There is a life cycle for any product, and it is much shorter on average today than five years ago, especially in the technology world.
Companies that are successful with their first product must begin thinking about the costs of additional products or of that product’s replacement well before any evidence of a peak in sales is noticed.
There are rules of thumb for various industries in creating a reserve for research and development. To attempt to find an average number, companies should “tax” themselves by reserving some percentage – say ten percent of their net revenues – for research and new product development.
It is a certainty that even with patent protection, a successful product will be challenged, duplicated, even exceeded by competitors, and within increasingly shortened time periods. It is a difficult concept, but a necessity of the modern age, to plan to obsolete your own successful products before someone else does that for you.