Copycats

Oded Shenkar: Probably it was an incremental process but if you go back for instance to the Roman Empire imitation was actually the pedagogy. This is how we used to teach our children, our students, this is the beginning if you will also of some kind of academic scholarly work. It was formal pedagogy but it was more complex than the way in which people would treat it today which is part of the problem meaning that you would start with replication as is and you would incrementally progress into more complex type of imitation concluding with some form of imitation with inspiration which is where you get to the creative side of imitation which people have taken for granted then but I think we have lost the ability to appreciate.

Rachel Salaman: It's interesting isn't it that in the world of art imitation is called influence. If you copy someone's style it's called an influence.

Oded Shenkar: That is absolutely true and I've read the text on art and it's very interesting. In art by the way as well as in other fields we have had a certain cycle. There was some point at which we really wanted to replicate, genuine replication representing the original was a good thing and then we kind of moved away from it and it became something quite negative and then again now there is much greater appreciation of it. Of course people can mean different things by copying in imitation but by and large there is a certain appreciation of it now.

Rachel Salaman: Well let's talk about the parameters of the useful imitation that you talk about. To be clear you're not promoting stealing intellectual property or piracy are you?

Oded Shenkar: I want to be very clear about it absolutely not and actually, and this is part of the irony of it when people hear that I wrote this book, I've actually been quite vocal about the need to defend intellectual properties rights including appearances before the US China Congressional Commission where I've been making the point for years that rather than being obsessed with the exchange rate and the like let's focus on the issue of knowledge, our ability to protect it, this is a much more important issue. So there is certainly a line between the two. I very much not only reject but oppose a violation of intellectual property rights. Having said that it is very important for us to remember that this protection actually is quite limited. Even when you talk about patents they really provide a very limited protection. There are lots of things that cannot be patented or trademarked and I would also acknowledge that it is somewhat of a moving line.

For instance there is legislation right now before the US Congress on copywriting designs say for clothing. So it means if I come up with a certain pattern you cannot copy it without buying a license from me and so forth. Many people, including myself by the way, believe that this is not enforceable but the line itself can change, different legal systems can change the definition. So the line is not always very clear cut and the line can move around but nevertheless there is a very important line that is there.

Rachel Salaman: Where the moral line is drawn might be slightly different from where the legal one is drawn?

Oded Shenkar: Absolutely and it is a very important issue among other reasons because this might be perhaps one of the reasons why companies are reluctant to acknowledged that they are engaged in the activity but morally speaking to me it's a very, very complex question. If I may give you an example, actually I just read it yesterday. I read The Guardian and I see that there is an issue about Fair Isle sweaters and the like. Since I also intend to visit Scotland I took a special interest and read it and it's very interesting. Basically what these people are saying is, look, everyone is now copying us, it's not the real thing. I mean we have developed it, it has been around for centuries and now various companies, they can be in China or wherever, they basically knock it off in a negative term and they get away with it so we want protection for that. Now here is the interesting thing, toward the end of the article it is mentioned where the islanders got the pattern in the first place. So in the 16th Century apparently a Spanish navy ship shipwrecked over there and basically what the islander did was to copy the designs that were on the soldiers? clothing. So if you think about it morally where is the line. I mean basically they're asking for protecting something that they themselves copied. So it's kind of a simple example but it shows you the complexity I think.

Rachel Salaman: Where do you draw the line yourself? What do you think is acceptable when it comes to copying in the world of business?

Oded Shenkar: First of all of course everything that is not protected by law I would say is fair game, and I'm not talking again about a gray area, things that are very, very clearly beyond the law. This is the same distinction that you may want to make between a company that engages in industrial espionage which is of course illegal and so forth but in the company that follows very closely the annual report, the press releases, speeches and so forth of their competitors which we call business intelligence so this is okay. So, again, I think it is fairly easy to put the line in there but again I acknowledge that there can be instances are way more complicated than that and where the ethical lines may be blurred but you would expect executives to be able to hand the complexity.

Rachel Salaman: Now many listeners will be familiar with the idea of core competencies, the idea that companies should do one important thing or some important things uniquely well in a well that competitors find really hard to imitate. How do your ideas fit with this?

