Friday, September 28, 2007

Product Lifecycle

The difficulty of adopting new technologies is a consequence of the typical product lifecycle.

The life of a product begins with a single unit of production and a single unit of demand, the producer. The producer creates demand by demonstrating its value to others. Price of the product increases as demand grows, pressuring the creator to increase supply, converting some of the demand into capital to provide the resources for doing so. As price drops in response, the producer (motivated by the potential for profit, getting paid more than it cost to produce the product) increases demand to bring the price back up; this involves exposing the product to more people and potentially adding value to the product (using capital paid for by either of the profit, or barring that, loans by investors).

If demand decreases, the producer loses incentive to increase supply; and if it drops irretrievably below the amount necessary to maintain any supply, the producer stops producing the product. Likewise, if the cost of maintaining the supply increases, the supplier must increase demand to compensate or reduce production.

“Technology” is what producers use to convert resources into products, and if there is no demand for its related products, a technology is literally worthless. A technology is truly successful if it is used in the creation of multiple products.

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