A copycat path to strategic move
Imovation = Imitation + Innovation
Much of the current business books and theories will lead you to believe that there are great benefits associated with innovation and pioneering entry. The same is true for the popular media, which has elevated innovators to cult status. Yet the business environment is littered with first movers who have underperformed their peers. Think Blockbuster, the first video-rental chain, which is now closing all their stores; think Diners Club, the first issuer of a credit card, which holds on to a tiny sliver of the market it created; think Yahoo, which pioneered with e-mail and file sharing, but found itself losing leadership in this market years later.
Indeed, many imitators do so well that they push the innovator out of business. Some have been able to repeat the feat time and time again, as did IBM, at first with mainframe computers and then with the personal computer. Of course, not all imitators fare as well. Delta Airlines has tried not once but twice to imitate the Southwest Airlines model, the second time with the help of a famous consultancy, but to no avail. Some imitators arrive to market too late, after pioneers and early followers have established an insurmountable lead, or by the time other latecomers cutting into each other’s margins have flooded the market. Others stumble as they blindly follow the formula of a competitor whose capabilities they cannot match. Still others fail to discern the intricacies of a model, producing imitations that are not up to par. But this is precisely the point – one must know how to imitate.
The advantages of Imitation
Having observed market reaction, the imitator can better calibrate a product and often can offer the customer something better/cheaper, or both characteristics. With the innovator and pioneer paving the way, making much of the research and development and marketing investment, the second mover enjoys a “free ride.” With the benefit of hindsight, imitators capitalize on the shortcomings of the early offerings. Imitators pick and chose what to adopt, which permits them to go after more profitable opportunities. They can tweak the original to fit shifting consumer tastes and adjust it to new or emerging circumstances. They can also leapfrog into the next technological generation since they do not carry the sunk-investment made by the pioneer incumbent.
Imitators are also less likely to become complacent, unlike innovators and pioneers who are so taken with their success that they underestimate the dangers lurking in the rear view mirror. Imitators, who come from behind, tend to be humble and paranoid about others following in their footsteps and hence are better prepared to defend against other imitators. Since they need to differentiate themselves from the original, imitators are attentive to game-changing technologies, whereas many pioneers stick to their original formula.
“Indeed, many imitators do so well that they push the innovator out of business”
Crucially, imitation and innovation are not two opposites. Today, innovators have to focus their effort on a few core features or produce a novel and creative recombination of imitated elements. Ironically, although the capabilities to imitate share a lot with the capacity to innovate, innovators do not adopt them because of the stigma associated with imitation and the conviction that one has to compete and lead by innovation.
How to become an imovator
To become an imovator, a firm needs to approach imitation in a strategic fashion, devoting as much time as it does to the development of strategies for innovation. These imitation strategies can be formulated and reviewed using a simple inventory of questions, including where, what, who, when and how. The questions should be able to resolve the “current problem” in a way that will not jeopardize the value proposition.
In many ways, the sources of innovation and imitation are similar. Like innovators, imitators improve their capabilities ‘by doing’ and through other channels such as R&D, buying, training, hiring, reverse engineering and other forms of search. Also, like innovators, imitators struggle to mesh know-how acquired externally with their own history, capabilities and operational procedures, thereby engaging in processes of search and discovery unique to their experience. Good imitators possess much of the same: They are able to improvise as they go about adapting an imported element or system to their needs and requirements, they can combine different knowledge bases that reside both within and outside their boundaries, and they are capable of identifying and leveraging “spillovers.”
At the same time, imitators must learn to tap the potential for creativity and imagination that are commonly expected and demanded of innovators. Just as European entrepreneurs have found a way to marry Chinese porcelain to modern production techniques, innovators come up with new and better ideas than the ones that are already out there, yet offer something better, cheaper, or more fitting to the target environment. Finally, and for both innovators and imitators, denying imitation opportunities to competitors is of major importance, but it too requires skills that are rare and can contribute to competitive advantage. Innovators are better at producing effective barriers to imitation as much as imitators are experts at finding ways to overcome those barriers. Combining those two sets of skills will likely produce a much more effective wall of deterrence and more effective strategies to diffuse imitation.