Software Management
Risky Business
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23 Jan 2002
Over at Cooper Interaction Design, Wayne Greenwood wrote a piece called "The high risk of low-risk behavior" in which he argues that, in software, innovation and taking risks is always better than doing things the way others do.
His reasoning generally makes sense, but I disagree with his point about copycats. It is not always the best idea to create features if your competition can easily copy them.
In the 1990’s Duracell started putting disposable testers in battery packages. Eveready responded by placing testers on the batteries themselves. Duracell quickly copied that innovation and included testers on their batteries.
The fact that both companies include this feature has eliminated the competitive advantage it was supposed to have created. Now each company has additional R&D, production, and marketing costs associated with a feature that provides no advantage over the competition. Prices couldn’t be raised; consumers wouldn’t pay more for this feature. So the end result of this innovation was that both Duracell and Eveready saw profit margins fall.
It is always important to consider the reaction of your competition when planning any change in strategy. "Move fast so you will always be first" is a very dangerous way to play the game.
Comments
James Buckley
February 1, 2002 8:42 AM
The logic against that would be, then why bother innovating at all? Advantages are always temporary in business, its a cat and mouse game that could not exist at all without constant innovation and refinement.
Adam Kalsey
February 1, 2002 5:10 PM
Obviously innovation is important, but it is also important to consider the capabilities of your competition as well. You have actually lost if you use vast resources to create an innovation and then your competitors cheaply copy it. If your reason for innovation is to create a competitive advantage, then you have to understand how to create a sustainable advantage. It does no good to create advantages that you immediately lose.
Gerri Ann Campau
June 6, 2006 1:23 PM
Mr. Kalsey, I am writing a thesis paper on business. It seems I can choose any subject within management. I have chosen to write it on companies and their competitive advantages. Your paper on battery companies using the same idea of technology is exactly what I was looking for. I am hoping you can send me some information on articles posted after 2004 about where I may find factual information. Thank you for your help,,,Gerri Ann Campau
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