Chapter 7

Retire

Retire

7.1 Welcome to Retire

Unfortunately, all good things must come to end. When a product comes to the end of its life, there is often an emotional sense of failure or loss, sometimes with and added fear of change. As such, there is often a reluctance to retire products unless problems are severe, obvious or inherited; a costly mistake for innovation. If you wait until you have to, retiring a product might be costly in terms of both finances and brand equity.

Actively looking for products that are on a downward trajectory, have limited potential or are no longer needed to deliver your current strategy, is a healthy endeavour for a company’s long-term growth. Growth and innovation requires continuous investment of resources and energy. Whatever size your organisation, you will have a finite capacity to manage products at every stage of the lifecycle. A mindset of minimising waste and maximising value through applied effort will undoubtedly improve your product portfolio.

The opportunity cost incurred by dragging out products that should be retired is wasteful, high risk and to some degree negligent. It’s incumbent upon decision makers to ensure their efforts are applied to the most rewarding endeavours to deliver on strategic goals. This is not just for the benefit of capital return for investors, but for the security of the company’s future and those that depend on it.

Recycling retirement capital to the top of the innovation funnel or doubling down on other promising endeavours should be strategically encouraged to improve the chances of long term corporate survival. Another benefit of actively considering retirement candidates is that the activity can reveal new ways to utilise and apply existing capabilities and technologies. There are ten key points to consider when retiring products. We outline these below.

7.2 Ten key points to consider when retiring products

As you make your decisions to retire, you will be considering financial performance, customer feedback and other trend data. However, these data alone are not enough to make a conclusive decision to retire a product. Beyond finances and customer feedback, we need to make other considerations in order to make informed decisions, manage customer expectation and support employees that are affected by decisions to retire. We also have to consider the risk and impact of our decision. We have identified ten key points that can help you make your decision and manage the process of retiring a product.

