The Late Majority Product Management Manifesto

Product management for ‘mature’ products is different. Once a market has been formed and competitors deliver multiple solutions, product managers face different challenges than a startup or rapidly growing companies do. The Late Majority Product Management Manifesto lays out the principles that should guide product managers in these enterprises

  1. Our approach to product management must be tailored to our market, our position in the market, and our enterprise’s ability to execute.
  2. We recognize that we are bound by the constraints our businesses impose – funding, resources, revenue/profit targets, etc. We seek to optimize based on these constraints.
  3. We value business outcomes over vanity metrics
  4. Our craft starts with understanding market problems and the problems our users face
  5. We excel at translating these problems into definitive statements of user needs and communicating them throughout the organization
  6. It is not our job to define how user needs should be technically implemented. We define what needs to be done and the priority it should be done in. Engineering and Operations determine how it should be done.
  7. Our success is defined by our ability to collaborate across the organization – engineering, operations, marketing, sales, support, services & finance
  8. Agile is an effective approach to building products. While we would like to be in a totally Agile enterprise, we recognize that only parts may truly be Agile.
  9. Product management certifications are helpful, but not mandatory. Experience is the best teacher
  10. Product Owners, Product Ops, Scrum Masters, and Release Train Engineers are welcome additions to the product team. For the organizations that can afford them
  11. Innovation can be found in all markets. It is a product manager’s job to foster, discover, and apply innovation wherever possible
  12. Using quantitative data to make decisions is effective, but qualitative data can be helpful as well.
  13. We have not been or will ever be the CEO of our product.

Summary

2022 is an exciting time to be a product manager. The maturation of cloud technology, the rise of artificial intelligence/machine learning, and the overflowing coffers of venture capitalists make it a great time to be at the center of new product development. Product managers at firms that IPO’d in 2021 like Snowflake, Doordash, Palantir, Gitlab, FreshWorks, and Coinbase are riding high. Unfortunately, products in the early adopter and early majority stage of the technology adoption life cycle only account for a portion of the product managers working today. An equal, if not greater, number of product managers work on products that are in the late majority and laggard stages of the TALC. These products account for more than half of all software product revenue in 2021. Late majority product management is tough, but some has to do it.


Also published on Medium.