Know-How Exchange : Book Club

Sure there's a place for "interim" products...think fads (vs. trends and permanent shifts). If a company can get into the market hard and fast with a novelty product (like pokemon cards, hula hoops, leg warmers) they can stand to make a lot of money--but they have to be a good judge of how much to produce and which segments to hit.

Insofar as the interim technology products, like the fax (which e-mail has in large part replaced), I would think that several companies (and toner cartridge co's) made money...it's just what they've done to replace those revenues since that time.

On the other hand, since technologies are always evolving, one could make the argument that most all tech companies are 'interim' co's. They're just constantly moving and capitalizing on new technologies and products. Take Sony and how it started with the Boombox (portable music) then the Walkman (lightweight portable music)...too bad Apple beat 'em to the iPod (DIGITAL portable music).

I like the idea of 'beta' as an iteration of something that will allow for a future better product. In that sense, this is a temporary missing link between a product or service and what the collective will add over time.

We forget where the initial prototype came from and go with the iterative evolution that serves the needs of the marketplace better. As for making money, the magic is in finding that sweet spot on price.

It is impossible to build a strategy around "missing link" products unless one has a very clear crystal ball. That kind of predictive foresight is simply impossible. You don't know a product is a missing link until something comes along to make it obsolete.

That said, when missing link products are examined in retrospect, I think they could easily prove to be as profitable as any other product -- which is to say that some will be profitable, and others won't. The profit element has nothing to do with the fact that a product may, in the fullness of time, prove to be a missing link, UNTIL the product that forces it's obsolescence is introduced.

The strategy and culture part of the equation has to do with how likely it is that the company that owns the missing link product is to be be the one that introduces it's replacement.

This is why it's hard to stay on top. The market leader has a deeply vested interest in maintaining the status quo. With this bias, most companies don't aggressively work to obsolete their own products, so they are unlikely to be the ones to displace it.

It is a rare company that can maintains a culture that encourages displacement of it's star products. One example: the internal combustion engine. Who among us believes that people will be conveyed to their desired location in the future by burning fossil fuels?

The internal combustion engine is destined to be a missing link product between the steam engine and whatever replaces it. The major automotive companies are the ones in the best position to replace it, but will they?

Missing link products can be very profitable . . . for a short period of time. Netflex is a good example. But companies should be quick to shut down these products when their life cycle fades. Polaroid is struggling with this issue today.

Actually all products will someday become obsolete. Look at the light bulb which looks like it will be replaced by the fluorescent bulb or LEDs in the years ahead. The light bulb market leader, General Electric, is naturally fighting this issue.