What Copycats Know About Innovation

SARAH GREEN: Welcome to the HBR Idea Cast from Harvard Business Review. I’m Sarah Green. We’ll be talking today with Oded Shenkar, the Ford Motor Company Chair in Global Business Management at the Fisher College of Business. He’s the author of Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge. Oded, thanks so much for talking with us today.

ODED SHENKAR: It’s my pleasure.

SARAH GREEN: Calling someone a copycat isn’t a very nice thing to say usually. And I think even imitation itself has a negative connotation. How did you come around to seeing this as a strategic advantage?

ODED SHENKAR: Well, I think that was kind of an evolution on my part. I did a book on China a few years ago. And I work very often on China and with companies operating in China. And China, in many ways, is the consummate imitator.

And I’ve noticed that they’re doing pretty well with that. I mean, they always wanted to talk about innovation. But I noticed that at the same time, they were doing pretty well with the imitation. So I started reading more about the topic in various areas, looking at more and more case studies. And I became convinced that imitation is being shortchanged.

SARAH GREEN: Well, you say in the book that we’re actually living in an age of imitation. What do you mean by that?

ODED SHENKAR: Imitation has always been around. I mean, if you look at human history, it has been actually a very, very powerful and important force in human civilization. But what is happening right now is almost unprecedented in the sense that there is a confluence of a number of factors that make imitation much more widespread, much more cost effective, much faster than it used to be.

And that’s basically what creates the so-called age of imitation. And now that includes a number of developments that have not been around. I mean, we have quantification. Everything is being quantified. This is, you know, one of the main drivers, if you will. It has to do with the advance of a computerized system, with artificial intelligence, and so forth.

And this quantification is supposed to help us operate internally within a company. But at the same time, this very same quantification makes it much easier to copy what it is that we are doing. Other things, or other drivers of this so-called age of imitation, is globalization. You get a very big increase in number and the diversity of players. And many of those players are much, much more capable than they have been in the past.

It’s not so simple, for instance, to copycat a car. You got to have certain capabilities. But we now have players that are not only able, but also willing to do that. Another driver is the modularization of the value chain. That drastically lowers the entry barriers to new players. And these new players don’t really have or don’t really need R&D capabilities. They basically copy what is already out there.

And on and on. I mean, the spread of consultancies is also a factor in imitation. Because basically, what these consultants work is as mediators of sorts, a channel through which an idea develops in one place, or applies in one place, would then be replicated in other places.

And so forth. So when you combine all of these factors together, you get what I would call this age of imitation.

SARAH GREEN: But in that sense, that goes to maybe why we hear so much about innovation and disruptive innovation– the idea being that in a crowded field, where everything seems sort of the same, it’s better to stand out from your competition. Do you think that standing out from the competition, being different, is an advantage that has been overstated?

ODED SHENKAR: Perhaps yes. And also, we tend to forget that many times, the one who stands out is really the imitator. I mean, it can be for instance the first, second, or even the later entrant who comes in and tweaks the product or the service and differentiates it in a way that the consumer actually prefers it over the original. So we end up with the imitator being the one who stands out.

We also know that price is also a very important driver. And this is part of the irony. And this is a very important point, I believe, this connection between imitation and innovation. Because if I can undercut your pricing by virtue of imitation, one thing that I can do with the margin is basically to take it and improve on the product or differentiate the product.

SARAH GREEN: Can you give us maybe an example of some companies that you see as great imitators?

ODED SHENKAR: Yes. Companies that are great imitators would include companies such as Walmart. And Walmart’s founder confessed, if you will– he said very clearly that almost everything that he used has been borrowed. He always said that he liked the term borrowed rather than stolen from others. So this would be one example.

You can look at Apple. And this is part of the irony. Apple is considered by many the consummate innovator. But if you look closely, you’ll find out that most of Apple’s technologies– even the product. The iPod, for instance, is really an imitation.

And this is a great example to the question that you’ve asked before. Basically with an iPod, they have taken an existing product and they improved on it. So they ended up being the differentiator. The imitator was the differentiator. And the imitator ended up standing out in the crowd.

