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27 november 2018

“It becomes obsolete before entering the market.” Problems of the hardware product lifecycle and how to solve them

Image: Unsplash

In many industries, the traditional pattern of the product life cycle ceases to exist. Some products bypass the stages of market growth and saturation, getting “mature” sales. How manufacturers of complex hardware can pick up that speed. Here are some insights from the General Manager of YUKON ADVANCED OPTICS WORLDWIDE, a company that has been on the market for night vision and thermal imagery devices for 25 years.

The peculiarity of the hardware products lifecycle

This is the memorable chart that displays the product lifecycle.

Image: Malakooti, B. (2013). Operations and Production Systems with Multiple Objectives

This held for our company five years ago. Today, this pattern does not hold at all.

When developing a new product, we keep the process in strictest confidence. Only when it’s ready, we share the information on the Internet and send prototypes for testing. After that, the product goes straight to the maturity stage and the company has to provide huge sales. There are no stages of introduction and growth.

We would like to have a smooth sales decline, but this also does not happen. We are forced to end production, not at the decline stage, and often not even at the maturity stage. Sometimes the product is still in demand, clients are eager to buy it, but we tell them that production is over. Instead of a smooth decline , there is often just a vertical line. It’s the phaseout.

We are now working with a lifecycle of one or two years. Why is this happening? There are two reasons — rapid product obsolescence and constant innovation within the company. The period of preparation, development and production of the product is one or two years. Imagine the following scenario: when a product is ready, we see that the market is already thriving with new ideas. Our suppliers also constantly offer new components.

That being said, we can predict that in 2020 consumers will apply new requirements to our products. We also understand that our forecasts of these requirements do not correspond to reality.

Management problems to solve

1. Shutting down production may leave illiquid components. The extra supply parts for the period of the cycle have simply no use.

2. Illiquid stock products. If stock products are not eliminated in time, the supplier will have a lot of problems with distributors.

3. Unpredictable competition. We do not use external intelligence, this is not safe. Nevertheless, we are always in the midst of tough competition and always wonder if a new product will emerge that will knock us out of the market.

4. Long order periods for electronic components. The delivery time of some orders amounts up to three years. How to develop a product, test and bring it to the market if you have one or two years?

5. Coordination of production assets with orders. A small number of orders leaves production assets underused, and a lot of orders also won't do any good.

The need for a change of all products in a very short time.

How do we solve these problems

1. Ceaseless design process. When releasing the product, we already know that it is outdated. Sadly, an engineer who has just finished working on a device, should start again. The situation stinks, but it corresponds to the market.

It should be noted that it is not enough just to improve the performance. You need to change the concept and design, key parameters of the components — that is, to take big steps. The one who runs faster wins in this competition. We achieved good results because our competitors were a little behind us.

Let's give an example. In 2015 we introduced Apex, a new thermal imaging device, the first in an acceptable price segment (€ 3000–3500) at that time, which was successful on the market. In 2017, we completely redesigned the model. The renewed device boasts high resolution, battery pack system, 8 hours of work with Wi-Fi on, full water protection, photo and video recording. But most importantly, it grants access to the Internet of things. We have created an application that performs a variety of functions. For example, a user can link this device to the cloud and receive updates.

2. Supporting products. At the end of  a basic model production, we begin to produce additional modifications for it, for example, a built-in range finder.

3. Utilizing of both software and electronic platforms. It’s impossible to design 50 products all the way through, it requires vast resources, even with the account of optimized concept. Therefore, they are all designed at once, in all modifications and types, with different sensors, displays, interfaces, which are embodied in the finished product. So we get fast scaling, and suppliers get favorable prices.

4. Components base choosing. Obviously, it is inappropriate to simply choose a components base from what is available on the market. It becomes outdated just like everything else. Therefore, we work together with our suppliers from the States and France. They develop the component and we adjust the technical specifications for the products together. We do not have the exclusive right to use the components, though. Then manufacturers sell new models to anyone, but we buy them first. So we always have the best components on the market.

At the development stage, we ensure that the life cycle of components is as long as possible, using integrated programming and testing boards.

5. Competitors and new products monitoring. Before starting production, you need to look at what is on the market. We attend exhibitions and buy samples with the annual budget for this around $100 thousand.

6. A user-initiated software update. We have StreamVision mobile app. When the update is released, a user receives a notification. Software versions are constantly updated, and if users lack some functions at the time, then later they will receive them for free.

7. Roadmap and life cycle planning. We are not a startup and we have to plan things. We must have a clear idea about each product — is it an additional segment or a directly competing product. In the latter case, the previous model is removed from production.

8. Continuous plans update. The first thing you need to pay attention to is production planning, — that is, a detailed production plan, for instance, for a year and a half. We describe in details what we will produce next year. Every month, taking into account the conditions and features in the market, the plan should be adjusted.

Alexander Olshevsky

The founder and general manager of YUKON, a leading developer and manufacturer of digital night vision devices and thermal imaging devices for the civilian market. YUKON's main market is Europe (60% of sales in 2017), USA (17% of sales), as well as countries of the CIS and Asia.

Featured image: Unsplash

This piece was published in cooperation with Alexander Olshevsky and YUKON.