Oded Shenkar - Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge

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Library of Congress Cataloging-in-Publication Data

Shenkar, Oded.

Copycats : combining imitation and innovation to outsmart your competitors / Oded Shenkar.

p. cm.

9781422160633

HD41.S54125 2010

658.4063dc22

2009049543

The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48-1992.

To Miriam, Keshet, Josh, and Riki; inimitable

Imitation is not only more abundant than innovation, but actually a much more prevalent road to business growth and profits.

Theodore Levitt, 1966

A few years ago I approached an acquaintance, a senior executive with a large national retailer, to promote a new technology-enabled marketing tool developed by a foreign start-up. The tool, embedding voice recognition technology in a novel marketing application, seemed especially suitable for that retailer, which enjoyed a reputation as an industry trendsetter. My contact later returned with a question: was this a novel concept, or had it already been in use? I proudly confirmed that the tool was brand new and that his firm was the first to be approached. In that case, came the surprising response, we are not interested. When I asked why, my acquaintance explained, Our policy is to never be the first to try something new; we will only consider the tried and true.

My stunned reaction can be forgiven in light of the innovation imperative that is the rage in executive suites from New York to Sydney. Innovation is a powerful force, a significant factor in corporate survival, growth, and prosperity. It is a source of monopoly profits that flow and flowuntil imitators show up. Inevitably, they do: White Castle founder Walter Anderson, who was first to come up with the concept and system for a standard-fare fast food chain in 1921, saw a slew of competitors descend on his restaurants, recording everything from store design to operational routines. It did not take long for some shrewd and efficient copiers to surpass the original, now a minor player in the vibrant industry it launched.

Indeed, negative stereotyping notwithstanding, many imitators do so well that it is the innovator that is left in the dust. The systems of successful followers, such as McDonalds, were replicated, in turn, by next-generation imitators such as Rallys (e.g., the drive-through concept, itself borrowed from others). Then when McDonalds shifted gear to offer healthier fare, Yum Brands quickly followed suit, introducing the same in its Taco Bell and Pizza Hut chains while also emulating McDonalds in its hot pursuit of the breakfast and dinner crowd.

Other examples include EMI, which introduced the CAT scanner in 1973 but lost market leadership within six years. Two years later EMI exited the business, ceding the market to latecomers such as GE. A similar fate awaited RC Cola, whose innovative products, such as diet cola, were quickly appropriated by Coca-Cola and Pepsi. Sony introduced digital photography in 1981 but was soon overtaken by Japanese manufacturers of traditional cameras and by late U.S. entrants such as Hewlett-Packard.

Examples abound. Diners Club was the first credit card issuer, but now it holds a minuscule share of a market ruled by Visa, MasterCard, and American Express, none of which was around when Diners fought an uphill battle to introduce the novel concept to banks, merchants, and the public.

Thirty-four of forty-eight key innovations were imitated by the time they were studied, and the rate of brand imitation now exceeds 80 percent. It is even higher in certain product categories; for instance, all major cereal brands have been imitated. The same is true of many of the services we use and our corporate practices and business models. They are imitated by small-time players (such as the hundreds of YouTube look-alikes) or by industry leaders such as Hertz, whose Connect car-sharing service bears an uncanny resemblance to the Zipcar model of the start-up by that name.

Hundreds of books tout the magic of innovation and tell you how to make it happen. Virtually all of them take the virtues of innovation for granted, and so their starting point, to borrow a phrase from a recent CNBC special, is that organizations must innovate or die. It may rarely be stated explicitly, but the implication is that imitators, if they can survive at all, are sentenced to poverty, living off the crumbs left by ingenious innovators. Imitation is presented as a spontaneous and haphazard act of desperation, and to defend themselves, innovators need merely erect tall barriers and then move on to bigger and better things.

This book, in contrast, is not about the innovators but about the imitators. Its basic premise is that imitation is not only as critical as innovation to business survival and prosperity but also is vital to the effective exercise of innovation itself. Further, this book argues that imitation is a rare and complex strategic capability that must be carefully nurtured and properly deployed.

What I mean by imitation in this book is the copying, replication, or repetition of an innovation or a pioneering entry; however, a number of caveats apply to the treatment of the term in this book. First, what is imitated can be a product, a process, a practice, or a business model. Second, the imitation can be as is or can represent a variation or an adaptation. Third, it can range from precise, blueprint copying to broad-brush inspiration, or anything in between. Fourth, the imitation can range from instinctive imprinting to full-fledged (or true ) imitation (see chapter 2 for details). Fifth, illegal forms of imitation, such as piracy and counterfeitingimportant and widespread as they areare not part of our discussion. Finally, imitation is approached as a strategy that not only is consistent with innovation but also is essential to the focused and effective use of innovative capabilities.