clues posterous

I have been thinking recently about my ailing country, Greece and that Holy Grail of Hope, a rather loosely defined concept named "innovation", which could miraculously solve all our problems, turn us into the silicon valley of Europe and generate instant growth.

Innovation seems to be at the mind of our government's wishful thinking and at the hearts of wannabe startups. However, "Research indicates that "fast followers" - that's imitators or copiers to you and me - get the best advantage. Too often there is a first mover disadvantage: the market is not fully developed, the offer is not fully formed, development costs are disproportionately high, risks are higher....the list goes on." (from freshbusinessthinking)

Insights into the perceptions of the concept of innovation, would surely come up with keywords like “new”, “original”, “unique” and so on. But innovation is not something that creates a bump on your head when you sit under a tree, an apocalyptic vision of a religious kind, or a thick-rimmed spectacled whiz kid rewiring stuff in his garage. This is a misleading notion that can guide the minds and efforts of able people and valuable resources into the wrong direction.

What prompted this post was reading a few articles sparked by Oded Shenkar’s Copycats book  (which I haven’t read yet), who believes that “imitation is at least as important as innovation if you really want to grow efficiently and make a profit.”
A very good Boston Globe article probably sums it all in the title: “Innovation is overrated. It's time to appreciate the power of the copycat”, from where I quote:

“…where innovation brings new things into the world, imitation spreads them; where innovators break the old mold, imitators perfect the new one; and while innovators can win big, imitators often win bigger. Indeed, what looks like innovation is often actually artful imitation..” 

Imitation can take the form of shameless plain stealing but this is not really what creates sustainable wealth. Imitation at its best is learning from others, adapting their ideas to suit a particular market or need and building on where others have stopped. “Creative Imitation” is an art in itself and a forgotten one, since innovation came into fashion.

Apparently, Shenkar traces the historical roots of our modern love for innovation to the Romantic Age and points to the fact that, until then, imitation was the dominant paradigm, one on which even the Roman Empire thrived on; even Adam Smith believed that imitation should be granted “the status of a creative art”.

The premise on which the merits of imitation rest are simple and should really be commonsensical. After all, this is how kids learn, and how humanity evolves. Shenkar believes that the best imitators in business include Wal-Mart, McDonald’s, Ryanair, Samsung, and Apple.

Imitation of course does not mean to copy your competitors. It does mean that you should get inspired by other sectors, other models and markets. It is quite probable that someone in another market has already found a sound answer, devised a new process, bundled a new service. Your –difficult - job is to recognize it and then transplant it into your particular business case. This task takes a lot of talent and is not something we should discredit so easily.

In another post on the same subject, Venkatesh Rao notes:

“In business, the benefits of imitation are obvious. Somebody else comes up with an idea, pays the capital costs, goes through the painful process of discovering a market and working out operating processes. Then boom, you come in and steal the playbook and build a much bigger, and better business than the original innovator. The original innovator is probably married to its idea, while you can benefit from 20/20 hindsight, unclouded by emotional bonds.”

Venkat also picks some interesting stats from the book:

• The costs of imitation are 60-75% the costs of innovation (yes, imitation does have costs)
• Pioneers who create new markets generally end up with around 7% of the markets they create. The copycats get the rest. 
• 98.7% of the value of innovations goes to the imitators - this is not surprising as imitators grow the market (cited at a series of articles here)

Now, another interesting angle on the subject is the success story of Groupon, posted in a Social Entrepreneurship blog.

First of all, Groupon has sparked off a large number of copycats all over the world, made easier by the fact that there are not many barriers (patents, copyrights etc) to do so. So, earlier this year Groupon had to buy CityDeal the German based clone, in an obvious effort to fence its expansion but also gain a conveniently quick way into the European market (later also bought Japanese Qpod and Russian Darberry among others). According to the post, “…the people behind CityDeal are masters of the art of Europeanizing leading American companies, having built versions of Zappos, Facebook, and an eBay copycat that was eventually acquired by eBay”.  That doesn’t sound like such a bad deal for wealth creation tactics. By the way, BBC also carries a similar story on how "Emerging rivals threaten Facebook's dominance".

Secondly and on a different note, the history goes that Groupon itself, “…spun out of The Point, an activism focused company that was originally trying to leverage the power of groups to achieve specific social goals. When they couldn't make that model work, they did what great entrepreneurs do and started experimenting. They hit group buying and it was off to the races." 
But read the fascinating story told by the CEO and founder Andrew Mason himself. Now, this internal transformation process from a social enterprise to a commercial one, is good innovative thinking in my books.

Nevertheless, if you subscribe to the overall view of innovation vs imitation, it is easy to see what the subject of progress through imitation entails for education, business mentoring or policy and what it also means for small countries like Greece; We need to be exposed to an intelligent mapping of initiatives, ideas, business models from around the world.  We need more story-telling, the first hand experiences of people from other industries and other markets who "have been there before". And we need to focus more on wealth creation.

Otherwise we will forego the business benefits of leapfrogging and spend millions chasing the rainbow of innovation.  

[Photo by Bala K]

Watch this video that describes a platform that allows for realtime collaborative music making. It is developed by Ohm Studio, a Paris based audio software company.

Thought: Tech startups do not need to engage just with "generic" ideas. Frequently, successful ideas come from people who possess a specific knowledge and have a specific problem to solve through technology. If you want to address a niche market, you need to engage the people who possess this specialized knowledge and integrate them into your team.

This is not new of course. In the music business for example, the legendary Mark Levinson was a seasoned jazz musician, playing double bass and trumpet with John Coltrane, Sonny Rollins, Sonny Stitt, Johnny Griffin, Chick Corea, Keith Jarrett and Paul Bley. In 1972, after experimenting with studio recording technologies (e.g. he built the stage mixer used at the Woodstock Music Festival in 1968),  he went on to form the Mark Levinson audio hi-fi company, a legendary company in its own right of course, then Cello and most recentlly Red Rose Music. Moral of the story? Technology sometimes solves technology's own problems, but more often than not, it solves other kind of problems. This is a lesson frequently overlooked by many startups who form themselves around the need to "make money" and not around the solution of "problems", real market needs or around great ideas outside technology per se.