LINTHICUM, Md., July 17 -- Although new personal computers appear to be reaching store shelves at a dizzying pace, computer manufacturers have not really shortened the life cycles of their individual high tech products, according to a study in the current edition of a journal published by the Institute for Operations Research and the Management Sciences (INFORMS). The conclusion means good news for business -- but implies confusion for consumers.
"Conventional wisdom holds that product life-cycles are getting shorter over time," says Dr. Barry Bayus, a marketing scientist at University of North Carolina, Chapel Hill. " However, I find that product technology and product model lifetimes of desktop PCs have not accelerated. And manufacturers have not systematically reduced the life-cycles of products within their lines." Part of the problem with conventional wisdom, says Dr. Bayus, is that a different definition of the 'product' life-cycle is used by each industry observer. His study carefully analyzes 'product' life-cycles using multiple but consistent definitions over time.
Dr. Bayus's findings may spell relief for hardware companies that often feel pressure that they must always beat competitors to the marketplace. "My research indicates that the real lesson is not to rush new products to market unless a careful analysis of the potential benefits and costs show that this is indeed the best strategy," says Dr. Bayus. Those shopping for a new PC, though, still face a multiplicity of choices because of the large number of companies and models that have flooded the market.
"For consumers, these conditions imply an increase in product options, configurations, and technologies," says Dr. Bayus. "Unfortunately, this expanded choice also comes with greater confusion over the alternatives that are available."
18 Years Of Data Studied
The study examines product lifetimes -- the time between product introduction and withdrawal -- of desktop personal computers over the period 1974-1992. Given that there seem to be no significant trends of shorter product life-cycles over the first 18 years of this industry, Dr. Bayus believes that these results can be extended to the present.
The author analyzed International Data Corporation's Processor Installation Census, a database composed of annual domestic and international unit sales. The census yielded information about 600 manufacturers and 2,800 brand models. The results of the analyses were consistent for various product-market definitions:
- Product technology and product model lifetimes: Product technology is not accelerating, as can be seen by a comparison of the time to peak sales for 8-bit personal computers, which was 11 years, and its successor, the 16-bit machine, which was longer, 14 years (peak sales for 32-bit personal computers had not been reached by 1992). Similarly, says the author, Intel has kept steady its introduction of new microprocessors, barely varying from its usual three-year increments.
- Brand model lifetimes within manufacturers: Manufacturers are not systematically shortening their own brand model lifetimes, as indicated by analysis of 20 top computer manufacturers.
- Brand model lifetimes across manufacturers: The more recent entrants into this industry have products with shorter lifetimes than firms that have been in this industry for some time. Products based on 'old' technology have shorter lifetimes than products with the newest technology.
Perceptions Correct -- Up To A Point
Although individual companies are not shortening product life cycles, statistics do, in fact, leave the impression that personal computer lifetimes have declined over time.
However, this observation is not due to an underlying acceleration in product technology or product model lifetimes, nor is it due to individual firms systematically reducing the life-cycles of products within their lines. Instead, the first products of firms that have entered this industry in the more recent years tend to be based on previously existing technology, and, not surprisingly, these products have life-cycles that are shorter than those of established firms.
Implications For Business
The study has several implications for corporations, says Dr. Bayus:
- The sales opportunity window in which to obtain a financial return on invested resources in this industry is not getting shorter over time. This again suggests that those looking over their shoulders at rivals can maintain a constant level of new product development rather than increase spending to speed up R&D.
- Firms in this industry are not systematically shrinking the lifetimes of products within their own lines. This finding suggests that firms are balancing the costs and returns associated with their own individual product strategies.
- The competitive environment is this industry is complex, with multiple generations of technology available at any time. This finding suggests that consumer purchasing behavior is complex, with some consumers, for example, selecting old technology (perhaps with lower prices) in spite of new advances.
The study, "An Analysis of Product Lifetimes in a Technologically Dynamic Industry" was written by Dr. Barry L. Bayus, Professor of Marketing, the Kenan-Flagler Business School, University of North Carolina, Chapel Hill. It appears in the current edition of Management Science, a publication of INFORMS.
The Institute for Operations Research and the Management Sciences (INFORMS) is an international scientific society with 12,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work primarily in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications.
Journal
Management Science