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Growth Through Imitation: A Cracking Good Strategy

21.11.2010



Growth through Imitation: “Being the first with a new innovation is not necessarily goof for business.

 

Research indicates that “fast followers” – that’s imitators or copiers to you and me – get the best advantage. Too often there is a first mover disadvantage: the market is not fully developed, the offer is not fully formed, development costs are disproportionately high, risks are higher....the list goes on.


Prof Oded Shenkar, in a book published by Harvard Business Press in June 2010, argues that 98.7% of the value of innovations goes to the imitators – this is not surprising as imitators grow the market. (What is surprising is the specific accuracy his findings!)


But a lot of people have a real problem with “imitation”. It is a major strategy for growth, but since we were kids we have been told: “don’t copy...do it yourself”. Our teachers have a lot to answer for on this front. It is a reflection of old meritocratic values where hard work and individual endeavour would get you out of the work house.
We work in a very different environment now. Teams and networking are the heart of how we live. Sharing ideas and concepts which get developed through collaboration is a way of life. Open Source software is one of the most obvious examples; development through imitation and refinement for the good of all.


In business imitation is not only rife it should be seen as a fundamental strategy for growth. Our whole development as a species has been built on imitation: Darwin showed us the way with the Origin of Species. We developed a wheel originally in solid rock or wood. Others imitated and in the imitation refined the concept from the original “rolling log” into the centuries old efficient hub and spokes design.
So businesses should imitate. It is a core strategy and one that we should be proud of using effectively in growing our businesses. In many cultures copying is a core way of life: China is making more than a habit of it, Japan has done so for decades and was the basis of their growth in the second half of the 20th Century. They imitated, but in the imitation they improved and developed.


This article looks at the importance a great imitation strategy from four key principles:be aware, rational assessment, market fit, and company culture.

Imitator Strategy: Be Aware


The first key principle of a successful imitator strategy is startlingly obvious. Know what to imitate!
This may sound obvious but it is not as simple as it may seem. The key to knowing what to imitate is information. Information on market trends, on legislative change, on supplier development and what competitors are up to.
In the same way as you need high quality data and information to grow your business through organic growth or mergers and acquisitions, you need the same high quality information to grow through imitation.


Being aware of opportunities to imitate requires you to be aware of the different types of opportunity to grow. Growth is about the development of company assets. It is not a revenue or profit target: that is the output of growth. Growth is driven by increasing the value of the company’s assets: people, processes and products. If you only focus on imitation of the products you will miss the significant opportunities through inadequate development of your people and processes at the same time.


It is also not enough to keep a look out on your own sector. Imitation strategies can be developed based on initiatives in adjacent or even far away sectors. For example: mobile phones are no longer phones. They are mobile computers, cameras, file sharing devices, music and video players oh.... and yes you can call anyone anywhere in the world whenever you want. Ask camera manufacturers how they see the market now versus five years ago.
 

 


Imitation Strategy: Be Rational & it’s not just about Product


Your imitation strategy needs to be rational. Just because an innovation has appeared in the market does not mean that you should necessarily follow suit. Every company needs to make sure that it imitates rationally.

 

This may seem obvious but regularly we in Carr-Michael come across businesses where the only reason for the imitation has been a knee jerk reaction to copy a competitor’s initiative. In such cases there has been little or no rational assessment of the benefit to the company.


Rational assessment is the cornerstone of an effective imitation strategy. This starts with checking out that the imitation actual fits the needs of the company – that it provides material gain either as part of their growth or defensive strategies. Any imitation will take company resources, resources that could otherwise be targeted to driving cash or developing alternative growth.


As a result each opportunity to imitate needs a clear understanding of the costs involved, the financial returns expected and how the core assets of the company (people, processes and products) will be enhanced.
Beyond the initial rational assessment of how the imitation will fit the company strategy, the business also needs to be highly critical of all aspects of the innovation being imitated. This starts with the core elements of the product proposition. 

 

Many companies uses a “tear down” of how the competitor's product functions and how it is built, to try and find out how to build it better and improve its performance at lower cost. Key issues in the tear down also include how to improve durability, quality and reliability to lower failure rates and minimise customer dis-satisfaction.
Imitation is not about doing the same thing, it’s about delivering, profitably, a better solution to the same customer need with greater customer value. By learning from the innovation of first movers, imitators often substantially improve on the initial solution, avoiding the obvious mistakes and uncovering efficiencies and refinements that were closed to the original.


In addition to the product elements, innovations can be improved through pricing and positioning. Many imitators spot the opportunity to segment the newly emerging need by customer type or usage. Premium, standard and economy versions are obvious examples as are more subtle differentiations through special offers, volume terms, linked offers and loyalty discounts. Imitation is not just about the product or service. Imitation needs rational assessment to maximise the revenue stream through targeting and appropriate positioning.


