The Surprising Cost of Delayed Product Launches

The Surprising Cost of Delayed Product Launches

It’s evening and you’re getting ready to attend an exclusive party that starts at 9 p.m. Between the excitement of the people you’re expecting to meet and the night’s planned entertainment, you’ve been looking forward to the party all month.

A few minutes before you head out to catch the train, you answer a phone call and get so caught up in the conversation that you miss your train. You catch the next one, but you don’t arrive at the party until a little past 11 p.m. Instead of walking into a high-energy room full of people, you see

The staff clearing empty glasses from mostly deserted tables…

A crowd of people gathering at the valet waiting for their cars…

And the band is announcing their last set.

You missed the party’s peak moments—the ones, if you had been there, you’d never forget. Sure, the wine is still flowing and a few people are still socializing, but try as you might, you can't restart the party.

You stick around for the "after scraps," but you lost out on participating in the vibrant conversations and good times that happened when the party was at full tilt.

That’s how it is when your product launch or software upgrade is pushed out. For these projects, the peak selling period is where most of the profits and competitive benefits are generated.

Just as you can’t restart a party, you can’t recover anticipated profits that are lost when product launches and major programs run late. But there is a way you can ensure they land on time and capture their peak revenue window. First, it’s important to understand how…

Delays curb peak revenue

Most people think if they push a launch out six months, they’re just delaying anticipated revenue or benefits by six months. From that perspective, showing up late to the party means they’re “kicking the cash can down the road.” There’s little net loss, just a deferment of benefits.

This may be true if a product has a long life cycle, such as food products like breakfast cereal. A prime example is Rice Krispies, which was released in 1932 and sells briskly to this day. This is also the case for incremental system upgrades, such as improving a process where the benefits are improved efficiency and reduced costs.

For these kinds of launches, there is no peak period per se. Instead, there’s a plateau that sustains for an extended period of time, if not indefinitely.

But what if the benefits have a short- to medium-life cycle where what’s novel today becomes old news within a few months or years? This is common, for example, in technology products ranging from software services to electronics.

When you launch these types of products late, you give the competition time to get established at the market’s peak demand period—or worse, move the market to something different altogether.

When it comes to launching a game-changing upgrade to your service, such as a digital feature, there is also an end to its relevance. That’s the moment when the next new thing wins the war for market share.

Every product has a run-up period where it reaches its plateau period of benefits—the point where most of the profits are finally realized. Products and features with a short- to medium- shelf life have a fixed end date—when companies begin the “end of life” period of winding down support and investment in them as customers move on.

Your product is either there for the peak sales period or it is not.

Try as you might, you can’t extend a market’s appetite for your offering past that point. When Apple introduced the iPhone with its touch screen technology, there was nothing RIM’s Blackberry team could do to extend the market for a mobile mechanical keyboard.

Executive consultant and author Henrico Dolfing powerfully illustrates the true financial impact of entering the market on time and late in this chart:

Dolfing Cod

When you allow your team to launch late, you sacrifice participation at the top of the market. Then you end up settling for the scraps left as demand for the solution dies down.

This is where the fallacy of deferment gets real—the deception that you’re just kicking the cash can down the road. When your launch runs six months late, you don’t miss out on the first six months of ramp-up revenue. You miss out on the BEST six months of peak revenue.

A McKinsey study of technology-related products and limited shelf life pharmaceuticals from the early 1990s shows how significant the amount of lost revenue can be. The paper is unpublished, but a Harvard Business Review article shares one of the study’s most quoted findings, which is considered  a strategic rule of thumb for most product launches at this point:

“On average, companies lose 33% of after-tax profit when they ship products six months late, as compared with losses of 3.5% when they overspend 50% on product development.”

Sit with that for just a moment.

You can overspend by 50% on a product launch and still capture over 95% of its potential profits. Delaying launches to preserve cash in the short term is a case of being “penny wise and pound foolish.”

More recently, Professors Vinod Singhal and Kevin Hendricks conducted a broader analysis of more than 450 publicly traded companies that experienced product launch delays over a 16-year period. Their analysis confirmed what McKinsey originally postulated.

