A Really Lean Product Development Approach: Copy

“I have focused on what companies should be doing,” says Oded Shenkar, Ford Motor Company Chair in Global Business Management and professor of Management at the Fisher College of Business, The Ohio State University and author of Copycats: How Smart Companies Use Imitation to Gain Strategic Edge (Harvard Business Press).

Note the word should, then consider that fifth word in the subtitle of the book. Which is to say that if you really want to do lean product development, then you’d be hard-pressed to find anything a whole lot leaner that what Shenkar is talking about.

Yes, copying.

Now Shenkar emphasizes that he’s not talking about illegal forms of imitation, such as outright counterfeiting. So put that to the side.

But he also points out that while almost everyone seems to think that to be an innovator is laudable, the imitation approach can also be exceedingly beneficial as a corporate strategy. And looked at from an even higher level, he observes, “The problem for the U.S. is that it is the consummate innovator and China is the consummate imitator. Who is getting a better return on their investment?” If you want to take it a whole lot higher, realize that Natural Selection is essentially the imitative approach.

There is a bit of a problem with this whole idea that he is promulgating of development through copying. Shenker says that unlike in the past, the whole notion of being an imitator has a stigma tied to it, one that is getting stronger. He believes that it is “damaging “ to organizations.

Rather than having a completely binary approach—being one or the other, an innovator or an imitator—Shenkar says that companies should do both. In his book he coins the word “imovator” to describe a company that is taking the combined approach to getting the job done.

Recognize that the imitative approach that Shenkar believes can lead to success isn’t an unthinking one, as his research has led him to observe, “Those who have engaged in blind copying have usually failed.” That’s because the people who undertake that approach don’t understand that there is also such things as process and culture behind what is being done, things that aren’t nearly as visible. A good example of this can be found in the failure of such would-be Southwest imitators including United’s Ted and Delta’s Song. “The legacy airlines just copied the external features,” Shenkar says. But the underlying structures of those airlines were not conducive to achieving what Southwest was (and is) doing.

One Southwest imitator that has done well is the European carrier Ryanair, which has taken Southwest’s standardized, low-cost approach to a whole new extreme.

In another area, there is the case of Sam Walton and the colossus he created, Walmart. “Everything was borrowed from somewhere else,” Shenkar says of the organizational principle behind the company. One aspect that is exceedingly important in this is the way the borrowed elements are organized so that the projected end is achieved. In the case of Walmart, Shenkar says that Walton and his colleagues (1) improved upon what they’d copied and (2) combined the various elements in a novel fashion with the overall objective of “extracting value.” He says, “If they relied only on imitation, they wouldn’t have done as well.”

In Copycats he looks at consumer electronics company Vizio, which has achieved a market share in the U.S. television market comparable to Sony, yet which was established with just an investment of $600,000. Think of the years and the billions that Sony has spent to get to where it is today. Shenkar writes that Vizio “refrains from investing in R&D or in manufacturing. It contracts with one of its part owners, a Taiwanese OEM, and sells via large retailers such as Costco and Walmart’s Sam’s Club, which provide it with market knowledge, packaging and distribution. This makes it possible for Vizio to undercut competitor prices and rapidly build scale that generates further price advantages.” Notice that this isn’t purely a play of not having to pay for R&D or for manufacturing operations, but also of achieving the necessary market intelligence for developing new products not through hiring market researchers, but through gaining it from its sales channels.

Shenkar goes on to write, “The entry of firms like Vizio into a crowded field that once required billions of dollars in investment and the development of a solid technological base is facilitated by a wave of outsourcing that disperses knowledge and resources that were once contained within a single company. This dispersion is accompanied by agglomerations of suppliers whose flexible systems permit profitable small-batch production and whose ready availability makes things still easier for incoming players.”

Again consider what is happening. There is an increasing number of suppliers who have the capability and know-how that allow them to be the kind of resource to companies that once needed to develop or acquire in-house. The imitative company doesn’t need to make the investments that would otherwise be necessary. Because they don’t need to make these investments—and because they also didn’t at the front end of the process (e.g., R&D, engineering)—they can offer a more competitive price point
for their offerings than those who have spent the money.

However, this is not to say that an appropriately executive imitation strategy doesn’t have a cost because it does, and a significant one. Shenkar writes, “Research shows a ratio of imitation to innovation costs of roughly 65 to 75 percent, with a ratio of imitation time to innovation time of around 70 percent.” Realize that it may be much cheaper to attempt the flat out superficial copy, but remember that he points out that tends to be a recipe for failure. But if you can cut your costs and time to market by some 30%, there are great opportunities for market success.

Successful imitation isn’t just a matter of cleverly deconstructing and reengineering existing products. “Culture is very important,” Shenkar says, and he goes on to point out something that is evidence that most companies don’t have a culture where imitation is valued as much as he thinks it should be: “When did you last see a picture of ‘The Imitator of the Year’ when you walked into a company boardroom?”

What’s more, while plenty of companies would be eager to follow a path like P&G, which is widely lauded for its innovativeness, Shenkar says that even P&G practices imitation—he says it is “wise imitation,” and that the company “learns from companies in other industries,” something that his studies have shown is not a common capability.

His counsel for companies? “Focus on what and where they innovate best. Imitate elsewhere.”