Being a Copy Cat Can Pay Off Big When Partners Show the Way to Success

North American companies often pride themselves on their ability to innovate and create exciting new products and services with great benefits for all. However, these same innovations often have an Achilles heel, for example, a design that adds unnecessary costs for providing or maintaining the product or service.

The engineering department that does such a wonderful job of providing these exciting innovations may not have any responsibility for manufacturing the product or providing the service, and may miss these issues totally. Patents can make the problem worse by providing rich profits that suggest little need to improve during the period when competitors are excluded. On the other hand, cost reductions and effectiveness improvements at this time can greatly expand the market and help to discourage competitors when the patent does expire.

According to reports in the business media, this circumstance happened to Xerox in the 1960s, 70s, and 80s. Xerox produced the first plain paper copier, which was an enormous improvement over the existing wet copiers. When the Xerox copier patents began to expire in the 1980s, Xerox was astonished to find that Japanese competitors were selling small plain paper copiers in the United States at prices that were below Xerox's costs for making similar machines.

How could this be? I interviewed some former Xerox officials about this. According to them Xerox executives from the United States flew to Japan to visit Fuji Xerox, the company's joint venture with a Japanese company.

While there, the executives learned that its joint venture could also afford to profitably sell small Xerox copiers at prices well below U.S. manufacturing costs. As the executives discovered, the designs in Japan had far fewer parts, so fewer suppliers were required and the machines were less expensive to assemble and needed less maintenance.

Quickly heeding these lessons, Xerox launched a successful improvement of its copier quality and costs led by designs that emphasized equally innovation, low costs to manufacture, reliability, and ease of servicing. Without the Fuji Xerox experience, it might have taken Xerox many more years to learn how to most effectively design its innovative products in order to create the most success for the organization.

When a company has the field to itself during the period of patent protection, adding partners (from different countries, with rival technologies, alternative distribution and other types of resources) who can provide friendly competition through alternative ways of thinking can be an excellent way to prepare for the inevitable day when unrestrained competitors will arrive. Otherwise, needed innovations will be rejected summarily as not being consistent with the best thinking of the company's top innovators.

Those who rely only on the perspective of one design team in one location will find themselves increasingly vulnerable to all kinds of irresistible forces: changing customer needs, currency shifts, competitive pressure to be more effective, and new ways of providing the goods and services to customers.