new development Timing
By Steve Mowry
T
his article tackles the topic rates. Some economists believe that slowing, less money being spent, un-
of cyclic phenomena, the Eco- stock price trends precede business employment rising, and wages and sal-
nomic Business and the Product cycle stages. aries declining or remaining stable.
Technology Life cycles that vary with
time, and how they can impact the eXPAnsion sTAGnATion
effectiveness of new product develop- When the economy is growing and Stability in growth is a goal of the
ment projects. When to “pull the de- businesses in general are doing well, private-enterprise system. This means
velopment project trigger” is a ques- the period is known as expansion. that there aren’t any drastic changes
tion that implies that there is a target There are several ways in which eco- in prices and the economy is moving
at which to aim. Well, there is. The nomic growth is measured. One way is forward at an acceptable rate. How-
timing of product development can be gross domestic product (GDP), which ever, stability can lead to stagna-
rationally based on economic theory is the total value of all goods and ser- tion, a time when there is too much
by looking at the business cycle and vices that are produced in a country complacency, which in turn leads to a
the technology life cycle. Once you in a specific time period, such as a decline in new product development.
understand these cycles, the timing month, a quarter, or a year. If produc- If this occurs, consumers can become
that minimizes risk and maximizes tion is increasing, this is an indicator dissatisfied with what is available and
customer affordability—and thus that the economy is growing. spending slows down, followed by a
maximizes sales and profit margins— Another measure of economic ex- decline in the economy.
is almost obvious, although perhaps pansion is personal income. If workers For example, if consumers are spend-
counterintuitive at first glance. have increasing income, the indica- ing at a steady rate and they are will-
tions are that the economy is growing ing to pay reasonable prices for goods
The Business/economic cycle and workers can be paid more. Like- and services, manufacturers don’t feel
The Economic Business Cycle refers wise, if unemployment rates are de- the need for innovation and growth
to the fluctuations of economic activ- clining or remain low, this means that in new areas. This causes stagnation,
ity about its long-term growth trend. people who want to work are finding which leads to economic decline.
Notice continued long-term economic jobs and the economy is expanding.
growth is assumed. The cycle involves One fear is that the economy will ex- Recession
shifts over time between periods of pand too rapidly, leading to inflation. The National Bureau of Economic Re-
relatively rapid growth of output (re- search defines a recession as “a sig-
covery and prosperity) and periods of conTRAcTion nificant decline in economic activity
relative stagnation or decline (con- The economy will reach a point at spread across the economy, lasting
traction or recession). Although called which expansion first slows and then more than a few months.” However,
cycles, these fluctuations in economic stops. There might be a period of in macroeconomics, the definition of
growth and decline do not follow a stagnation during which there is no recession is a decline in any country’s
purely mechanical or predictable pe- growth or even a decline in economic GDP, or negative real economic growth,
riodic pattern. The fluctuations are activity. An economic decline, or con- for two or more successive quarters of
rather the results of changes in pro- traction, typically follows this period. a year.
ductivity, monetary supply, consum- This is the result of business activity
er confidence, government policies, The PRoducT/TechnoloGy
costs, product supply and demand, life cycle
sometimes referred to as economic Figure 2 shows the typical life-cycle
“shocks.” of a new product or a manufacturing
Another indication of the economic process or a production system from
business cycle is the predictable long- the stages of its initial conception to
term pattern changes in national its culmination as either a technique
income. Traditional business cycles or procedure of common practice. The
undergo four stages: expansion, pros- y-axis (vertical) of the diagram shows
perity, contraction, and recession (Fig. the business gain to the proprietor of
1). After a recessionary phase, the ex- the technology while the x-axis (hori-
pansionary phase can start again. The FIGURE 1: An abstract business cycle. zontal) traces its lifetime. The tech-
phases of the business cycle are char- (http://upload.wikimedia.org/ nology life cycle is concerned with
acterized by changing employment, wikipedia/en/b/bb/Business_cy- the time and cost of developing new
industrial productivity, and interest cle_01.png) technology, the timeline of recover-
20 Multi Media Manufacturer May/June 2008 www.multimediamanufacturer.com
ing cost and modes of making the mature product in order to drop com- cal maximum on the business cycle
technology yield a profit proportion- ponent part inventories prior to dis- curve. There is then a reasonable
ate to the costs and risks involved. continuing the manufacturing of the chance that the product technology’s
The technology life cycle may further product. vital life will coincide with economic
be protected during its cycle with contraction (trough) or even a reces-
patents and trademarks seeking to TiminG sion in worst case.
