Notable passages from
Copycats by Oded Shenkar

Harvard Business Press, Boston, 2010

   [I]nnovation and imitation have a lot in common, and competitive advantage depends on our ability to bring them together


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Imovation: Fusing Innovation and Imitation

When I looked for the consummate imitators, I was surprised to see that quite a few were known as innovators. This was true of Wal-Mart, IBM, Apple, Procter & Gamble, Sherwin-Williams, and Cardinal Heath, among others. General Electric (GE), a storied innovator and one of the most imitated firms, uses imitation to outmaneuver competitors that have superior technology and has a history of importing practices, such as quick market intelligence from Wal-Mart and new product development methodology from HP.
   We call such firms imovators. Imovators understand that imitation is not contradictory to, but rather supportive of, innovation.


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   Randall Rothenberg, formerly of Booz-Allen, concluded that most value creation in businesses in the United States over a thirty-year period can be traced to only four ideas: power retailing (big box stores such as the Home Depot), mega branding (umbrella branding as in Disney), focus/simplify/standardize (process simplification as in McDonald's), and value chain bypass (eliminating the middleman, as in Amazon.com).


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   "Innovation is the buzz. Imitation happens." [Lionel L. Nowell, former senior vice president and treasurer of PepsiCo]


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   During the heyday of Japanese competition, economists asked, "Why are Americans such poor imitators?" as opposed to the "creative imitations" displayed by the Japanese. Economists concluded that innovation-obsessed Americans invested all their energy in the research portion of R&D, whereas the Japanese focused on development, which involves small, incremental improvements, often using an imitation model as its base. After World War II, Japanese auto firms started by knocking off U.S. automobiles, whose makers paid little attention to the then small and insignificant copycats. Those copycats went on to dominate products ranging from industrial robots to VCRs, all of which originated in the United States but were turned by the Japanese into successful new products. By 1991, Japanese firms, the imitators, obtained 44 percent of their profits from new products as compared with only 28 percent for the innovating U.S. firms.
   Ironically, the Japanese were imitating what used to be the American way before the god of innovation had taken hold. A 1968 report found not only that the United States was responsible for 84 or the 140 most significant innovations in the post-World War II era but also that "US firms have turned into commercial successful products the results of fundamental research and inventions originating in Europe. Few cases have been found of the reverse." Another study concurred that U.S. firms' technical and commercial lead since World War II "has depended not so much on their capacity for original invention or completely new products as on their success in developing a series of greatly improved models embodying new features in design and much higher standards in performance." Clearly, U.S. firms continue to be foremost innovators, so one much conclude that what they have lost is the ability to imitate and, with it, the ability to imovate.


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   Based on my experience, an extensive review of available evidence, and numerous conversations with senior executives, I have compiled a list of capabilities that must be developed and mastered if a firm wishes to be successful in the imitation game.

  • Getting ready: Building a culture and mind-set that not only accept but also value and encourage imitation as much as innovation
  • Referencing: The capability to identify and target imitation models of potential value
  • Searching, spotting, and sorting: The ability to seek, spot, and select products, processes, services, practices, ideas, and models that are worth imitating
  • Contextualizing: The skill to identify relevant environmental factors and view the original and the imitation as embedded in respective sets of circumstances
  • Deep diving: The capacity to conduct in-depth investigation that goes beyond simple correlation analysis and captures complex cause-and-effect relationships
  • Implementing: The ability to rapidly and effectively absorb, integrate, and deploy imitated elements down to the operational level


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   According to Nowell [Lionel Nowell, formerly of PepsiCo], to make imitation acceptable, "flexibility, open mindedness, and willingness to change" are critical; to The Limited's Wexner, it is curiosity that is most important.
   It is not a coincidence that these same attributes often surface in reference to innovation. In the case of imitation, however, there is one more obstacle to overcome: the stigma associated with the activity. In 1600, Japan, which had more guns than any other nation at the time, had let this crucial technology die out because it was associated with low-status foreigners and challenged the sword monopoly of the samurai class.
   Many firms suffer a similar predicament, and part of the problem, but also the solution, has to do with the reward system. As [Theodore] Levitt notes, "plaudits, brownie points, and promotions go to the clearly innovative individuals," while "the people who suggest imitative practices get viewed as being somehow inferior or less worthy." Have you seen a CEO bestow an imitation award? Have you noticed pictures of the "imitator of the year" next to those of innovators on the company's wall of fame? Yet, says Wexner, imitation needs to be "celebrated."

