Oct 092010

… And Why Companies Need To Be More Serious About Copying

Earlier this year, we had a short discussion, based on a review, over some of the concepts in the recently published book Copycats, by Oded Shenkar. I’ve finally had a chance to read the book, and wanted to post some quick thoughts on it. The book is definitely worth reading. It’s a really quick read actually, so it’s not even a huge time commitment. The basics concept of the book is clear: it notes how much economic advantage is gained through companies copying one another, while bemoaning the negative connotations associated with imitating and copying others. But, of course, if you look closely, you see elements of copying from companies all the time. Any time a competitor does something successful, you’re likely to see others copy it.

Where the book really shines, in my opinion, is in Chapter 4, where it details the massive successes and failures of copycatting in two key industries: airlines and discount retail. In that chapter, Shenkar looks at the success of Southwest Air, which “imitated” the failed People Express, but figured out how to do discount air travel while avoiding a few key elements that resulted in People Express’ failure. He then goes through a variety of other airlines and how they tried to mimic Southwest Air, covering many examples of both success and failure, and explaining why some succeeded where others failed. Most notable, perhaps, was the dismal failure of pretty much every single attempt by the big airlines to copy Southwest. They all appeared to copy the superficial aspects of it — the key things that everyone knew about — without quite grasping the underlying structural reasons why Southwest succeeded, thereby setting up a business model in conflict with itself. It’s yet another fantastic reminder that the idea that big companies can just come in and copy what some innovator does is quite frequently not really true.

The same chapter also looks closely at Wal-Mart, how it, too, copied certain key aspects from others, while also learning from the mistakes some other players made. The chapter notes that Wal-Mart, K-Mart and Target were all founded in the same year (1962), but were hardly the first in that space. Instead, all were copying a few other players who were there before — none of whom survived. It looks at how these three firms have changed over time, including how Wal-Mart copied many ideas from K-Mart, and then improved upon them, and how K-Mart then tried to copy Wal-Mart back, but failed (for the same reason that the big airlines had so much trouble copying Southwest — they got the superficial stuff, but didn’t realize how that clashed with certain infrastructure issues). And then it covers how Target has carved out its own highly successful niche, both by copying Wal-Mart, but also in tweeking the model in different ways as well, such as targeting higher-end shoppers.

Read more . . .

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