1.  Have you identified any dependent service level agreements and contractual obligations?
  The you have decided to retire is likely to be part of an ecosystem with contractual service level agreements (SLAs) in place. Failing to consider these SLAs could result in legal repercussions or brand damage which could far exceed the cost of keeping the product alive. Look to identify these SLAs first before making any decisions and consider the cost of breaking the contracts, the impact on your brand and other strategic opportunities. This is particularly important if there is a chance of negatively impacting your customer or partners.
  Consider pharmaceutical companies which may be contractually obliged to maintain reserve stocks for a period of time. Customers who utilise a product as a critical service may have contracts with the company to protect this service. In some companies, minimum notice periods may be specified and in service companies there may be obligations to support customers for a specified period of time. You may also have contractual obligations to hand over the intellectual property or source code if you are a software company. All these things have to be considered when making the decision to retire a product.
2. Do you have sufficient customer service and marketing resources in place to manage the additional support required to support product retirement?
  Following an announcement to retire a product, you will likely see an additional spike in customer support activity. A lot of customers will have concerns about the impact of your decision to retire a product. As soon as there is an announcement, customers will seek more information and reassurance. Larger companies will also need to consider market opinion which creates a media interest that needs to be managed.
  You may need to consider training and investing in more customer services for the period of the retirement, even though you might be reducing other operational activities. Other costs and impacts should be considered in marketing to handle PR issues, announcements and communication campaigns, direct contact with customers and other such activities. Retire is a phase and not a transactional decision. As such, this will often require project-related activities, diligence and managed oversight.
  Consider the impact of the retirement decision on your internal teams as well. Announcing products for retirement can have an adverse effect on your staff across the company, beyond the directly affected product team. Internal messaging and support should be managed internally to assure those who may feel insecure as a result of the decision. Not handling the internal impact could result in talent loss and may damage the company’s reputation as a desirable place to work.
3. Do you have sufficient technical capabilities in place to manage the retirement phase?
  Just as you need to invest in customer services and marketing, due diligence should be undertaken to ensure that we have the technical and specialist skills needed to manage the retirement phase. When retiring a product, you may need to assign and make available dedicated teams, persons or need to recruit new skills in order to handle the activities of the phase.
  Consider for instance data management as a retirement activity. You will likely need to manage the destruction and/or the migration of data securely; and provide evidence of standards being met. This might be part of your process for reducing the impact on customers, allowing them to migrate data or assure them with evidence of destruction of their data. If you are ISO 27001 compliant you will already be aware of the standards expected, but you might need to increase activity to manage these processes. As such, it is critical to ensure that we have these capabilities in place before we retire a product.
4. Have you identified dependencies and communicated the retirement intention and plans to all stakeholders and business areas?
  Investigating the impact on dependent systems is an exercise well worth undertaking. Many dependent systems can be easily overlooked where features sitting in the corner somewhere could be unknowingly providing valuable contributions to other products and services within your company’s portfolio. An exercise analysing the dependencies on a product can reveal unknown risks from dependencies that may be in place. This exercise allows us to understand the ecosystem impacted by the product that is marked for retirement. The exercise can also reveal components of intellectual property that can be extracted and further utilised. If there are dependent systems which utilise the value of the service, ensure that the cost and revenue is proportionately attributed to better inform your retirement decision.
  It is also important to engage with key functions and stakeholders before making decisions. This may reveal insights which would otherwise be missed by the using data alone to make decisions. For instance, sales teams who might be in front of the customers everyday may have empirical knowledge as to what the customers may migrate to as an alternative or how they may react. This could affect your tactical decisions and should be considered for improving outcomes.
5. Have you identified how assets, knowledge and resources can be utilised by other areas of your business or partnership network?
  Consider the retirement of products as a learning opportunity. Before closing the doors on a product or service, consider what could be learned and utilised. You are likely to have very experienced staff, which could add considerable value elsewhere in the business. A declining product should not be presumed to be associated with a bad team. Products failed for many reasons and the team could be very valuable when applied in other areas.
  A lot of company cultural knowledge resides in your employees which would take considerable time and effort to retrain if you were to lose the team. The people associated with a retiring product should not be associated to any notion of failure. Making such associations could be an expensive mistake. For example, in operations you may have in-depth knowledge of customer usage data, which other products could use and benefit from when innovating.
  The product being retired may also have key assets that could be of ongoing value to the company. These assets should not be discarded as part of the retirement process. They can be added to current products, used as a basis for creating new products, preserved as intellectual property for future use, sold to other companies or licenced for revenues.

Tip  Tip

Consider positioning the employees of the retired product into an internal marketplace for talent acquisition. You can help employees utilise their existing networks, update their recognised, CVs and even hold job fairs. If you’re an enterprise with many products, you may have products moving into different lifecycle stages who are recruiting. This can help employees move to new and interesting opportunities.

