Why copy pasting is a brilliant business strategy? Ask Google!
Google makes more money than any other website in the world. But at the heart of the search engine's success is a business model that was copied. The interesting story is recounted by John Mummins and Randy Komisar in their book Getting to Plan B: Breaking Through To a Better Business Model.
Google was started by Larry Page and Sergey Brin who were both PhD students at Stanford University. Page and Brin thought their search engine was much better than the ones already in the market. So they put out their semi-finished version to see how well it functions.
The search engine was a huge success as it gave users more relevant results. But even with the huge popularity of the search engine, Page and Brin were not making any money out of the search engine.
As more and more people started using Google, Page and Brin had to buy more servers to support the additional web traffic. They had some PhD grants that could fund a portion of the cost. But Google had to start generating money if it was to be a sustainable business.
The business model, which led to the success of Google, was copied from a company called Overture, a paid search specialist company, based in South California. As Mummins puts it, "They actually stole from a company called Overture, based in South California."
Google wanted to have an objective search engine as well advertisers. "So when somebody is looking for a tennis racket, we will allow sports goods companies to place an ad so that person can see it. Overture's genius was they separated the two. So they kept the objectivity of the search but on the other half of the page they said, here are the paid results. And you, the user, click on our objective links and if you want to click on our paid link, you can do that too," explains Mummins.
And every time the user clicked on the paid link, Google would make money from the advertiser. This bid for patent mechanism, which allowed the search engine technology to be combined with text ads and an ad placement mechanism, was pioneered by Overture and they even had a patent on it.
The US Patent office had issued Patent 6,269,361 also known as the 361 patent to Overture in July 2001. "Now that is not exactly a rocket science idea. It's just to put objective search on one side of the page and paid search on the other side of the page. And yet that simple idea was stolen from Overture, and they had to pay Overture, they got sued, but they settled," says Mummins.
The new darling of the web, Facebook, has also been accused of copying the idea of a social networking site from the twins, Cameron and Tyler Winklevoss. The twins sued Facebook and the last has not been heard on this case.
What these examples clearly tell us is that imitation or copy-pasting what others are doing is a prevalent and successful business strategy.
Peter Drucker referred to IBM as the world's foremost creative imitator. In fact, as Oded Shenkar writes in his book, Copycats - How Smart Companies Use Imitation to Gain a Strategic Edge, "IBM repeated the feat with a personal computer that took the best of the Apple and Commodore machines, among others, and combined them to create the first commercially viable product, only to lose out to clones led by Compaq and Dell ."
Another great example of a company that started a new category but never got around to leading it is White Castle. Walter Anderson, the founder, came up with the concept of a fast food chain way back in 1921, only to see a slew of copy-pasters descend on him, and copy everything from the store design to his operating processes.
The first credit card was issued by Diner's Club and not Visa or Master Card which are the most popular now. In India, Hindustan Unilever Ltd in the early 80s was having a tough time fighting Nirma, a low-end detergent.
Instead of diluting the positioning of Surf, their premier detergent, they launched their own "Nirma" and called it Wheel. Over the years Wheel became a bigger brand than Nirma. Other than this, scores of Indian pharma companies survived and thrived by copying drugs produced by multinational companies, when the process patent regime was in place.
Captain Gopinath had the vision to start a "low-cost" airline Air Deccan, a model soon to be copied and improved upon by other airlines like Go Air and Indigo .
Recently, Apple sued the South Korean company Samsung for copying "the look and feel" of its iPad tablet and iPhone smartphone.
One reason why imitators are so successful is because their costs are lower than that of innovators. Bessen J And Maskin E. estimate in their research paper, The Imitation and Diffusion of Industrial Innovations, that overall costs in case of imitators are around 60 to 75 per cent of the costs borne by the innovator.
As Shenkar explains in his book, "with the innovator and pioneer paving the way (and paying for it), the imitator enjoys a free ride. It saves not only on research and development but also on marketing, because customers have already been primed to use the novel product or service. The imitator avoids dead ends."
So the moral of the story is, if your business model is not working, look around and you might just find something.
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