The Life Cycle Of Software
Each software product goes through a very similar life cycle. It is not only important to know where your product is on this timeline but also where is your competition and the positional competition of any market that you are considering entering.
1 – Idea
An entrepreneur or small team identifies a need in the market. They believe it is underserved and that creates an interesting opportunity.
It all starts with the idea but where it begins has very little to do with where things will end.
2 – Looking For The Fit
When looking for the fit, the company is attempting to match this product with the potential user/client. Identifying this is critical to success and this is the stage that is the most difficult for most software products to get past.
3 – Achieved Product Market Fit
You know the product is here when you read “The top 3 products are A, B and C” in an article, and it’s named as one of those three.
When the market is at this point it is a very bad time to go head to head and launch a new product. These products are about to start the uphill climb and if your not on that top 3 list you are probably too late to the game.
Adding Fuel To The Fire
4 – Growth
Now it’s time for a land grab. Usually there will be one leader that takes the lion share of the market. The second and third places are allocated small shares and not much left past that.
The Growth Slows
5 – Consolidation
At some point the land grab will be over and the only way for growth is through acquisition. A few smaller players will be bought up and the landscape is left with a small number of large products.
At this point the products are larger, complex and there are well known industry leaders. The chances to catchup here are about 0%.
6 - Hitting the Plateau
Now that the products are large and are a fit for the target market there is not much room left for growth. The original “build” engineers have either all left or will soon be leaving. The product is now in maintenance mode and at this point the business plan is to maintain the customer base and keep costs down.
In many cases this phase of the product lifecycle can go on for years.
The Time To Strike
7 – Too Large To Change Direction
The benefit to having a large customer base is large profits but the issue is that all the customers require support. Also by this point the product has usually grown to a large code base. Now making a small enhancement there is a huge cost.
Product enhancements come slow and most of the time is spent maintaining the current customers.
8 – Can’t Be Everything to Everyone
The product is now the Swiss Army Knife of software in the industry. The codebase and feature set are huge and many features do not receive the focus they once did.
Also, now the costs of supporting this large foundation has required the price of the product to also rise.
9 – The Entrepreneurs Time To Strike
Now it’s time for the entrepreneurs to strike. Either technology has significantly changed the landscape or the incumbents have ignored the needs of a subset of their users. Either way, there is now a market opportunity.
Many times the incumbents have even known of this opportunity but can not move on it. This may be because it could jeopardize revenue from the current client base or may just not have been a large enough to get priority.
10 – Little Guys Move In
We have come full circle, an idea is formed and the search for market fit is started. The market is small and unimportant to the larger players. Since the new team is focusing on a smaller market, they are usually able to very specifically target them. Also, since the team is much smaller they are able to come in at a lower price.
Between highly targeted features and a much lower price, this new team is able to gain traction and hopefully the life cycle starts over again.