Innovation is getting a lot of attention at the moment in development and humanitarian work. Many, including myself, see this as long overdue. But, according to an article in this weeks Economist, this attention may be misplaced. The piece makes a strong argument for the importance of imitation in business, and its advantages over innovation. In this post I want to take a look at these arguments for imitation. I also want to see what complex systems research tells us about the limits and possibilities of such an approach.
I: The Virtues of Copying?
Innovation is essential. Countless speeches, articles and books attest to its central importance – in economic growth, business success, and organisational effectiveness. As a result, imitation is a “heretical idea”. But the uncomfortable truth, according to the piece in this weeks Economist at any rate, is that in the real world, firms that copy others are more successful.
- The iPod, the iPhone and the iPad were not the first of their kind: “Apple imitated others’ products but made them far more appealing.”
- Pharmaceutical firms can be divided into inventors and imitators, and some inventors have joined the copycats, selling generic drugs
- Supermarket own-label products copy well-known brands, making for a multi-billion dollar product category
- High street fashion firms consistently copy innovations from the catwalk.
Such imitators often proved to be the winners in business:
copying is not only far commoner than innovation in business… but a surer route to growth and profits…. studies show that imitators do at least as well and often better from any new product than innovators do. Followers have lower research-and-development costs, and less risk of failure because the product has already been market-tested…”
So why isn’t imitation lauded? The key issue is that the incentives for copying are weak – whether legal, individual, organisational or cultural. Set aside the obvious issue around patents, and we learn that “praise and promotion do not go to employees who borrow from other firms.” A study of how new product development firms go about their work found that none had a formal or informal policy for responding to other firms’ innovations, making them slow to learn from others successes. And there may well be cultural factors at play here, although the piece made what for me was a rather lazy and out-dated comparison: US firms tend to be obsessed with innovation, whereas Asian firms are far better at legal imitation.
II: Imitation or Exploring Adjacent Possibilities?
I finished the piece feeling that there was more to this issue than the author acknowledged. At best, the analysis was incomplete, at worst, very simplistic.
First, many of the successful “copying” efforts highlighted in the article highlights were far from easy or straightforward. The process of imitation involves numerous adaptations and innovations – some of them significant and certainly not cheap.
Take the iPhone, which is held up as a kind of archetype of copying. Clearly it wasn’t the first smartphone, but compare it to what was around at the time and it is clear that Apple weren’t simply copying and pasting ideas. The idea that Apple somehow saved on the R&D costs of the iPhone because of the advances made in prior products seems risible.
To borrow an idea from evolutionary biology, I would argue that the key to the most of the successful imitations that the article presents is really that many of the so-called copycat firms explored the “adjacent possibilities” – the diverse and emergent possibilities that spring up around a new idea, product or process.
Stuart Kauffman uses this concept to explain how such powerful biological innovations as sight and flight came into being. More recently, Steven Johnson showed that it’s also applicable to science, culture, and technology.
The core of the idea is that people arrive at the best new ideas when they combine prior, adjacent, ideas in new ways. Most combinations fail; a few succeed spectacularly. So, copying might succeed – but there are all kinds of examples where it doesn’t.
III: Innovation in the App Ecosystem
Second, and perhaps even more importantly – you need innovators to copy from in the first place. No innovators means nothing to copy which means nothing to sell. To really get to grips with the ‘imitation vs innovation’ debate, the Economist piece needed to pay more attention to the overall system of firms, consumers and products – and the dynamics and interactions in that system. Fortunately, recent and excellent work by two researchers at University College London addresses exactly this issue in the context of mobile applications, and presents some very pertinent conclusions.
The “app economy” of producers and users that has sprung up around the applications that run on mobile phones and devices is nothing short of startling. It has been referred to by industry experts as “one of the biggest economic and technological phenomena today”.
Lim and Bentley – one is a prize-winning software engineer, the other a successful “app entrepreneur” – started with the insight that will be familiar to Aid on the Edge readers: that the app economy was best seen as a “co-evolving system of apps, developers, and users [who] form complex relationships, filling niches, competing and cooperating, similar to species in a biological ecosystem.”