6.  Have you provided options for customers to export and manage their data and other invested assets?
  The customers of the product you are retiring, maybe your customers of tomorrow. Treating them well and considering their needs when retiring products is in your interests. There are many things to consider around how the retirement process will impact your customers and this should be at the forefront of your decision making.
  One of those concerns is customer data. Customers will have concerns about how you will manage their data as part of the retirement process. Being transparent about this could potentially settle their minds and reassure them. This can be done by explaining how their data will be destroyed and managed as mentioned above, but you could also provide customer with an opportunity to extract their data and for potential use elsewhere.
  Consider for instance if your product is a wearable technology that tracks customer health data. If you were closing down this product, customers may want to download their data in a universal format to utilise on an alternative product. If you are looking to cross-sell an alternative product, you may want to migrate the data to this other product as part of the process. Alternatively, if you are leaving this product space, you could explore ways to format or export the data for the customers to migrate to other platforms.
  Supporting the customers and/or partners to self-manage any invested resources they have in your product will require analysis, consultation and effort. Some of the skills you may have for innovating and exploring customer needs to create a product, could be directly applied in understanding their needs for retirement. Getting this right will help protect your brand and reputation, as well as reduce any negative impact that may otherwise be felt if not managed well.
7. How will you manage the customer acquisition pipeline?
  When a product is selected for retirement, it’s important to close the pipeline of new customer acquisitions. This may include the capability of signing up for the product or creating an account on a digital platform. You should extend this to discovering the product through various channels and informing sales and marketing so that no future sales will be negotiated.
  You may wish to stagger the execution of the retirement phase with different functions, events and departments. For instance, your sales force might need to be updated, trained and encouraged not to sell the product before an official public announcement and be in position to answer customer questions. If you have consulted such functions as part of your due-diligence process, this should not come as a surprise to them.
8. Have all finance issues been identified and resolved?
  Retiring a product is not free. You may be stopping other key functions, but there may still be costs to retiring the product. All these retirement costs should be identified and presented as part of the cost of retirement. It is expected when executing the retirement process of a product that additional finances will be required to manage the points identified in the process. In addition to this, any products costs and loss of revenue should be identified and resolved using financial forecasts and budgeting so that capital can be managed for future investment.
9. Have alternative products been identified to help manage and transition customers?
  Just because we are retiring a product does not mean that we should lose all the customers connected to that product. Instead would should offer customers the
    opportunity to move to an alternative product where possible. Transition opportunities should be identified and migration expectations should inform our retirement strategy. We should work to identify customer migration paths and create processes to help make this transition as painless as possible for our customers.
10. Have you explored the option of renewing and refreshing the declining product?
  A final question to consider before we pull the trigger is whether the product can be renewed and refreshed with a different business model. It is very easy for products with repetitive operational cycles to decline, and this can result in opportunities being missed. Market conditions can change, new channels can open or technology can advance. As such, it is key to explore whether these changing circumstances provide an opportunity to have a second growth curve on our product’s lifecycle.
  In this regard, we can go back to ideation and run brainstorming workshops. We can redesign our business model by considering how to make it more adaptive to the new business environment. This work would take the product back to the earlier stages of Idea, Explore and Validate; as we test our newly designed business model before we scale. The potential outcome could be new innovations which have been trapped inside the business unit or product team.

7.3 Refreshing your product with adjacent innovation

As already noted, retiring a product is not just about releasing capital or reducing waste, but can be a proactive process to discover more valuable applications for the declining products or their components. By seeking more value, you may uncover new and innovative business models which would not otherwise be discovered. Remember that it is highly likely that the business environment has considerably changed since the product’s inception and the business model could be revisited.

A powerful example of the reapplication of a technology is well described by Naji Radjou and Jaideep Prabhu in Frugal Innovation – How to do better with less.64

The Retire stage in the Lean PLC can encourage a team to revisit the breadth of new opportunities that might now be attractive to them but were priced out at the time of original product conception. Technologies which have aged in wealthier western societies, could have a second life in less affluent countries where cost was originally a significant barrier. New technologies when first conceived and supported by early adopters are usually expensive to scale and thus constrained for wider market application. With a reduction in cost, the potential adjacent markets could be significantly broader. In some cases, these technologies can end up creating new categories in new markets.

To put this in context consider 3D printing. The entry level for 3D printing is still a barrier for market adoption for most. Over time as the price drops, new markets and dependent economies may emerge. The intellectual property (IP) within the older devices is in some cases recycled into newer products with cheaper and more reliable materials, making products more accessible to a broader audience. As this happens, the technology can become transformational through adjacent innovation opportunities and broader market adoption.

A case in point is the work of OpenBionics.com who use 3D printing to support amputees. Traditional prosthetics hands can cost up to £90k and take months to fit, making them too expensive for most. Using the latest 3D printing and body scanning technologies, Open Bionics can create bionic hands for just £2k and can take just five days to fit. As such, if you were in the production of original prosthetic limbs, could you revisit your business model to utilise 3D printing as above? By doing so you could lower price and increase your total addressable market.