Oded Shenkar: A very good question because part of my conversation that I have is not only with the business community but also with business scholarship. My first argument on that is first of all a lot more things can be imitated than what business scholarship would make you believe and the scope and range of imitation is actually expanding all the time. So we tend to talk about innovation gathering pace but the same thing is true for imitation. So if you talk about core competencies first I would say the following. If you are talking about something where you can innovate in a way you are acknowledging that you need to imitate as well don't you. We like to forget about the residual, we're saying we'll focus on this one activity. What about the other activities, if you're not going to imitate on the other activities you're going to fall behind and therefore you must imitate and you should also ask yourself where should I imitate, what should I imitate. This should not only be a residual decision as to where I cannot innovate. It's also a question of what and where is good to imitate.

I would also add that, contrary to arguments in certain business scholarship circles that a core competency can also be imitated, not always but at times, and this would be almost blasphemy to some of the strategic rules but I think that you should look on the ground. If you look at many examples you'll find out that it is do-able.

Rachel Salaman: So if you're a company that prides itself on its unique competencies or some unique competencies should you still be looking around then and seeing whether and where you're being imitated or where there are new examples popping up that you can imitate. You shouldn't rest on your laurels.

Oded Shenkar: No question, no question about that and I would say it's more than looking around. I would say you need to be very active about it, I think you need to be very systematic about it. It's interesting that you talk about imitation but also protecting from imitation. One of the surprises that I've had in doing the book when interviewing people because it is not something that I expected was to find out that good imitators also know how to better defend from other imitators. So ironically your ability to imitate would also support your ability to innovate and to profit from innovation.

Rachel Salaman: Now the subtitle of your book talks about imitation giving companies a strategic edge and you've touched on this a little bit. Could you talk a little more about how that works.

Oded Shenkar: Sure, that fits in very well actually to the prior discussion we've had about business scholarship and core competency and the like. There is a basic assumption in the strategic literature especially the so-called [inaudible 12.19] in academic circles that only innovation is a rare and valuable capability. I would argue that this is simply patently wrong and, by the way, the argument is indeed based on reading those various areas ranging from the arts and history and archeology all the way to biology and neurosciences. What was most shocking to me was to read one field after another, and again these fields are very different from each other like humanities and exact sciences, and to realize that all of them without an exception have gone through a similar transformation. The transformation was that at the beginning they treated imitation as something almost stupid, something that only those who cannot create do. Some of the language is really funny, you go back to almost a hundred years ago, this is something that only savages do, and over time they've all changed it and have come to realize that imitation actually requires a lot of intelligence. This is a rare and valuable capability and therefore your ability to imitate I would argue is as important as your ability to innovate.

Rachel Salaman: And in your book you make the point that not everyone can imitate, that there's actually a skill to it or several skills.

Oded Shenkar: Absolutely.

Rachel Salaman: So what are those skills?

Oded Shenkar: Absolutely and this indeed flows from the previous argument that it is a rare and valuable capability meaning that not everyone has it but I don't think that these qualities, capabilities, are born. They are tied into a company history, a company corporate culture and so forth but they can certainly be developed and the main problem is the one that you mentioned in the very beginning that we don't look upon it positively. If we don't look upon it positively one needs to develop capabilities in this area but what I've tried to do in the book is really to define those capabilities and to show how they can be further developed so a company would be more successful because indeed if you look at various cases you will find cases of successful imitation but also many failed imitations. Now some people, some companies, when they fail they come and say well it's not good to imitate, we failed because we did not imitate, but I would argue in many instances, no, you have failed because you did not learn how to imitate.

Rachel Salaman: You use a lot of examples in your book.

Oded Shenkar: Yes.

Rachel Salaman: One of the most interesting is the example of South West Airlines where you point to some companies that successfully imitated that model and some that have unsuccessfully tried to. Could you talk a bit about that.

Oded Shenkar: Of course. I want to mention first why I chose South West Airlines to put up front. I use many other cases later and throughout the book but I kind of put it up front, here is the reason. In the strategy literature South West is a special example. There is an essay for instance written by Michael Porter, you know, one of the strategy gurus, that is called What Is Strategy and there is only one example there and this is South West and their argument is this is such a complex system that it cannot be imitated. So coming from a contrary perspective and challenging this view I thought let me start right there and let me show you that certainly it can be imitated. Now there are of course many that have failed, there are even those who have failed twice. For instance Delta Airline failed twice, the second time with help from McKinsey, to build this clone subsidiary and it had failed time after time. Continental tried it, United tried it twice, almost everyone tried it and failed, but at the same time look at Ryanair. Ryanair, and I give them a lot of credit for that, today up front say we have copied South West and I think this is one of the reasons why they did it right because they were not ashamed of it, they did it in the open. Everything that you do in the open you have a much better chance of being successful because you're doing it right, you're doing it systematically. If you do it in the dark and you don't even want to acknowledge this is what you're doing the chances that it will be done right are really slim.

