Market Maturity

Users’ expectations of a product depend on the maturity of its market. Markets for software products go through some predictable stages, each with a different emphasis. By identifying what stage your product is in now, you can anticipate some of the pitfalls that lie ahead.

An “Unusable” Success

Many years ago, we worked with one of the most unusable products I’ve ever seen. Everybody knew it—the developers, the users, and the company management—but nobody cared.

I’m talking about the VCR. When the first VCRs came on the market, there were only a handful of human beings on the planet who could set the time, let alone program the unit. But user-friendliness wasn’t important back then. The VCR let people do something they’d never been able to do before: choose the movies they watched at home. Everything else was just gravy.

Of course, once the VCR gained acceptance in the mass market, people became more discerning about the units they were buying. Authorities like Consumer Reports rated VCRs on their features. Usability began to creep in, manifesting in features like on-screen programming and battery backup (so you don’t have to reset the time). Now VCRs are so common that the consumer market takes them for granted.

The Four Stages

The VCR is one product that has gone through what we call the four stages of market maturity, explained below. Every product belongs to a genre of similar products—think of a genre as the common noun you’d use to describe the product (spreadsheet, modem, database). Products in the same genre move through the four stages together.

Stage 1: Raw Iron

Say your company is the first one to introduce a product with a radically new concept, and people love it. In the Raw Iron stage, users are excited about the product’s most basic capabilities, and they’ll pay top dollar for them. For example, the first pocket calculator had only four functions and sold for over $100. Users are tolerant of (or even oblivious to) usability problems. They are willing to pay for training and sometimes even special technicians to operate the product. All this apparent unusability is fine because these are special products and whatever alternatives the users may have are even less attractive. “Usability” in this stage means simply that the product is in the field and working.

During the Raw Iron stage, the development team is focused primarily on solving technical and delivery issues so they can get the product out the door to its eager new market. For big-ticket items, the sales force may need to do a lot of “hand-holding” with new customers before and after the sale. Training may be a significant source of revenue. The company may also find itself funneling a good chunk of revenues from the new product into beefing up technical support.

This stage doesn’t last long. Competitors quickly see an opportunity to grab their share of the emerging market. The company who pioneered the genre isn’t the one who decides when the Raw Iron stage ends—the first competitor is.

Stage 2: Checklist Battles

In the Checklist Battles stage, one or more competitors have entered the arena, each adding their own bells and whistles to the basic product. In this stage, functionality becomes the key differentiator. Advertisements and marketing materials contain checklists of features. Most genres in the computer industry are currently in stage 2.

In this stage, users gravitate to the product with the feature set that best meets their needs (or if they’re not sure, they’ll pick the most “loaded” product). If choosing between an “easy-to-use” product and one that contains a feature they need, users will always pick the latter. In stage 2, usability means having the right functions.

During Checklist Battles, developers are under pressure to cram in more functionality and fix bugs. Everyone is worried about what the competition is doing and when their next release is coming out. The company may also start feeling some pain due to the costs of supporting the product. This stage ends when vendors run out of functions that make a difference to the market. The companies themselves don’t cause the transition—the customers do.

Stage 3: Productivity Wars

As a genre enters the Productivity Wars stage, all the vendors offer pretty much the same functionality. The market has become more sophisticated. Users become unwilling to accept a product that takes time to learn (they probably already have a “Dummies” book for it on their shelf). They consider their own productivity when deciding what to buy.

Office suites are an example of a genre in the Productivity Wars stage. The trade press reviews don’t focus on specific features. Instead, the emphasis is on areas such as on-line help, consistency among applications, and ease of migration from a previous version.

During Productivity Wars, the company pushes to lower the costs of supporting the product. At the same time, revenues from training decline because users are less willing to pay for it. Developers strive to improve the ease of learning and speed of use by adding wizards, macros, on-screen instructions, templates, and other performance support features—solutions which require up-front development costs but will hopefully be offset by lower support costs.

Stage 4: Transparency

In this final stage, the products in the genre have become a commodity. The various vendors provide nearly identical products, and price increasingly becomes the key differentiator. Usability in stage 4 means that the product has essentially become invisible to users (ask people who manufactured the CD-ROM drive in their PC—most of them won’t know).

Once a product has reached the Transparency stage, there’s no advantage in further modifying it for that market. Companies focus on lowering production costs as price wars chip away at their profit margins. Or, they seek new markets for the product. For example, CD-ROM manufacturers now

market to the OEM/integrator rather than directly to the consumer.

Marketers hate stage 4. When spreadsheets and word processors reached the end of stage 3, Microsoft quickly created a new genre—the office suite—to contain these now-transparent products. The office suite genre is in stage 3, but its spreadsheet and word processor components are simply part of the package. Most software products still have a way to go before reaching this stage.

Summary of Stages

The Perils of Transition

The transitions from one stage to the next are often watersheds—companies that don’t see them coming may find themselves scrambling to catch up when their market starts placing new demands on them.

The transition from Checklist Battles to Productivity Wars is especially crucial. An unprepared company is extremely vulnerable. Many market leaders have died here, such as WordPerfect, Harvard Business Graphics, dBASE, and the VAX. In many cases, the competitors didn’t even have all the functionality of the market leader. Instead, they offered something that was significantly easier to use, install, maintain, and learn—and they offered it at the right time, when the genre had reached stage 3.

The problem for most development teams is that entering the Productivity Wars stage often involves a major re-design of the architecture. During Checklist Battles, development is usually an incremental process of adding new features. Over time, the original architecture is demolished by thousands of changes. To support stage 3, the company must re-think, redesign, and often re-code much of the product, and this is very costly. WordPerfect didn’t ignore the fact that people wanted an easier to use word processor—they just couldn’t afford to build one out of the product they had. In many ways, a company starting from scratch has an advantage over the market leaders when a genre is moving to stage 3.

The Good News

There are companies who have survived this transition. Even though you can’t control the market maturity process, you can anticipate the next transition and plan the resources and organizational changes you will need to deal with it. By preparing now for the next stage, you can create an opportunity to leapfrog the competition.