Ability of Competition to Copy

History of Duplication

Capsule: You can estimate the likelihood of an innovation being copied by a competitor in the future by looking at the speed with which innovations have been copied in the past. To do this you would place each past innovation on the Hierarchy and then calculate the average time competition took to copy each innovation type. These times serve as guidelines to predict how long you have to recoup your investment in each performance innovation.

For helpful context on this step:

Videos:

• Video #70: Overview of Products and Services Part 2: What to Expect

• Video #71: Overview of Products and Services Part 3: What to Do

• Video #35: Reliability Innovation Versus Convenience Innovation in Hostility

• Video #37: Performance Innovation Tradeoffs in Hostility

Perspectives:

• "The Danger of Competing on Features"

• "Overcapacity: Threat or Opportunity?"

• "Staying Alive in a Hostile Marketplace"

• "Success Under Fire: Policies to Prosper in Hostile Times"

Symptoms and Implications:

• The larger companies are squeezing out the smaller

• Competitors are emphasizing reliability in product quality

• Some competitors have formed partnership services with their channels of distribution

• The level of convenience offered to customers has increased

The Hierarchy tool proves useful when the Company considers the speed with which competitors can or will copy a benefit innovation. Some benefits on the Hierarchy are easier to copy than others. This fact is particularly evident in very competitive markets. Competitors in very tough marketplaces can, and usually will, copy a Price innovation quickly. Competitors in highly competitive markets will also copy Function innovations quickly. Competitors in these hostile markets copy new Price schemes and Function benefits quickly because both are highly visible to competition and valuable to many customers. A Company's failure to stay current with competitors on these components of the Hierarchy will usually result in a rapid and significant loss of market position in a Hostile market.

• Audio Tip #95: The Customer Buying Hierarchy

Very fast growing markets exhibit substantial differences in Function and Price among competitors in the market. These aspects of the Hierarchy distinguish winners from losers more frequently in fast growth markets.

Reliability and Convenience tend to be the benefit components on the Hierarchy that distinguish successful companies in most mature markets. These types of benefits remain unique for the longest period of time in highly competitive markets. Reliability and Convenience benefits are much more difficult for competitors to copy. Reliability entails a quality orientation and commitment to customers that must become part of a Company's culture. Convenience often requires extensive presence in broad geographic areas of the marketplace. This extensive presence takes time and significant investment.

The effective life of an innovation is the period of time that the innovation might offer you a competitive advantage. The effective life lasts from the introduction of an innovation to the market until the time that half of the competitors in the market offer that innovation as part of their own products and services. The effective life of Function innovations tends to decline as an industry matures.

• Audio Tip #97: How Do We Know if an Innovation Will Remain Unique?

The effective life of the innovation must allow you enough time to recoup your investment in the innovation. As long as fewer than half of the competitors in the industry offer the innovation, it proves useful in attracting customer volume to the Company. The new volume that the Company receives as a result of the innovation, or the volume the company might lose without the innovation, pays for the cost of creating and implementing the innovation.

Positive Volatility by Buying Criteria: Industry Examples»

• Worksheet #18: Developing Priorities for Product and Service Innovations
  

History of Duplication Questions
	Analysis 45 : Positive Volatility by Buying Criteria
	Analysis 46 : Ease of Copy
How long have past innovations in Function, Reliability, Convenience or Price remained unique in the market place? That is, how long does it take, on average, before at least half of the competitors in the market duplicate the unique benefits? Into what components of the Hierarchy does the annual positive volatility volume in the industry fall? What percentage of the total positive volatile volume would the Company classify as Function, Reliability, Convenience or Price? (Analysis 45) Into what categories (Function, Reliability, or Convenience) do the Company's potential performance innovations fall? Given the history of past innovations by Hierarchy category, how long is each of these innovations likely to remain unique? (Analysis 46) If the history of the effective lives of past innovations is a reasonable prediction of the future, how much time does the Company have to recoup the cost of each type (i.e., Function, Reliability, Convenience) of performance innovation?

• Self Test #18: Developing Priorities for Product and Service Innovations
  

Basic Strategy Guide Users Return To: Step 18

Summary Points

Next: Priorities