Steven P. Schnaars - Managing Imitation Strategies

MANAGING IMITATION STRATEGIES

I mitation is not only more abundant than innovation, it is actually a much more prevalent road to business growth and profits. I wish I could claim credit for that insightful observation, but it was first made more than twenty-five years ago by Theodore Levitt, the noted Harvard professor. I simply paraphrase his original statement because the idea it conveys is as applicable today as it was then. Imitation is still more commonplace than innovation, and it is still a viable marketing strategy.

That is not to say that imitation is preferable to innovation in all, or even the majority of, instances. The merits of innovation are indisputable. Firms that develop and bring to market innovative products before competitors often build and sustain commanding leads in market sharethe so-called first-mover advantages or order-of-entry effect. But innovation is not the only choice of market entry, and in many instances it may not even be the best choice. Just as often, innovators end up worse off than those who follow.

The basic thesis of this book is that the benefits of innovation and early market entry have been grossly oversold. So much has been written about the benefits of innovation, and so little about imitation, that it has become a one-sided argument. A search of ABI/Informa computerized business database that tracks articles published in more than seven hundred leading business journalslists a total of 9,006 articles on the subject of innovation but only 145 on imitation. A more specific set of delimiters yields not a single article containing the terms product imitation anywhere in the title or abstract, and only one article contains the term product copying. Likewise, the database lists 17,940 articles on engineering, but only 93 on reverse engineering, and almost all of those deal solely with a specific computer software issue. On the basis of sheer proportions someone might conclude that imitating the innovations of others is an ineffectual, infrequent, and economically unimportant exercise. That conclusion would be dead wrong.

For a variety of reasons, the evidence in favor of imitation is often hidden from public view. Whereas firms are often eager to trumpet the occasions when they were the first to discover something, they are often less willing to publicize their skills at imitation. Still, examples of successful imitation can be found in nearly every nook and cranny of the economy. Imitation is no fad, nor is it restricted to a few unique industries.

In soft drinks, for example, a marketing manager for Coca-Cola explained his firms marketing strategy to a Business Week reporter in 1983 as follows: The high ground is that we should be leading the way, but thats not our style. We let others come out, stand back and watch, and then see what it takes to take the category over. A historical analysis of Cokes action suggests that that policy has been in place for some time.

Pepsi obviously holds similar views. The CEO of North American operations was quoted in 1993 as saying: Im very much in the camp of thinking stealing ideas is one of the most honorable things you can do.

In breakfast cereals, the Wall Street Journal observed a change in competitive patterns in 1991: Whereas in the past the rivals seldom copied each other, both [Kellogg and General Mills] are now blatantly using knockoffs to win points.

A 1987 Business Week article examined new product introductions in the distilled spirits industry. The magazine concluded that Hiram Walker has often allowed others to test new markets first, and only when [the firms president, H. Clifford] Hatch is satisfied that demand is solidly in place will Hiram Walker move in. Following that time-honored pattern, the firm entered the fastest-growing markets for vodka, gin, rum, and tequila through imitation and later entry.

More than a decade later, little had changed. In 1989 Business Week noted that liquor has always been a me-too business. After the market success of DeKuyper Peachtree, a sweet cordial introduced in 1985, a flood of competitors entered and eventually surpassed that innovative brand with imitative entries.

In 1984, Business Week observed that the large chemical and pharmaceutical firms were beginning to enter the emerging biotechnology business. The industry giants were expected to overwhelm the smaller firms that pioneered the market. As one manager noted: Its becoming the waltz of the elephants, and the fleas are going to get squashed.

None of this is new. In 1933 the New York Times reported that competition for television setsan incubating technologywas likely to follow a time-honored pattern: [It] has usually been the practice since 1927 to let

Other examples of successful product copying go back even farther than that. In the 1500s, Dutch sailors discovered Chinese porcelain in the course of their explorations. That innovative new product created a huge growth market when introduced in Europe. Demand exceeded supply. As one author concluded: [S]o the Dutch began to knock-off the porcelain. They even went so far as to copy the Chinese symbols and used similar colors. The technique is still used today and the product is known as Delftware.

Sometimes small firms succeed with copies of larger firms products. In recreational vehicles, for example, Rexhall Industries muscled its way into the market by selling a cheaper version of the all-chrome, bubble-shaped Airstream trailer. According to Business Week: Rex [the entrepreneurial founder] got his idea the old-fashioned way: he copied it. He copied Airstreams innovative design but substituted less expensive fiberglass for chrome. Rexhalls president summed up industry practice this way: In this industry, we call it R&C: research and copy.