Their findings show that the more competitive and dynamic the industry, the deeper that delays slash anticipated revenue. Revenue decreases because competition drives products into obsolescence faster. For instance, if an electronics product is pushed out 9-12 months, it can lose 50% of its anticipated revenues.

Delays cut revenues

Their analysis also suggests shareholders understand the negative business impact of running behind schedule. When companies announce product delays, shareholder value drops by about 12% on average. And for good reason.

Layoffs and cutbacks are complicating schedules

If you are reading this and thinking, Many of our launches haven’t gone off on time, you are not alone. Nearly half (45%) of all product launches occur behind schedule, according to a Gartner survey. Even more alarming, that high rate was in 2019 (pre-COVID) when the economy was more stable and money was flowing.

It’s predicted that more projects will fall behind schedule this year as companies pull back to survive uncertain economic times. They’re defunding projects in flight, pushing out product launches, and pausing programs and digital upgrades until the economy improves.

More launches are running late as companies also cut capacity in their desire to cut costs. Over the last few months, more companies are laying people off, implementing hiring freezes, and leaving roles unfilled. But many already wish they hadn’t done so.

A Vanson Bourne survey shows nearly 4 in 10 leaders (38%) regret laying people off to manage expenses earlier this year. Among the top reasons for their remorse is later realizing that to get promised deliverables out the door, they actually needed the people they let go. And with fewer hands on deck, productivity and operational efficiency dropped.

Managers regret layoffs

It’s wise to conserve cash during an economic downturn, but as I discussed earlier, pushing out launch schedules suppresses peak revenue—and ultimately, return on investment. No company can afford that.

However, there is a solution. It starts with learning how to…

Prioritize launches by CoD

Deciding how to prioritize launches and programs can get complicated. Should you go 30% over budget to get new features on a popular product out on time? Or scrap the upgrade and invest the funds into a new product, which costs twice as much and will take another year to complete? Maybe you should run both launches simultaneously? Or fast-track one over the other?

Consultant Henrico Dolfing suggests the best way to answer such questions is by prioritizing launches and programs according to how their cost of delay (CoD) will impact the business. “CoD combines urgency and value,” said Dolfing. His article provides details on how to calculate CoD.

A launch’s value is its anticipated benefits, which usually fall under these categories:

  • Increased revenue (e.g., Launching on time will give you first-mover advantage)
  • Protected revenue (e.g., A new product feature will help you retain a large client)
  • Avoided costs (e.g., The fines you’ll pay if systems don’t comply with new regulations)
  • Positive impacts (e.g., Increased worker safety or engagement, or reduced theft)

A launch’s urgency is determined by the life cycle of a launch’s benefits and the effect of being late. For example:

  • How long will it take for competitors to launch something similar or better?
  • Will arriving first to market make it difficult for latecomers to enter the market?
  • Will being the first to scale inhibit competitors from catching up? (This is especially the case for AI-powered services that gain power from user feedback, also known as Learning Effects.)

Delays not only suppress profits, but also, in many cases, lead to quality issues and reduced features in the rush to catch back up. This can lead to products having a weaker competitive position in the market. So, after you prioritize launches by CoD, you must keep them moving on schedule to capture full value.

Ways to ensure on-time launches

Here are a few ways to keep launch schedules on track—even when you have less money and fewer employees to get the work done.

Taskify and then skill source

CEOs responding to a recent Deloitte survey say talent shortages are the second leading disruptor of business strategy, behind only inflation.

In the planning stage, don’t assume that you’ll solve these talent dependencies through additional headcount or the “favor economy,” where team members pitch in along “the matrix.” It’s hard to get headcount approved these days, and most of your team members are already stretched thin as they’ve absorbed heavier requirements.

Instead, break down the launch program into discrete components, such as product build, marketing plan, and customer support. Then, break each component down further into specific tasks that need to be completed. Determine which tasks are best done by someone in-house who has the bandwidth to deliver on time.

