Staying Ahead in a ‘Copycat Economy’

Small-business owners know all too well how competitors can knock off, or copy, a dizzying array of products faster than ever.

Thanks to technology and the worldwide marketplace in which most companies now operate, these imitators can quickly drive down the price of a product or service and turn it into a commodity.

Boutique items and proprietary technology become low-cost, mass-produced, unspecialized products.

Wine, private jets, insurance policies, premium coffee and high-speed Internet service, even technology consulting, are just a few examples of the market niches that have been hit by lower prices in recent years because of widespread imitation and competition.

That may be good news for consumers, but not for the small businesses that invested time and resources to create products and build markets.

To survive and thrive, a small business has to learn to constantly innovate in every area, from back-shop operations to products to distribution, says management consultant Oren Harari.

His book “Break From the Pack: How to Compete in a Copycat Economy,” to be published in September by Wharton Publishing/Prentice Hall, is packed with advice for small businesses.

He advises companies to dominate a market or leave it, adopt the discipline of innovation and learn to go beyond mere customer satisfaction to earn premium prices, high margins and loyal buyers.

“I think I’ve hit upon the most critical challenge -- and opportunity -- for companies today,” said Harari, who is also a professor at the School of Business and Management at the University of San Francisco and a member of the U.S. State Department’s Advisory Committee on Leadership and Management.

In 2002, he was named one of the 40 “best minds” in management in the world by the editors of “Business Minds,” an annual book published by the Financial Times and Prentice Hall.

Harari will share his insights today as the keynote speaker at a private meeting of several hundred chief executives at a Vistage International conference in Irvine. Vistage is a membership organization that offers coaching and peer mentoring for small and medium-sized businesses.

We asked Harari to talk about how his ideas could help small businesses compete.

Question: Why write this book now?

Answer: I started to notice that, increasingly, what leaders were facing is what I ultimately called the Copycat Economy. It’s like a perfect storm of forces. It’s globalization. It’s deregulated markets. It’s transparency. It’s technological advances.

All of these things create a particularly compelling and challenging situation, which is, whatever you are doing becomes increasingly imitated and increasingly commoditized.

Q: Why should a small business worry about copycats and commodity pricing?

A: Because it’s become easier for competitors to imitate what you are doing. They can do it faster than before. They can use technology to crush the costs that you have to deal with.

Customers then start perceiving that there is not much difference between all these different vendors. So prices continually go down. Margins get squeezed. It’s harder to say to the marketplace, “I’m different. I’m unique.” There is real price value in being able to say that.

Q: Haven’t businesses always had to grapple with these issues?

A: Look, there’s always been movement toward commoditization and imitation in free markets. That’s what free markets are all about.

The difference is, it happened a lot slower. We used to talk about product life cycles of years. Now people are talking about product life cycles sometimes in terms of just months, and in some industries, like the Internet dating services, the life cycle could be minutes.

Q: Isn’t being a copycat a profitable business strategy for some companies?

A: There are some companies that say, “Let someone else do the dirty work, the R&D;, the infrastructure, all the initial marketing. Let them build the market and then we will simply come in and copy it.” That sounds good on paper, and that used to even have more validity when things were slower and product life cycles were longer.

Right now the market moves so quickly that people are not going to cooperate with you but are just letting you leisurely copy them while they stay inert.

Q: How can a small business compete in a copycat economy?

A: There are probably at least two things they have to confront, two erroneous premises.

One is that they really don’t have to change. A lot of small-business people say, “I serve a very small niche in a geographic area and nobody is going to bother me.” That’s not true at all. Now, the fingers of competitors can reach anywhere. Complacency is a dread disease.

Second is the company that gives up and says, “We don’t have the deep pockets of the big companies. The big companies are going to crush us.” That’s also a false premise.

Q: What advantages do small businesses have in a copycat economy?

A: One of the things I point out in the book is that the best big companies are trying desperately to act like little companies.

They want to be nimble, fast, agile, quickly capitalizing on a trend, the way Steve Jobs did with the iPod, and putting together all the pieces in a new way, the way Ted Turner did in creating CNN or Howard Schultz did in putting together Starbucks.

You know about economies of scale; well, there are really diseconomies of scale.

Q: What can a small-business owner do to break from the pack?

A: The most important thing is to be willing to let go of what no longer creates real value for customers and investors and to be willing to use your resources and your smarts to capitalize on the possibilities that are always out there on the horizon for anyone who really wants to capitalize on them.

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Cyndia Zwahlen can be reached at cyndia.zwahlen@latimes.com.