If you were a stand-up comedian would you use Jay Leno's jokes? If you were a film maker would you copy Star Wars? If you really liked motorcycles would you copy Harley Davidson? Why, not? All three are famously successful. If they've got a good thing going couldn't you do the same and capitalize on the momentum they've already started?
Recently I've received an unusual amount of calls from people who want to copy someone else. Since the big show in 1995 I've noticed a growing trend in copy-cat companies. These are companies that see what someone else has been doing and try to duplicate it. The vast majority of these copy-cats fail and fail miserably, sometimes as many as thirty or forty per year, especially since 9/11. Often they don't make it past one trade-show.
It's remarkable that so many creative people were not creative enough to come up with their own product ideas. Some blatantly knock-off some one's products, while others just can't see that their creations are just not that much different from others'. If you've seen what someone else is doing and think you can do it better, please take this reality check before proceeding.
First. The instant you copy someone you instantly create a competitor -- one for you and one for them. This means that you need to immediately worry about quality and price. You don't have the advantage of a monopoly like they did when they first started. In a way you've given them a head-start, and that might be many years of experience that's already behind them.
If it costs more than $500,000 to introduce a new product to the general public imagine what it would cost to launch your own product, then overcome and pass your competitors. It's unlikely that you will ever get over the hump. This process might take ten years if you ever do. If you were the first it might only take one year to introduce a new product, if you copy it might take twenty.
When you start any business it takes some time just to learn the ropes. Usually about three years. Of course that education is always expensive. If you copy someone, they've already made and paid for those mistakes. You might come along an think that you can do it better -- and start with one of the mistakes they've already made. Unfortunately for you, they will observe this and use their knowledge to your disadvantage. Years ago, when I was in the advertising business we had some people who decided to that they wanted to do what we were doing. Fortunately for us they bragged a lot about it. Because we had already been through the challenges they were just starting I knew just what to do to knock them out of the picture. It only took about an hour to stop them in their tracks. Fortunately for both of us they dropped it and went back into the construction business.
If you copy someone, especially at face value, you will only get about 80% of what you copy. They might have a tiny amount of a chemical in their formula that makes a big difference in performance. They probably have developed a little trade secret that you'll never guess simply by looking that their product. You might make harmful assumptions based on your limited knowledge that will lead to big trouble. If you plan to be a head-to-head competitor against another company you need to offer a product or service that is significantly better and much more visible than theirs.
For example; When I was in the advertising business we had a rock-solid contract. Our Competitors had none, just an invoice. After a year they finally figured out why they couldn't collect money from their customers but it was too late. They wilted away unable to collect a small fortune in old debts.
Low cost is not king, especially in our industry. All the companies who made economy products or cut their prices are now out of business. Don't think that you can make the same thing for less money and sell it cheap. Unless you are a major player (selling multi-millions per year) you can't afford to "sell in bulk." Just in case you don't know, buyers of bulk products buy at 60% of retail. I've seen many, many people get large contracts, work their heads off for a year, only to break even at the very best. If you get an order for a million products all you have to do is loose a penny on each item and you still loose ten grand.
Years ago I ran into a guy who wanted to copy himself. He ran a used lumber lot and at the time told me he had only lost $5,000 that year. He was enthusiastic to start three more lots until I pointed out that his losses would then be $20,000 per year. Fortunately for everyone he decided to drop the project all together and do something else.
Make sure there's a market. Often, especially in our business, the life-cycle of a product line has expired by the time people start to copy it. I'm amazed all the time by people who want to start making something that has been on the decline for years. I still get calls from people who want to copy something that I did years ago. I don't stand in their way, but I make sure I get my money up front.
If you make some exotic concoction you can be put out of business the instant someone publishes the recipe on the web. This has recently happened to stage blood. When someone does publish it on the web and everyone thinks they've found something to make and sell. If more than twenty other companies sell the same thing this year there will probably be forty companies next year. Eventually the stage blood thing will backfire because the formulas are so awful.
If you own a company and it's doing well, expect to be copied -- from the inside. Years ago, when we were in the advertising specialty business we knew that it was inevitable that we would be knocked off by an inside salesman. The reason we knew this was because my partner was an inside salesman for the company he knocked off. They had made the mistake of exposing their sales staff to their technology. Once he saw that he could do the same thing for less than a thousand dollars he was in business. This happens all the time. Often employees see something that they can do better. I used to be a engineering consultant for a medical devices company. That company failed a few years ago, but several key and competent employees pooled their knowledge to start another company. The new company used all the great ideas the former company refused to implement. The result was a new, strong, lean, innovative operation.