Now skill source the rest. You'll be surprised at how many specialized tasks can be completed faster and more cost-efficiently with external talent than by begging team members for help or hiring an incremental employee.

Skill sourcing is a workforce model that enables you to maintain a small, core team of employees and then empower them to tap work marketplaces like Upwork to achieve deliverables. This model works by having employees concentrate on work that only they can do or that leverages their strengths. Then they contract on-demand talent, such as freelancers, to handle the other tasks.

Unlike outsourcing, this solution allows your team to maintain control, “shop for their own groceries,” and maintain agency over meeting their deadlines. It also avoids the high markups these non-digital services charge because of their overhead.

This approach enables the engineering team at PGA of America to complete projects three times faster and innovate for nearly half the cost. Consistently, we hear the same feedback from our enterprise clients who have embraced taskification and then “put Upwork in the water supply” for planning and resourcing launches.

Freeze products midstream

Scope creep is the function of additional requests and changes to a launch after it starts. It’s a natural part of the innovation mindset: Add more to the soup as you go along.  But as Elizabeth Larsen, an advisor for the Watermark Project Management Academy, warns, “Unmanaged scope creep can have very bad consequences, including missed deadlines, cost overruns, reduced quality of work and even projects imploding under their unfairly bloated weight.”

A survey of 60 project managers hints at how widespread the problem may be. The managers said 92% of their engineering and software projects failed due to scope creep.

Scope creep

The best way I’ve found to avoid insidious creeping is by freezing a product midstream. This is where, at a predetermined point, no new features can be added.

The same mentality applies to the accompanying marketing programs and customer support efforts that go along with it. If you lock in the plan, follow the plan, and stick to the plan, you’ll avoid an ever-expanding plan.

Once launched, you can quickly test and then add additional components. This is the hallmark of software as a service (SaaS), which is in continuous upgrade motion. By managing scope creep this way, your internal innovations aren't wasted. And at the same time, you don't weigh down the launch schedule with opportunity debt.

Monitor delivery debt

Speaking of debt, no matter how proactive your efforts are, a launch’s delivery debt can still grow. You could be diligent at taskifying and skill sourcing from the beginning. You could be disciplined about freezing a product midstream. But as you approach the last mile of construction, so many overlooked deliverables can pop up that make you feel as if you’re playing a game of Whack-A-Mole.

You can still make deadlines and manage delivery debt by contracting talent on demand. This is a downstream strategy versus skill sourcing during the planning stage, which happens upstream—early on in the launch.

Skill sourcing as you reach the finish line applies near-immediate relief to schedule pressures. For instance, Upwork clients can find the right independent talent in a few  days and have them on-task within a week or less. Having quick access to talent enables you to mow through a punch list at breathtaking speed, allowing  you to convert operating expense budgets into near-instant results.

Contracting talent is much faster than trying to hire someone, begging internal partners for help, or worse—starting an RFP process to outsource the final sprint.

You can show up to the party on time

Similar to a host setting the time of an event, every product has an end-of-life date that’s set by the market and crowded by the competition. You can’t control the market for a solution or when competitors enter, but you can control when you show up. And if you get there on time, you gain all the benefits of participating when all the benefits are at their maximum.

To that end, here’s what I suggest: For your launches that are running late or are paused, determine the real cost of delaying those launches. Then use on-demand talent to ensure priority launches run on time. Share the compelling chart above with your leaders and team members to raise the stakes and sound the alarm that today’s delays have outsized strategic consequences later.

Understanding how to strategically leverage resources in this way gives you another advantage. You gain the power to use the economic downturn to leap ahead of incumbents. Get details in the article Powering Out of the Curve: How Challenger Companies Win a Recession.

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Author Spotlight

The Surprising Cost of Delayed Product Launches
Tim Sanders
Vice President of Client Strategy

Tim Sanders is the author of five books, including the New York Times bestseller "Love Is the Killer App: How to Win Business and Influence Friends." He was the chief solutions officer at Yahoo! and early-stage member of Mark Cuban's, and a faculty member of the Global Institute of Leadership Development.

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