Rachel Salaman: How much did Delta's failure have to do with the fact that they weren't open about it and what else were they doing wrong?

Oded Shenkar: In the case of Delta I think they did not fully grasp the fundamentals of the models and they did not do the analysis, and by the way it was my understanding that South West did. South West itself, the big innovator, is in some respects a copycat of People's Express which is the very first real discount model in the US that had failed and South West looked at why it had failed.

Rachel Salaman: That's part of doing imitation right?

Exactly.

Rachel Salaman: You actually use a term immovation with an "m" to combine the ideas of innovation and imitation and you summarize the main take away points of your book in the ten rules of immovation. We could look at a few of those now. One of them is don't reinvent the wheel which is exactly what we've been saying. Could you give a few examples of that in a business context.

Oded Shenkar: Right and again I try to select expressions that people relate to because they actually use them. If you think of IBM for instance IBM, and it's interesting, has a strong name as an innovator but I would argue that IBM is an immovator. If you look at the major successes, look at the main frame computer, they have not been the inventor, I mean Remington were the first. Look at the PC, they did not invent it, we have Atari, we have Apple and so forth, so when they thought okay we're going to make the product they didn't try to go back to square one and again reinvent the wheel but rather let's see what is out there and in that case make it better. Sometimes when we imitate we don't need to make it better, sometimes it's enough for instance to make it cheaper. In this case they have done it in a way both. This is really your starting point. You go back to square one, I can see some occasion when we want to rethink everything but most of the time this is not going to get us too far.

Rachel Salaman: So as a rule then it's let's look around and see if someone else is doing this thing we want to do and that's the wheel we're not going to reinvent.

Oded Shenkar: Absolutely and sometimes we'll conclude that the wheel is good enough or we cannot do any better and then we take our resource and effort and energy and creativity as well but we have saved ourselves from a dead end.

Rachel Salaman: You also advise people not to, quote, "round up the usual suspects," can you explain this.

Oded Shenkar: That's obviously copied too, borrowed from Casablanca, just a reminder that we're all doing it all the time. Here is the idea. Companies now are very much into bench marking and best practices and I have a big problem with that. First of all because the benchmarking many times really targets the usual suspects. In my own university, we have ten universities that we have benchmarked and if you will ask why this and not that that's the way we do it. Any time I would argue they are very different models to look at for that particular issue, for that particular challenge but it's almost impossible. So basically you have started with really good intentions but actually you really constrain people in preventing them from coming up with something creative. So look at companies that sometimes are small because the tendency is, and we know it by the way from empirical research, people typically like to target as the benchmarking the large, the visible, the prestigious sometimes and we know it's kind of ironic because the innovating people themselves will tell you that actually the smaller firms are better innovators than the large firms so why not but they are almost never benchmarked. Okay, so why not look at them.

Why not look at failing companies. There are some executives that call it worst in class rather than the best in class which I thought was interesting but they very rarely target. It's almost a kind of joke to say yes the worst in class but do you actually go and analyze why. They are very useful lessons to learn so that's what meant. Don't go just to... look at companies in other industries. I mean many so-called innovations are not innovations. They've basically been transferred from one industry to another and it may be something very simple. For instance when I talked to Les Wexner, the Chairman of The Limited, he basically... the idea that now of course is ancient of how we process a credit card, this is an old fashioned way, it is a sort of irony. Actually he was the first to use it, it comes from the airline industry, this is how tickets were issued and this is where we got the idea. So the innovator must say no this is exactly the same technology, he has simply looked beyond the usual suspects and brought it from one industry to another.

Rachel Salaman: Another of your rules is put things in context. What do you mean by that?