Have you noticed that the people at the top of the major search engines seem to stay there while everyone else fades into the backpages? If you are first you will likely remain first. If you start this year against someone who has been around for a decade you will always be ten years behind them. Web marketing is wonderful, but it rewards credibly much more that it rewards sincerity.
Only one out of ten patents make money for their owners. You might spend $13,000 on a patent, but you might spend $100,000 defending it. Many things can't be patented. Some things are just not worth it. In our industry few people ever bother to get a patent or formal copyright. There is a reason for this. Please speak to a patent attorney and do a patent search before you begin. If you infringe on a patent you will have to pay $250 to $400 per hour to defend yourself. When you copy, or if you choose to ignore patent protection you enter into a dangerous gray area that you will someday have to defend. This might easily put you into personal bankruptcy. Sometimes a lawsuit won't appear until you are ripe. If someone steals your idea for a movie, wait until they are rolling in money before you make your move. If you sue too early you will miss out on the golden egg.
Don't expect to grab customers. Customers are usually very loyal and don't want to bothered by making a bunch of decisions all over again. If you copy, expect to gain and service a new set of customers in your niche. Trying to cut the grass of your competition will be costly and they are in a much stronger position than you are. All they have to do is a make a small adjustment or two and they've got you scrambling to pick up the pieces.
Aggressive isn't better. During the last recession I started to get calls from local printing companies. For some reason they thought that an aggressive salesperson would help business. In fact it put me off. Most of them are now out of business. If I have a choice I'll go with the people who are polite and pleasant to speak with. If I don't have a choice I'll just put up with the rude people until I can find a new supplier. Please don't think that aggressive is enough of an improvement that it will help you capture market share -- after all, the company you copy can do it too, at a moment's notice. If it doesn't seem like the company you wish to copy is being aggressive there might be a reason for it, such as good solid market share. Don't forget they might already have tens of thousands of customers and you might only have ten. If I need to build business during a slump I've already got a great mailing list with thousands of people whom I know will spend money -- they are my established customers.
Make sure you won't blend in to the woodwork. If you copy a business that already has more than three or four competitors then you run the risk of being camouflaged. Especially if your company identity is difficult to distinguish from the others. You can overcome this of course with plenty of money in advertising, or better yet, effective advertising. Expect to spend more than $100,000 per year to get started. Also, do some marketing tests, not only for your product but for your company and company name. It might cost ten or twenty thousand dollars, but it might save you from wasting hundreds of thousands of dollars later.
Kleenex (R)is a great example of this. Kleenex(R) is a brand name,. A lot of people buy facial tissues and still call them Kleenex(R). Have you ever heard of another brand of the same kind of product that wasn't accidentally called Kleenex(R) by the consumer? Can you imagine the millions of dollars you would have to spend to establish a brand name that would eclipse Kleenex(R)? I don't think it can be done. In short, don't waste time and money if you will be invisible from the start.
Lastly, if you still feel like copying is a good strategy consider what it really says about your business sense. Poor strategists do what they've seen other do. Innovators create their own products with equally creative marketing. If you have a marketing degree from a reputable business college please remember that you've spent the last two years studying what others have already done. Successful people have good business sense and experience in the real world. You can't copy good sense, you have to have it. Good sense says what everyone says all the time -- good idea, good product, good company. The instant you copy someone else you tell the world that you don't have a good idea of your own. If you can't come up with an original idea then it's unlikely you will have a good product or a good company.
My customers are PDC, or Pretty Damn Clever. I'm amazed that their skills and ingenuity. For these people coming up with original ideas is easy. If you are one of my customers please take just a little more time to think out your idea until it becomes original. Please do your homework including some solid numbers. Please do the patent research. Please don't become infatuated with your idea to the point that you throw away all good sense. I want you to be successful because it helps me too. I love it when I can point to a going enterprise and can say, I helped those guys get started!
Good Luck,
Steve Biggs
April 2006
NOTE: Our next article will be about making bids and quotes.
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