By Robert W. Bradford
Note: This article was first published in Compass Points in April 2003. The info is still relevant today, and it will be nostalgic reading the examples from 2003. Part One was an introduction to this series from Bradford’s article The Easy way to Innovate is – the Hard way! In Part Two we discussed the First reason that competitors do not copy innovations: They are unable to copy the innovation. In Part Three we will discuss the Second reason that competitors do not copy innovations: They choose not to copy the innovation.
The second reason why competitors may not copy us is that they choose not to copy. Why would this happen? Basically, competitors are likely to decide against copying good ideas when they think that either (1) the cost is too high, (2) the payoff is too small or (3) they just don’t like the idea. Historically, many companies have used high cost as a barrier to entry, and this can work very well if you have deep pockets and your competitors do not. Small perceived payoffs can be just as good a barrier to entry, but it requires that you know something that your competitors don’t. And dislike for an idea can also be a powerful barrier to entry. Let’s examine how a competitor might reach the conclusion that they should not copy an idea.
First, the cost being too high: naturally, the cost might actually be too high, but this is one we don’t want to use, because it would hurt us, too. Much preferred would be that the competitor’s perceived cost is too high, while our actual cost is not. There are two key ways to hit this mark: one, choose innovation projects that appear to be expensive at first — and turn out not to be, or two, choose projects where you have some actual cost advantage in the innovation process. Both of these options require that you know a great deal about your product, service or processes — companies that are just dabbling will not likely succeed in either. In addition, the case where there is a real cost barrier to entry can be quite powerful if you have deep pockets and your competitors do not.
The second reason a competitor might decide not to copy your strategic innovation is that they perceive the payoff as being too low. If the actual payoff is low, this is not a very good situation to get into. In some cases, however, the perceived payoff may be much lower than the actual payoff. Some industries are perceived as dull and unrewarding. If you can gain entry into such a business, the perception of low payoff will help you almost as much as if it was real.
You will also find some cases where the low payoff is a reality for the second player in a market. This is often true with simple innovations that create strong brand preference. For example, Domino’s Pizza gained tremendous leverage from being the first nationwide pizza chain to advertise delivery. The players that followed them had all of the expense of building a delivery capability, but none of the brand preference that Domino’s generated during the years when “Domino’s Pizza Delivers” was a distinction.
The final reason a competitor may decide against copying you is one of my favorites. Sometimes, a competitor just doesn’t like the direction you are going. The beauty of this is that your competitors effectively leave you with a monopoly by making this choice. This can come about because people have had bad experiences with some kinds of business, or simply because of a gut reaction. For example, after the collapse of the dot.com bubble in 2001, many people assumed that all internet business was inherently unprofitable. This has created an opening for innovators who have developed new models of profitability for internet companies who would have been crowded out during the boom years of heavy internet investing.
In Part Four we will discuss the Third reason that competitors do not copy innovations: they are prevented from copying by someone else.
What innovations has your company developed that your competitors have chosen not to copy? Attend the Simplified Strategic Planning Seminar for more in-depth instruction on this subject as well as all other aspects of Simplified Strategic Planning.
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