You Can't Copy the Competition Forever

Sure, imitation is the sincerest form of flattery. Apple and Microsoft imitated Xerox Parc developments to make billions. But at some point, every company needs to innovate -- not imitate -- to remain relevant.

In Microsoft's case, the true innovation involved APIs -- like the Win32 API -- and low-cost licensing models that allowed its software to proliferate, with thousands of third-party developers jumping on the bandwagon.

In Apple's case, the true innovation involved tight hardware-software integration, and then controlling end-to-end ecosystems (iPods running music from iTunes, etc.) that were intuitive to navigate.

What's the situation in your business? Plenty of I.T. entrepreneurs are running lifestyle businesses. And in may ways, I suspect After Nines Inc. will be a lifestyle business (though I'm still not sure).

With a lifestyle approach, you're basically building a business that will stand the test of time, and you're making sure you generate plenty of cash for salaries, R&D, etc. But it's not really about generating massive growth or intellectual property (IP) that demands a high M&A valuation.

Got An Original Idea?

With a true growth business built on IP, you can certainly "copy" or "borrow" from the competition within reason. But that will only get you so far. At some point, your owners and investors are going to want a healthy return on their money. And that means you've got to break away from imitation mode and move toward innovation mode.

During the transition from imitation to innovation, you run the risk of creating an organization filled with "haves and have nots" -- as I explained yesterday. Your job is to look into both camps to determine who can truly innovate for you, and who the pretenders are.

Pay a premium to keep your innovators. Nurture their ideas into products or services. And find a way to reward non-innovators -- your blockers and tacklers -- especially those who work on the front lines with customers. Fail fast. Continue to copy the competition on some fronts. But determine what truly makes your business unique -- and charge a premium for those unique products, services and ideas.

Now that I've completed this blog and you've read this far, I have a confession. Perhaps we won't be a lifestyle business after all... We hope to have some true innovations out the door later this year.

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