SARAH GREEN: In the book, you have some different examples where you talk about airlines.

ODED SHENKAR: Right.

SARAH GREEN: Can you tell us also a little bit maybe about how those worked?

ODED SHENKAR: I was fascinated by the example of the airline among other businesses, because people have looked, for instance, at Southwest as an example of something that cannot be imitated because it has such an intricate component that are tied together. But Southwest has been imitated. And actually, Southwest has been imitated quite successfully by quite a few companies.

Domestically, you can look at the ValuJet, which is now called AirTran. You know, Spirit Airlines. But the most successful copycats are probably Ryanair and easyJet in Europe. And Ryanair is almost an exact copy. I mean, their CEO is, by the way, very explicit about it.

Ryanair was a money losing discount airline. When the boss of the company hired Michael O’Leary, who became the CEO, the advice was, shut it down. I mean, we cannot make money this way. And the boss said, no, no. Let’s go visit Dallas first.

So they went to Southwest. They met the Southwest founder and CEO and some of the senior executives. They came back home. And then they basically copied the model. And it’s a great success. Now, it is true that eventually, they went even beyond Southwest in terms of removing frills and so forth. But they will be the first to admit that this is basically a copycat of Southwest.

SARAH GREEN: We think of imitation as something that anyone can do. Anyone can be a copycat. And I think that’s probably why we have negative associations associated with that term. But is there something that actually separates the successful imitators from less successful imitators?

ODED SHENKAR: Absolutely. Absolutely. And if I can go back for a second to the example that you gave of the airlines, there were also very many failures. I mean, if you look at what the so-called legacy airlines have tried, they failed one after the other. Some of them have actually failed twice. If you look at United, if you look at Delta– they failed twice in trying the same thing.

And this is part of the message of the book, that you need imitation capabilities. Not everyone can do that. And incidentally, this is where I believe our scholarship [UNINTELLIGIBLE] in business has been really left behind. Because if you read the sciences, and I’ve looked at everything from biology, neurosciences, and also by the way, art history, and so forth. And the one thing that really striked me most was that, all the time, these disciplines have drastically changed their view of imitation.

I mean, if they started going back to maybe 100 years ago, with looking at either something very primitive, it’s kind of instinct that they used to say, only savages do that. But over time, they changed quite drastically. And now they talk about imitation as really a rare capability.

And part of the message of the book, yes, it is a very, very important capability. But this is also something that you can learn. And I’ve tried to identify what capabilities are really necessary for a company to do imitation effectively.

SARAH GREEN: As you know, we’ve been discussing this, I wonder for our listeners, are there any ethical cautions or questions about imitation as a strategy that you have encountered?

ODED SHENKAR: Well, yes and no, in the sense that I’ve been very, very clear in the book that I’m talking only about the legal form of imitation. And if it does not take away from the importance of the illegal form of copying– those that violate intellectual property rights. That is a very important issue in their own right.

But the focus of the book is strictly on the legal form. So I don’t really see that much of an ethical problem. But the stigma that most of us have vis-a-vis imitation– I don’t think it’s rooted in an ethical issue. It is rooted in history. It is rooted in psychology, if you will.

Basically, what psychologists tell us is that imitation, or acknowledging imitation, lowers our low self-esteem, our sense of self. So we are reluctant to acknowledge that we are doing that. And indeed, many of my interviewees did not like the word. I mean, they preferred to use something else. But at the end of the day, what they were talking about was imitation.

SARAH GREEN: So that’s like the distinction between like a first mover and a fast follower, or something like that.

ODED SHENKAR: Right, right, right.

SARAH GREEN: Well, Oded, thank you so much for talking with us today.

ODED SHENKAR: It’s my pleasure. Any time.

SARAH GREEN: That was Oded Shenkar. And the book is Copycats. For hopefully inimitable management wisdom, go to hbr.org. Or follow us on Twitter @harvardbiz.