Oded Shenkar: Okay, that goes back a little bit to my scholarly philosophy and so forth. My own field is international business and in international business we pay a lot of attention to context. Many of us also have a regional specialization, we have experts in certain countries, for instance myself I have also a Degree in Chinese Studies and the importance of that is not only learning about China, obviously China is now in but tomorrow it may be somebody else. The importance is getting some understanding of how important context is and to be very careful before you transfer, you transplant the assumption from one context into another context. The general tendency has been in recent years because strategy has become a kind of more dominant discipline to forget about context externalities, idiosyncrasies, and therefore we don't have to do it but the context is good. Part of the success, for instance, I think of Ryan Air is the interpretation and transferability of a model embedded in a certain context. When you look at the context it will also tell you at what time you can do something because for instance a South West type model would not fly in Europe before you had removal of visa requirement and so forth in the European Union because it is a model that requires a very fast turnaround of airplanes and so forth. If you have to stay on the ground for two hours because this is what it takes to process everyone forget it and of course there are other elements. Now instead of calling it inimitable like Michael Porter would, I say no, it is complex but it can be learned and I think many executives including quite a few of the executives that I have talked to I think were very complacent about it. I have talked for instance to the CO and Chair of Sherwin Williams and he said, listen, he said every day almost I get a frantic phone call from one of our stores, this is the paint company, that somebody is coming in with a camera and a meter and he says and I calm them down. I say there is a big difference between observing and understanding. What I add to that, yes, there is a big difference but the difference can be bridged.

If you read interviews with Sam Walton the founder of Wal-Mart, I'll quote just one of his statements he said in one of his interviews, "almost everything you see here we're stocking in the store has been stolen from somewhere." I prefer the term borrowed but it is true and he did spend a lot of time in K-Mart and other competitors and earlier discounters, all of whom by the way are almost gone or not doing very well. He did exactly that, he took pictures, measured, he made recordings but he then put it back in context. He tried to interpret the context for the model and for the copy and by the way this is exactly what people in biology including people in neuroscience will tell you. This is why they have come to appreciate imitation is a very complex type of an activity. You have to understand the context of the model, why did it develop in a certain way, but you also have to understand your own context in order to know whether it is transferable. Is it difficult, you bet. Is it possible, yes, with a lot of work yes.

Rachel Salaman: And you could add is it necessary?

Oded Shenkar: I would say it's completely a hundred percent necessary because again even those companies that have a reputation for being innovators, P&G for example, Apple, actually are also very good imitators so they fall into this immovator category.

Rachel Salaman: So if you look at this from the other way around what should be your response if your main competitor has copied some successful element of your own business?

Oded Shenkar: Obviously it can be very unpleasant. My own experience is that I've got copied, I was copied. To give you an example I was a fairly young and naïve assistant professor just graduated, I met in a conference not even a friend, a kind of classmate and he asked me what are you working on and I told him that I was working at the time on something called corporate reputation. Frankly it was not my idea but that was in this case an ethical thing because that was an idea broached by a colleague who wanted me to work with him on that and I gave him all the information and the next year I saw a paper on it with his name on. This is now this person's career, there is now a reputation I can tell you now between us in New York University that it's all based on this so-called borrowing of this one idea, does it hurt you bad? So I have a lot of sympathy but at the same time what is the lesson?

Now, if you ask me ethically this is something that I would not do personally. I've had obviously enormous opportunity to do that and never have done it, I am very, very strong about that. So sometimes I think the line is very clear, sometimes it is not, but I can understand the frustration. Again in this example of the Fair Isle business, people who have been in business, they identified with this but not only is it their livelihood of their identity. If somebody picks it up and runs with it and makes millions from it would I feel good, no, but this is in a way the reality but I'm not the kind of person who would say tough luck and you have to be tough. I understand, I am sympathetic to that but say as an executive you have responsibilities and I would be the first to say that your responsibility is not only to the shareholders, certainly to your employees and to the community. If you fail to imitate and as a result the company goes under there are also repercussions.

Rachel Salaman: So protect where you can, imitate ethically where you can and keep moving forward?

Oded Shenkar: Yes that's what it is. I think it is very vital and I think this is a debate and I would call it a debate in the sense, obviously people can disagree, but the shocking thing is it's not even being put on the table. It's kind of a bad word, we don't do it, the only thing we study in business school is how to protect from these pesky imitators. I hope that executives will learn to overcome the transition part of which can I think be quite difficult but I think that ironically because there is such a knee jerk opposition to it those who will be able to go to the transformation will ironically have a competitive advantage so something to think about.

Rachel Salaman: Oded Shenkar talking to me in London. The name of his book again is "Copycats, How Smart Companies Use Imitation To Gain A Strategic Edge." I'll be back in a few weeks with another Expert Interview, until then goodbye.