Why Competing Successfully Is About A Lot More Than Just Copying The Technology

from the not-quite-so-easy dept

Last week, we kicked off quite the discussion following my post suggesting that Apple's iPhone patents weren't necessary. One of the commonly used arguments against that is that without the patents, others would simply copy Apple and there would be no ability for Apple to profit. I had hoped that the original post showed why that was wrong -- in showing that copying a product isn't as easy as just being able to reverse engineer it, but perhaps I didn't make the point strongly enough. Copying the technology is just one aspect to competing, and if the market is dynamic, by the time you catch up to whoever you're copying, they're way ahead of you. Witness the iPod. Apple continues to be innovative and pushing the boundaries of what can be done, and while competitors have made similar products, they're always immediately behind when Apple launches something new. Partly because of that there's also the perceived value or brand value associated with getting an iPod as opposed to a competitor's product. Even if it's an exact copy, people know and trust Apple, and trust the quality of its work. They also recognize that since Apple has established itself as a market leader, there's an ecosystem around it that helps support the value of the iPod over other solutions. The iTunes store is one example (supplied by Apple, obviously), but also all of the other accessory makers out there who design products to work with iPods, but not with competing devices. It's clearly a situation where even if someone could copy the technology, that's not really enough to hurt the originator. Apple can still sell its products at a premium, because of a variety of factors.

Now we have another example as well. Microsoft has long viewed Google as a serious competitor, and apparently Bill Gates and the folks in Redmond have been pulling out all the stops to compete with Google. In many cases, they've created products that seem as good, if not better, than Google's versions. Yet, despite all of that, they're losing traffic while Google gains it. Once again, it's not just about the technology, but the perceived view people have of Google as compared to Microsoft. Microsoft just hasn't been able to convince that many people that its search and mapping solutions are as good or better than Google's. Despite the claim that there are "no switching costs" for users to go elsewhere, that's not quite true. The perception that Google is better (and the feeling that it's "good enough") means that there's no reason for people to look elsewhere, and a Microsoft offering would need to be not just better, but significantly better to attract attention. Alternatively, they can work on increasing their brand value as well, in the space of online services. In other words, there are plenty of things that go into being able to innovate and build a successful product -- and simply copying someone else's technology is often a small part of that (and usually not a particularly good strategy). Patent protection only protects that aspect of copying (business model patents are another issue completely), but if they're supposed to encourage innovation, and the technology is only a small part of innovation, then the incentives are mis-aligned. The market can reward innovation without needing government monopolies and protectionist policies. The trick is to continually innovate, not just in the technology, but in the quality, the service and the brand as well.

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  1. identicon
    Dosquatch, 16 Jan 2007 @ 1:34pm

    Re:

    Your argument semi breaks down when it comes to pharmaceutical products.

    Not exactly. Pharms aren't in a constant upgrade cycle like technology*, so you don't have the factor of "by the time you catch up, they're ahead again". When a generic for Prozac came out, it did exactly the same thing in exactly the same way in everything but name (which gets changed to a chemical formulary) for a much lower price. There's very little reason NOT to switch to the generic. By a similar token, if Creative released a "fruit branded compressed digital media file player" that was in all other respects completely identical to an iPod, but for half the price, do you not think the generic would sell better?

    With pharms, you also don't have a 3rd party accessory market specific to a given drug. (Indeed, I have a hard time imagining how any such accessory could possibly be medication specific short of something like a Prozac Pez dispenser...)

    You also lack the community tie-in. Community support tends to pop up not around a particular medication, but rather around the ailment it is meant to treat. These communities tend to focus on treating the disease more effectively and/or less costly, which pushes towards newer medications or generics, but never towards a name-brand if an alternative exists.

    * - the closest analog is something like a subtle change in formulary near end of patent, creating something like "Prozac CR", which gets patented as a new drug.


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