Driving Business Growth Through the Practice of Creative Imitation: Part I

Editor's Note

We live in a business world that increasingly worships innovation. Why? Because it's essential to sustaining long-term growth and profits.

But before all our energy and imagination is directed at producing and managing innovation, it's useful to look at the realities of business life.

Most "newness" is not innovation at all; In reality, it's what Peter F. Drucker called "creative imitation," and what Tom Peters, American writer on business practices, colorfully named "swiping from the best with pride."

Every organization desires to grow. But only a handful have a growth policy, let alone a set of explicit growth strategies.

Even fewer have a systematic, well-organized approach to carefully and thoroughly identify “low hanging fruit” opportunities for growth.

Growth can occur through acquisitions and mergers, innovation, creative imitation and aggressively identifying and exploiting successes.

Creative imitation and exploiting identified successes are typically the specific job of individual managers/executives within their own individual sphere of responsibility.

This article discusses creative imitation. In a future article, we'll discuss the process of identifying successes and how to produce and manage innovation.

Every organization needs a balanced combination of innovation, creative imitation and exploitation of success.

Introduction

Growth is essential to every organization. The opposite of growth isn’t "no-growth”—it's decay.

The first question to ask in a growth policy is, "How much growth do we need to avoid becoming a marginal player as our market grows?"

Bruce Henderson, co-founder of the Boston Consulting Company, coined the phrase "the rule of three and four."

Said Henderson: "A stable competitive market (or strategic segment of the market) never has more than three significant competitors, the largest of which has no more than four times the market share of the smallest."

Henderson, over many years, presented empirical evidence that cost is a function of market share as a result of the experience curve effect.

Simply put—in many situations—with increasing volume or units sold, total operating costs continuously decline.

With healthy growth (i.e., growth that adds performance capacity, not fat), productivity within the organization tends to significantly increase.

The point? Organizations that have the lion's share of a strategic market segment are quite likely to have significantly higher profit margins as a result of lower costs and greater productivity than marginal business rivals.

When an economic downturn occurs, higher profit margins enable most market leaders to survive even the sharpest possible setbacks.

Marginal businesses in an industry, no matter how large, suffer disproportionate shortfalls in profitability. And they tend to fall further and further with every turn of the business cycle.

An Example

Niche-focused online publications of all kinds depend on advertising revenues. In good times, marginal publications (those without a dominant market position) survive quite well because advertisers still include them in their budget.

But when the market declines, advertisers are likely to slash their advertising budgets by eliminating spending on marginal publications and concentrate their expenditures on only the biggest and best publications.

Bottom line: No business can afford to slide for lack of adequate growth into a marginal position.

How to Achieve Healthy Growth

Healthy growth is not automatic; It doesn't just happen.

It requires a disciplined approach (e.g., a strategic marketing planning process) that renders explicit each growth strategy (i.e., creative imitation, exploitation of identified successes, organization of new business units to carry out new innovative ventures).

Every growth strategy must be converted into a specific work plan for which someone is responsible.

These work plans lead to goals and targets. What results are needed from the selected growth strategy? Where? When? How?

The work plan is a tactical tool that contains work assignments, deadlines for performance, budgets and specific accountability.

All growth strategies must be converted into specific tactics to convert them from good intentions into operational reality.

A Few Words About Innovation

Breakthrough innovations are always a big gamble. They require great effort and the employment of first-class resources, especially human resources.

In the majority of cases, they require major spending on research and development and significant capital investment.

Of course, innovation is a necessity to sustain growth. And it must be pursued in a disciplined manner for long-term business survival when the situation demands doing something totally new and different.

(In Part II, we will distinguish different kinds of innovations.)

Breakthrough innovations typically carry the one risk most businesses can't afford to take: Being unable to exploit success and defend against the inevitable hordes of both "copycat" and "creative imitation" competitors.

It's always wise for the originator/innovator to think through, in advance, what it must do to fortify its market position to protect itself against the near-certain market entry of rivals all wanting "a piece of the growing pie."

(Defending existing markets will be discussed in detail in forthcoming articles as well).

Take-home message: Drucker considered the pioneering/breakthrough innovation approach very risky because the probability of success in creating new markets is, typically, quite small.

Simply put, in many instances "pioneers get killed by the Indians." This reality leads many organizations and their executives to pursue "creative imitation" and "exploitation of success" growth strategies and leave the job of innovation to others.

The High Failure Rate of New Ventures Encourages Growth Through Creative Imitation

Most seasoned executives know it's much harder to get support for a novel/truly innovative idea than an imitative one.

Senior-level managers preach the need to innovate.

But they truly subscribe to the caption under a classic New Yorker magazine cartoon: "What we need, gentlemen, is a completely brand-new idea that has been thoroughly tested."

People who aspire to high places learn very quickly it's better to avoid high-risk projects, new ventures that might go wrong.

Many learn, by witnessing the fate of others, if things go wrong in a new venture, management might not be so forgiving.

Understandably, and without realizing it, most senior-level executives have a higher opinion of people who succeed at low-risk tasks than people who fail at high-risk tasks.

New Venture Funding Realities

Let's be blunt: It's much easier to get funding for a "creative imitation venture" than something that’s totally new and different.

In most cases, when true innovation occurs in a mid-size or large organization, it has the support of very senior-level executives who realize the importance the innovation could have on the future success of the organization.

Without that support—and genuine assurances one's career will not end if the new venture fails—most executives opt for "creative imitation," "exploiting successes" and "growth strategies."

Reverse R&D

Exploiting what you have falls into the category of "identifying and capitalizing on successes."

Exploiting what others have can be classified as employing "me-too" and/or "creative imitation" strategies.

Executives with real corporate battlefield experience are well aware that the possibilities of innovation within their own company are limited.

Therefore, they aggressively monitor what competitors are doing and look to "imitation" as a survival and growth strategy.

Indeed, the term "reverse R&D" refers to products, services and processes aimed at creating imitative equivalents of innovations pioneered by others.

(Reverse R&D requires a disciplined process of active surveillance and watchful waiting with respect to competitive offerings. These processes will be the subject to future articles.)

See examples of how Xerox, ADP, Paychex used creative imitation to differentiate products, ultimately leading to fundamental change (or not), in Part II.