Emulation: the untapped supply of corporate innovation

When I talk to entrepreneurs about Rocket Internet’s copycat model, I get two kinds of reactions. Some of them grunt, considering “imitation” as the lowest act in the world of entrepreneurship and a true disgrace for those who dare take a crack at it — or build an empire on it… Others see in this model the genius of true entrepreneurial minds; identifying an opportunity and tackling it before anyone else does. In fact, emulation — or imitation — is true (and smart) innovation when adapted to a new market: it offers that market something different, while considerably reducing risk and making the most of other people’s prior experience.

The rise of the copycat model

It all started with a “no” from eBay. The Samwer brothers created their first venture, Alando, as a response to eBay’s American focus, neglecting Europe and the rest of the world. They decided to copy eBay’s business model in their market — a business model that could not be protected by patents — and focus on rapid growth through aggressive advertising. The venture grew so quickly that a few months later, eBay decided to buy them out for $53 million. This first success gave the brothers the financial edge to replicate this model: Rocket Internet was born.

The company was built on the identification of business models (in their case, e-commerce) known to meet needs and address pain points, replicated in markets where the need was not covered. Their strategy: grow ventures as quickly as possible and sell them (partially or totally) to the original model, to harvest the funds needed to create new ventures. For instance, the e-commerce platform Jumia meets the need for a reliable delivery service in Africa, unmet by the local post offices and conventional transport services. By using validated business models, the company can focus on speed of execution to quickly take the leadership position on the new market, creating an obvious “exit path” when the copied company decides to expand geographically. That’s what happened with CityDeal, acquired by Groupon to conquer the European market, or Daraz operating in South Asia and Southeast Asia, now owned by the Chinese e-commerce platform Alibaba.

In a sense, what may be seen as a threat to the original venture can also be considered as a great acceleration for the development of one specific business model throughout the world. The question is: can the copycat model be applied to corporate innovation?

Imitating the copycat model

I reckon that one of the main roadblocks to innovation in companies is the belief that innovating is costly and takes forever. The idea that innovation consumes considerable amounts of time and money — and is therefore painful per se — often relies on the initial hypothesis that you are starting from scratch. The truth is that in this “start from scratch” scenario, you’re usually unsure of quite where you’re going, and you will waste valuable time and resources. However, a lot of this time-wasting comes down to the way in which innovation is approached. Corporates tend to lead with their assets, pushing new products or services onto a market, hoping they will find and address an unmet need and thus, be met with demand. This is the reason why resources are wasted and why roughly 70% of new products fail. This is where imitation can be a game-changer.

Unmet needs can be difficult to pinpoint, and that’s why imitation can bring value to the world. Technology adoption often follows a geographical path (from country to country). By exploring trends and startups in more advanced countries for a given technology or topic and comparing them to what’s happening in your own market, you can identify these silent, unmet needs. In a globalized world, the probability of having that same pain point present in your market is high. Focusing on successful foreign business models helps minimize the innovation cost and accelerate a venture’s time-to-market. The needs and pain points are clear, the direction is easier to set, the business model may need tweaking and adapting to local specifics but overall, the innovation burden suddenly feels a lot lighter.

Emulation is particularly interesting for ideas that:

• are easy to replicate (thus excluding difficult technologies that could take years to develop)
• can be applied to your market, are adapted to local customer needs, market specificities, and regulations
• offer a strong and unique competitive position in your market
• address markets with significant potential commercial value
• are aligned to your company’s business strategy and objectives

The benefits of imitation are clear, but the value one can reap from it doesn’t stop there: the real multiplier effect occurs when you are able to take full advantage of the learnings that the original model offers.

Whether you’re an entrepreneur or a corporate, the very first rule for innovating is: start with what you’ve got — your personal or internal resources, your network, your knowledge of a specific market or technology, your capabilities, your leadership…When you imitate, what you start off with is…quite a lot!

Boosted execution

“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” — Steve Jobs.

When it comes to the execution of your idea, emulation is a no-brainer. There is a huge amount of free data, free knowledge and free experience to be gleaned, simply by studying an original business.

The business model is an obvious starting point. Beyond the raw model that may be your inspiration, there may be a history of MVPs and pivots, of directional changes, that help fathom what lies ahead in the market(s) you are targeting and can help you decipher in advance what adaptations may be required. This can add up to a tremendous amount of saved time and resources.

Then there are the operational elements, such as the partners that were used along the way and the technology selection. If you are able to retrace the partner selection process, how and why the relationships were built, you may be able to save precious time building your new venture and ultimately, accelerate your go-to-market. The same goes for technology: if you already know what works, the risk factor diminishes drastically, and speed of execution improves.

Additionally, corporates who wish to innovate and to build new ventures, usually need a pretty good upfront assessment of what the investment will look like, whether cash-wise or skill-wise. They must get budgets approved, and more importantly, must figure out whether they have the right resources internally or if they need to externalize. Analyzing the business you are aiming to emulate will help the corporate better estimate these resources and limit the investment risk. Business model choice and the solution-problem fit will also see their associated risk levels decrease significantly. This means the team can really focus on execution, on adapting the model to the target market and growing as quickly as possible — not on politics.

All this data, knowledge and experience are available — for free.

For too long, many corporates have spent years and millions developing new products, services and ventures with little results. Some have thrown in the towel and left the dance floor to ambitious startups. Sure, emulation may not feel uber-groundbreaking, but it is innovation — and the resulting ventures are well positioned to succeed through enhanced execution, and ultimately, to deliver more impact. Exploring trends and startups in more advanced countries for a given technology or topic could help you carve out a niche and give you an edge for rapidly developing a venture in your market(s) in a more cost-effective and de-risked manner.