This approach may seem like cannibalisation of your business model. However, if the product is already in decline, this may be a great option for your company. It’s important to actively measure how each product is performing against your strategic goals. Whatever size company you belong to, you will have a finite capacity of idea generation and execution. Releasing the untapped potential from existing products or teams by actively seeking to retire products, can help propel you forward and innovate.

SUBMISSION TEMPLATE
Retire review SUBMISSION

Product ownership
Investment board                              
Business sponsor  
Product owner  
Product overview
Product name                              
Idea description  
Strategic fit  
Why Retire?

What is your rationale for retiring the product?.

 
What impact is this having on our customers and key stakeholders?
 
What are your plans to mitigate impact?

What are key tasks and milestones involved in retiring the product?

 
Planned activity

What are key tasks and milestones involved in retiring the product?

 
Financial impact

What will be the financial impact of Retiring the product on our company?

Expected revenue over 3 years Expected costs over 3 years Profit margins over 3 years (%)
     
     
Resources and funding requested

To complete the Validate stage, we are asking for (e.g. dollars, time, people):

 

A case study – Nintendo

Following a series of successes in the early 1980s with arcade games, Nintendo made plans to create a cartridge-based console. Nintendo president Hiroshi Yamauchi firmly stood behind his vision of providing a family computer (famicom). His vision focused on the simplicity of the cartridge and controller, allowing the product to be more accessible to a wider range of family members. This was a key factor and resulted in having no needed for a keyboard, which at that time many found intimidating.

This idea eventually led to the creation and release of the NES, which was launched on 15 July 1983. Despite there being many games consoles prior to this idea, including the Binatone TV Master, the Atari 2600 and Nintendo’s own Colour TV-Game series, the NES leapt forward with games which engaged families across the globe.

The console offered many innovative features at the time, especially the subtle introduction of the D-Pad (Direction Pad), giving gamers more control and user engagement. In addition to this, Nintendo created some of the most iconic games of its time ranging from Super Mario, The Legend of Zelda, Donkey Kong to name a few. This grew Nintendo’s foothold as a category leader. The games have long outlived and evolved beyond the original NES capabilities and today sit across many platforms including our smartphones. However, without any doubt the NES was a huge defining moment for Nintendo.

Now younger readers or those less familiar with gaming history might see the NES today as an antique of sorts. This is especially true in the advent of Augmented and Virtual Reality with incredibly rich and powerful consoles and smartphones. However, that doesn’t mean there is no value left within the NES ecosystem.

Thirty-three years on in 2016 Nintendo decided to resurrect the old NES and package it into a smaller modified version, preloaded with 30 games called the Classic NES. Despite the obvious advancement in technology in the last 33 years, there was significant demand for the Classic NES, way greater than Nintendo even expected. Nintendo anticipated this would just be an additive product for a seasonal offering, but demand was much higher.

In comparison the original NES sold approximately 2.3 million units and the Classic NES sold 1.5 million units following increased production in just a matter of months.65 Despite the demand, Nintendo did eventually stop production to most people’s surprise. Their reasoning was that the NES was not aligned with their strategic interests. However, the demand for the Classic NES has since given rise to the resurrection of other older games consoles including the Commodore 64 Mini,66 Nintendo SNES Classic, Ataribox and more.

This example with Nintendo demonstrates two main things. First, it is possible to successfully retire your own products, before the market kicks you out. Second, there may be trapped value in older products and platforms you offer. Just because something has been around for a long time, it doesn’t mean there is no market for it. Clearly Nintendo revisited a core product decades later, applied some innovative thought into how it applies to the modern context and re-invented the technology which could have otherwise been easily overlooked.

____________________

64 Radjou, N. and Prabhu, J. (2015). Frugal Innovation: How to do more with less. London: The Economist.

65 Time (2017). Nintendo says it sold over 2 million NES classics. Available at http://time.com/4759594/nes-classic-millions-sales/.

66 Swapna Krishna, E.S. (2017). A mini version of the Commodore 64 is coming in 2018. Available at https://www.engadget.com/2017/09/29/commodore-64-mini-releases-in-2018/

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