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   The academic literature identifies three imitation tendencies based on the models selected. The first, labeled frequency-based imitation, is to imitate the most prevalent behavior within a given population, most often that of industry peers. The second, trait-based imitation, is to follow the behavior of firms most similar to one's own—for example, those of the same size or market space. The third tendency, outcome-based imitation, is to imitate what seems to produce favorable outcomes.


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   Developing contexualizing capabilities requires jettisoning strategy jargon such as externalities and idiosyncrasies—which assign the environment a hypothetical, fringe role—and replacing them with region-, industry-, and company-specific thinking, which enables a rich and meaningful examination of an imitation target and its potential fit.


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   Almost a half-century ago, Theodore Levitt commented on the need to develop imitation strategies. The pace of innovation had been accelerating, and he realized that this rate of growth increased the urgency to develop and deploy imitation strategies. Yet he found that even well-managed companies, which paid a great deal of attention to innovation, approached imitation in a way that was neither "planned nor a careful process" but was rather "random, accidental, and reactive … an almost blind reaction to what others had done." Not one of those firms had an imitation strategy in place!


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Solving the Correspondence Problem

What gives humans the ability to decompose and reassemble complex behavior as is required in true imitation? What gives us this capability is our powerful cognitive perceptual abilities. The greater the cognitive capability, the higher the amount of imitative activity and the more accurate the imitation is likely to be.
   Cognitive abilities, in turn, are vital to the tackling and resolution of the correspondence problem, which is widely perceived to be the central puzzle in imitation research. The problem—rooted in the difference in coding parameters between the visual system (observing an act) and the motor system (performing the newly acquired activity)—is defined as the challenge of converting a model into a copy that will preserve the favorable outcome observed in the original. Its solution requires a series of phases, from reception to comprehension and conversion into the recognizably similar.
   To solve the correspondence problem in a real-life setting, it is not sufficient to decompose and reassemble the elements of the two systems (that of the model and that of the imitator); rather, as with all translations, it is necessary to preserve—and, if necessary, reinterpret—underlying rather than literal meanings, something that, in turn, requires solid understanding of the respective environments and mental models.


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   Don't forget to consider models that are successful imitators—that is, those firms that have consistently shown that they know where, what, whom, how, and when to imitate, have figured out solutions to the correspondence problem, and have been able to extract value from imitation. Apple, Wal-Mart, P&G, PepsiCo, Cardinal Health, and Zara, among others, have shown that they know how to use parity as a starting point and build out with innovation. However, you also want to learn from the experience of firms that have repeatedly failed to imitate successfully.


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   Finally, do not neglect to engage in internal imitation: evidence shows that a firm's best plant can be twice as productive as the worst, and so it's a good idea to imitate within. Battelle's Alex Fischer notes that the seven national labs run by Battelle have learned from and imitated each other. Internal imitation is easier thanks to access, lack of legal barriers, and knowledge of subject matter and context. Experience in internal imitation can also serve to develop some, though not all, of the skills needed for external imitation.


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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. This is still a substantial cost—which, for a minority of cases, is on par with the cost of innovation—and it emanates from the need of the imitator to retrace many of the innovator's steps, including applied research and product specification, investment in plant and equipment, prototype construction, manufacturing, and marketing.


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   As with imitation capabilities, the fact that almost all your competitors deal with imitation in what Levitt called "a random, accidental and reactive" manner will put you at a competitive advantage, provided that you break with the pack. Start by recognizing that imitation can be distinctive even if it relies on existing elements, and then proceed to strategize precisely how to create a unique package that will not only achieve correspondence but also produce value.


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