lengthen the cycle and to maximize From the perspective of the finance The economic downturns since
the profit from it. department, the tendency is to fund World War II have ranged between 6
Referring to Fig. 2, you can see the R&D when economic conditions have and 18 months, with an average of
Technology Life Cycle as composed of reached prosperity. However, this is 11. It is a reasonable task to estimate
four phases. the timing that indicates the most the length of time to complete the
1. The Research and Development risk of bringing a new product to mar- development stage of a project and
(R&D) phase (sometimes called the ket when the economic conditions are reach start of production—typically
“bleeding edge”) occurs when in- contracting. This will minimize sales it’s one-year and the “vital life” of a
comes from inputs are negative. and margins. Starting and funding product’s technology is typically no
2. The Ascent phase happens when new product development projects less than five and no more than 10
out-of-pocket costs have been re- based on company cash flow alone is years. It may take some time to ac-
covered and the technology begins just too simple and potentially costly tually realize that the economic con-
to gather strength by going beyond and ineffective. traction has begun and the planning
some point in the Technology Life Manufacturing may not have the of a new product development project
Cycle curve (sometimes called the capacity for prototype runs during will also take some time. Thus a bit
“leading edge”). periods of prosperity. New manu- of guesstimation and/or some Inter-
3. In the Maturity phase, gain is high facturing processes, which need to net searches on the topic of economic
and stable, and the region is going be developed concurrently with the downturn may be helpful in dialing
into market saturation (sometimes new product, are more conveniently in the best date to begin. However,
referred to as “state-of-the-art”). developed during economic contrac- the point here is that that date is se-
4. The Decline (decay) phase is the tion, assuming sales (demand) are in- lected to be during an economic con-
time of reducing fortunes and util- creased by prosperity and decreased traction or even a recession, but not
ity of the technology (sometimes by contraction. On the other hand, during economic expansion or pros-
called the “falling edge”). the marketing department will be perity phases.
most effective during economic ex- Then ideally and with respect to
The value of the technology depends pansion. Consumers have been delay- Figs. 1 and 2, the local minimum on
on the stage of its development—ear- ing purchases and confidence increase the business cycle curve (trough)
ly, mature, or declining phases. Some during expansion. should coincide with the local mini-
of the major factors that dramatically The human resource department mum on the technology life cycle
impact price of technology products will find it easier to locate those spe- curve (R&D phase). Thus the local
include competition, inventory levels, cial development human resources maximum on the business cycle curve
changes in technology, and manufac- during times of economic contraction, (prosperity) will coincide with the lo-
turing processes. A relationship may whether those resources are newly re- cal maximum (product maturity) on
also exist between where a product cruited, from within company staff, the technology life cycle curve. This
is on its technology life cycle curve or from independent consultants. assumes a business cycle with an eco-
and its price. It is not uncommon for Furthermore, the critical technical nomic downtime of approximately
a supplier to reduce the price of a and/or R&D resources that are re- one year followed by economic recov-
quired for new product development ery with a period of approximately
will be available at the lowest cost at five years; however, the business
the economic trough (local minimum cycle can now be considered a vari-
on the business cycle curve). able (driver) in the length of time and
Now having looked at the develop- for what price the product is sold in
ment timing from the standpoints of the marketplace. These quantities are
finance, manufacturing, marketing, reasonable assumptions. Is the most
human resources, and engineering/ effective timing for a new product de-
R&D, take a close look at Figs. 1 and velopment project obvious now?
2. Actually, the curves are similar in With regard to the present-day eco-
shape but they represent two very nomic conditions, by the time you
FIGURE 2: An abstract technology different quantities. It should be read this, it will most likely be a good
life cycle. (http://upload.wikimedia. clear now that a bad time to start a time to start that new product devel-
org/wikipedia/en/d/db/ new product development project is opment project. Why wait until the
Tecnology_Life_Cycle.png) at peak economic prosperity, a lo- economy begins to recover? Recovery
Multi Media Manufacturer May/June 2008 21
is the time to introduce the product
to the market and subsequently satu-
rate the market with respect to sales
during economic prosperity. With its
increased stimulus to demand, con-
sumers have money to spend. The
company that has invested in new
product development in a timely
manner will have little competition
regarding the new technology prod-
uct. With supply based on the de-
veloper’s production capacity of the
new technology product and demand
stimulated by economic prosperity,
sales and margins will be maximized
and business will be “good.”
On a supply-related topic, during
significant economic contraction or
recession, inefficient and ineffec-
tively managed and/or funded com-
panies may be forced out of business.
This purging of weak manufacturers
and suppliers during economic down-
turns is an inherent characteristic of
the free market (capitalist) economic
system. Well-managed and reasonably
funded companies are best equipped
to take advantage of this development
model. Develop low and sell high. M3
Steve Mowry, president of S. M. Audio
Engineering (www.s-m-audio.com),
has a BS, Business Administration,
from Bryant College, and a BS and MS,
Electrical Engineering, from URI with
highest distinction. Steve has worked
in R&D at BOSE, TC Sounds, EASTECH,
and P.Audio. Steve is currently an
independent consultant/lecturer in
project management/transducer and
system design.
22 Multi Media Manufacturer May/June 2008 www.multimediamanufacturer.com