Create your competition (no. 29 in our list of IP mistakes)

It’s the end of the first Batman movie from 1989 and Batman is fighting his nemesis, the Joker. Batman says, “I’m going to kill you!” The Joker says, “You IDIOT! You made me.”

So it plays out in real life too.

We make our own competition. From whom do you think the low cost airlines bought their used airplanes? Wasn’t Kodak a pioneer of digital photography? From where do the generic drug manufacturers get their compounds? We encounter, in creating your competition, a mistake that is sometimes unavoidable. Success breeds competition. So maybe the best we can do is to seek to contain the potential damage.

We create our competition all the time, and in fact, the more successful we are, the more likely we are to create our nemeses. A host of generic companies cued in on Lipitor® because Pfizer and its customers had made it successful. Wellcome developed and sold the first H2 antagonist cimetidine to treat stomach ulcers, and claimed around the product very narrowly. Glaxo made some relatively minor structural changes and came up with a similar, slightly better product. With heavy marketing, the Glaxo product, Zantac®, fairly quickly overtook Tagamet® and Glaxo became the biggest UK pharma company on its back, allowing its management to dominate a Glaxo and Wellcome merger down the road. Apple proved that selling personal computers made a viable business, and hence an IBM rival appeared. IBM in turn, through choices about which technology it would keep propriety and where it would seek outside solutions, opened the door for Intel and Microsoft to control chips and software. This created an opportunity for the host of computer clones to build upon IBM’s success, a plethora of rivals that both IBM and Apple had to contend with. Apple, in the day of the Batman movie, says, “I’m going to kill you!” IBM says, “You IDIOT! You made me.”

A key purpose behind IP is to delay the rise of competitors that your success fosters. Pfizer secured a period of time to sell Lipitor® before generic rivals could enter the fray, fully recognizing that the success of the compound that became Lipitor®, when later sold by generic companies, could make those generic rivals even stronger competitors in the future. Creating competitors becomes a mistake when we do not thoughtfully understand and manage the consequences of our success or when we leave the door open for a rival to offer better, faster, or at less expensive solutions that we could have kept to ourselves. Sometimes counterintuitive thought is in order.

Apple is a rival of Microsoft as providers of the operating systems used on most personal computers. Despite this rivalry, Microsoft allows Apple to offer the Microsoft Office® suite to customers of Apple computers. Why help a rival be more successful in the business marketplace that Microsoft considers sacred? One factor in the equation is to avoid creating a competitor of Microsoft Office. If Apple could not use Microsoft Office® programs like Word® and PowerPoint®, Apple could seek equivalent programs from another source. If those programs succeeded on Apple, the creator of those programs might seek to make a version compatible for PCs to challenge the dominance of the Microsoft Office® suite.

An enormous transfer of knowledge is now underway as established North American and European companies send know-how overseas to countries like China and India. This will no doubt help to create a host of competitors as bright managers and engineers from those countries create their own solutions and enterprises. Chinese personal computer maker Lenovo, for example, traces its roots to IBM. This transfer of knowledge stems from chasing the immediate benefits of low-cost production overseas even though it accelerates the creation of new competitors over the long-term. You cannot show people how to build solutions without expecting them to learn how you created them. The dialog could play out again as Silicon Valley says to new Chinese hi-tech rivals, “I’m going to kill you!” China’s hi-tech says, “You IDIOT! You made me.” The key then is to never let the creation of competitors take you by surprise.

(This is number 29 in our list of IP mistakes and how to fix them.)

[Image credit: Arty Smokes (deaf mute)]

2 Comments on “Create your competition (no. 29 in our list of IP mistakes)

  1. I agree, and in many ways the outsourcing trend has come back to bite us in the US. It seems many US companies that decided to save a few dollars by outsourcing ended up shooting themselves in the foot — by outsourcing, they armed foreign companies with the knowledge and skills to become their own biggest marketplace competitors. In this sense, the decision to outsource too often seems to be penny-wise and pound-foolish. I certainly hope that one day corporate executives will wake up to the scourge of foreign IP theft and realize that some of their outsourcing decisions harm not only American workers, but also themselves.

    • Thanks on your comment PL – Add to this that many organizations encountered new problems with the outsource approach that did not allow them to gain even the anticipated savings…see previous posts on the topic…Outsourcing is a tool that can produce benefits, not an all-encompassing solution. A lot of companies jumped on the bandwagon without really thinking it through – same way a lot of companies followed the lead of Jack Welch in dropping businesses that GE could not be number one and two in – and then when you really research it, you find that Jack didn’t actually do that all the time…

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