Co-Opetition - Adam M. Brandenburger [73]
It’s true that when someone literally copies your product or processes, that erodes your added value. Thus, American, with its 10:00 P.M. departure from Los Angeles to New York, loses some added value when United offers a 9:55 P.M. departure. Now American isn’t something so special in the air.
Some people take the ill effects of imitation even further. They say that there can be no long-lasting formula for generating successful business strategies.34 Why not? Because if someone discovered such a formula, the formula would be most unlikely to remain secret for long. And then any strategy generated by the formula could, and would, be copied. No one could make more than temporary gains. If correct, this argument would imply that there’s a limited shelf life for any business prescription.
But this argument isn’t correct. Take frequent-flyer programs: everyone can do it, everyone can make money at it, and everyone can continue making money at it. The gains are more than temporary. This isn’t just true for frequent-flyer programs. There are other strategies, such as meet-the-competition clauses and rebate programs, that also continue to work after being copied. (We’ll examine these strategies in the Rules chapter.) So where’s the mistake in the conventional wisdom on imitation?
Healthy Imitation
Imitation is the bugaboo of business strategy if the goal is to secure “competitive advantage”—to do better than others. Imitation means everyone can do the same thing. And then you can’t do better than others, since they are doing just what you’re doing. It’s almost tautological that you can’t have a sustainable competitive advantage.
Imitation is harmful whenever you think win-lose. You discover a win-lose strategy. You take two steps forward, and your competitor takes one step back. If your competitor can imitate you, the strategy gets turned around. Now it’s lose-win. Your competitor takes two steps forward, and you take one step back. Here, imitation is harmful: it erodes your initial gains.
That’s if you are lucky. It can get much worse than that. Sometimes win-lose means one step forward for you and two steps back for your competitor. The classic example of this is competing on price. You go after a competitor’s customers through low prices. When you do that, you gain less than your competitor loses because you gain a customer at the new, lower price, while your competitor loses a customer who was paying the old, higher price. It’s one step forward for you and two steps back for your competitor. You’re ahead, but only until your competitor responds by going after one of your customers. Now it’s one step forward for your competitor and two steps back for you. The net result is one step back for both you and your competitor. Prices are lower, and market shares end up back to where they were. Now imitation isn’t just harmful, it’s deadly:
win-lose + lose-win → lose-lose
So yes, win-lose strategies can backfire—quite badly—because of imitation.
Where conventional wisdom goes wrong is in ignoring the possibility of win-win strategies. Not a surprise, given the conventional mindset of business-as-war. With win-win, imitation is healthy. Now it’s one step forward for you and one step forward for your competitor. After imitation, it’s another step forward for your competitor and another step forward for you. Imitation actually amplifies the gains:
win-win + win-win → WIN-WIN
Look at frequent-flyer programs again. American got an advantage from AAdvantage. The program gave American a way to attract some passengers from other airlines. So far win-lose. One step forward for American and one step back for United. When AAdvantage was imitated, American lost its ability to gain share.