Apple releases very little data on its stores and so the researchers decided that the best way to get around this would be to build an ecosystem model to simulate the dynamics they observed. They programmed agents in their model – appropriately named AppEco – to mimic the behaviour of developers and consumers.
Developers build and upload apps to the app store; while consumers browse the store and download the apps. They also programmed apps – passive artefacts in the ecosystem which are the key means by which the agents interact.
They then programmed their developers with different characteristics. They identified five broad types of developers in the real app economy, and built these characteristics into their model agents. They are innovators, optimisers, milkers and copycats, and flexibles. Although specific to the app economy, there are clear parallels in most other sectors and contexts.
- Innovators are those developers who come up with groundbreaking apps – like AroundMe or TuneIn Radio. In te model, innovators were developers who produced different apps in a variety of categories – including social networking, business, utilities, and productivity.
- Optimisers take a hit formula, such as the Angry Birds franchise, and try to adapt and continually improve it. In the model, these developers were the learners – they took their own best app and made variations on it.
- Milkers have one specific idea and use it repeatedly. They might, for example, create apps for each of hundreds of town maps, rather than building one app that can call up many maps. In the model, they used their most recent idea and varied it repeatedly.
- Copycats build knock-offs of top-selling apps – see Angry Chickens or Angry Dogs – and work by appealing to or confusing users who end up buying the facsimiles.
- Flexibles begin with one of the strategies above, but change their strategy based on the strategy of the top developers.
Lim and Bentley then calibrated the model to match the behaviour of a real app store, in this case, the Apple iOS App Store, which is the oldest and best established store. They used three years worth of publicly available data from the store and primed the model until it closely resembled the behaviour of the real store.
The next stage was to run some “what if” experiments. The specific questions that inspired these experiments have direct relevance to the Economist piece. For example, with so many developers trying out different strategies to increase their downloads, Lim and Bentley wanted to know if an innovative developer would receive more downloads compared to a copycat developer.
At the start of each simulation of the App economy, all five categories of developers contributed an equal number of apps, but different constraints were placed on the system. A whole range of different scenarios then evolved, including the following:
- If the proportion of apps from each group was kept constant, copycats made the most money initially.
- Over time, however, the overall ecosystem suffered from a lack of novel products. Dissatisfied users moved onto better platforms
- Copycats rely on good apps created by other strategies; it is extremely difficult for an ecosystem to support a large proportion of copycats. (This result mirrors the app stores in the real world – copycat developers regularly appear and take advantage of the success of others, but nevertheless their strategy remains in the minority.)
- When consumer choices dictated which apps were successful, it was the optimisers who sold the most apps, followed by innovators, milkers and finally the copycats.
The general conclusions in the authors’ summary paper seem clear:
In a complex ecosystem no strategy can be a guaranteed winner, but our results indicate that some strategies should be chosen more frequently than others. Innovators produce diverse apps, but they are hit or miss – some apps will be popular, some will not. Milkers may dwell on average or bad apps as they churn out new variations of the same idea. Optimisers produce diverse apps and tailor their development towards users’ needs. Finally, Copycats may seem like the best strategy to guarantee downloads in an app ecosystem, but the strategy can only work when there are enough other strategies to copy from. In addition, this strategy can only exist in a minority, otherwise app diversity will decrease (many duplicated apps result in a scarcity of some features desired by users) and the fitness of the ecosystem will suffer.” (emphasis added)
IV: Conclusions: Mix it Up
Both of these ideas – “adjacent possibilities” and the ecosystem model – suggest that the Economist article downplayed the difficulties and limitations of imitation. While it briefly acknowledges Schumpeter’s concerns about imitation dominating industry, the overall tone is bullish, suggesting that: “copying is here to stay; businesses may as well get good at it.”
The reality, however, is that copying is seldom a straightforward matter, and can take as much creativity and resources as innovation.
And there should be serious concerns about the overall health of a ‘ecosystem’ dominated by copycats. Copying is a strategy that can only work for a minority of players, and then only for limited periods.
Any lessons here for the aid system, I wonder?