However, most propositions are not just a function of the core product or service on offer. Most propositions include other key elements such as availability, customer support, delivery options, payment & credit terms, warranty cover, upgrades and access to technical support. Your imitation needs therefore to rationally evaluate all aspects of the offer and decide how to provide best customer value from the total offer. Often great imitators see core product attributes as “cost of entry” but derive competitive advantage from packaging the overall offer better than the original.

 

Many successful companies adopt a fast follower imitation strategy: not the first in, but the “best dressed”.




Imitation Strategy: know YOUR Market

 

Whilst an innovation may well provide an opportunity to imitate, the key to successful imitation is to know your market and understand how to meet their real and perceived needs with a better version of the innovation. In other words slavish copying is not only dangerous from an Intellectual Property (IP) point of view it actually misses a key point of an imitation strategy: to make a better mouse trap for your customers.


It is likely that your customers have different (slightly or significantly) needs than the customers of your competitors.  Your task is to know how to imitate in a way that develops stronger brand loyalty to your company and its products and is disproportionately better at attracting new customers through the innovation.
 

The purpose of innovation and imitation is twofold: attack and defence. Defence because competitor innovations not only attract your customers away to the new product but they also attract your customers to the wider offering provided by your competitors. Consequently imitation helps protect your current sales of current products as well as encouraging new revenues and customers.


Customers like to deal with suppliers who they think provide excellent value for money. They also like to be seen to use suppliers who are innovative and proactive: this provides rub off image benefits beyond the products bought. Fast follower or imitation strategies are therefore very important in the development of your brand. If you regularly avoid first mover disadvantages and come in “best dressed” with a great refinement of the mousetrap, your reputation will be enhanced as a practical innovator for mainstream customers seeking new technology without early adopter risks. By contrast slavish copying of the innovations of others will damage your reputation by revealing a lack of vision and creativity.


In essence successful imitators work out quickly how first mover innovations change customer expectations of performance and value and how these new trends will be adapted into mainstream needs. It is clearly demonstrated every Spring & Summer, every Autumn & Winter in the fashion industry. Twice a year the couture houses display their new ranges for the season. Within days versions are being adapted and imitated for mainstream high street stores in every city and town of the world. Very rapid imitation is the lifeblood of the fashion industry. Yet despite this, we don’t view the imitators as copycats of couture, we see them as deliverers of mainstream fashion to real people in the real world, offering great value and fulfilling specific (customer) segment needs by retailer. Their success is in knowing their customers, in imitating with intelligence and flair. Slavish copying is not only to be avoided, it is a definite disadvantage.

 


Imitation Strategy: Cultural Fit


In the introduction I commented on the deep rooted concerns many people have around copying other people’s ideas. In schools and universities, original thought is highly prized and plagiarism seen in a very bad light. This is difficult to shake off for many people when they enter working life. Implementing an imitation strategy needs to be carefully positioned therefore within the company to make sure it is seen as positive, supporting and a valuable element of the company’s culture.


The need to manage how imitation strategies are seen internally is particularly important for companies at the mercy of global copycats. China is regularly noted as a region which pays little regard to the copyright, trademarks and patents of others and their attitudes are quite rightly seen as stealing. But there is a huge difference between stealing copyrighted and patented IP and the development of imitations that use the core concept but refine the offer to meet the company’s strategy and customers’ needs. [ Incidentally China is also a major first mover innovator in its own right, leading the world in technological developments in many high tech products.]


Imitation is a positive process. It needs to be positioned in the company in a positive and serious light, not as a “sneaky way” of gaining advantage, but as a legitimate process of improving on the innovations of competitors and others to further enhance customer value. Positioning it this way will ensure team and individual concerns are managed and that the company is seen as retaining the integrity necessary to sustain long term relationships with key groups: employees, suppliers, customers, trade contacts and shareholders. Failure to do this, risks impacting the company reputation and brand with a sense of “sharp” practice, that will be difficult to overcome and could significantly reduce shareholder value.


Many companies recognise the power of being a fast follower. They are great imitators. They wait to see how innovations are developing in the market, how they are being taken up by initial customers (early adopters in marketing speak), so they can avoid the costly mistakes and blind alleys of original thinking and development. Many fast follower companies however do apply original thought to the development of the core innovation and often seek IP protection for their enhancements. In other words they have a mixed strategy: part imitation part all new innovation. Often this mixed approach is the most successful. This is particularly the case when adapting innovations to new customer segments – when moving from early adopters to mainstream applications where costs and pricing become more sensitive in refining an imitation to expand and then consolidate the emerging market. The development of mobile phones and the expansion of the market from initial voice and text communications is a classic example of successful imitation strategies.