“Best business practices.” The first time I herd this phrase was Sophomore year of college. I was in business class and we were seated in the round having a discussion about business strategy. I don’t remember the exact case, but it was about a new company entering a crowded market. The question was: how should this new entrant compete against the established players?
One of my classmates, who thought he was clever, stood up and said, “Why doesn’t the new business just copy what the other businesses in that market are already doing?”
The class giggled a little bit, because copying
other businesses was obviously not the right answer to the case. However, the teacher surprised us. He said, “We call that, best business practices.” – and went on to explain how copying other businesses is something that happens all the time and how it can be a good strategy (or part of a strategy).
To be fair to our professor, by his frame of reference, he was right. He had spent his entire career working in more traditional industries that experienced a very slow rate of change. Copying your competitors, in some established industries, was a sustainable strategy in the pre-internet disruption era.
However today – we live in a completely different world. For the most part, copying your competitors has never been a worse idea.
In today’s world, there are really two kinds of businesses: disruptors and disruptees.
Copying a business that is in the process of getting disrupted is obviously a bad strategy because you too will eventually be subject to that same disruption.
However, copying a business that is doing the disruption can be an equally bad idea. Especially in high tech, the competitive landscape and market are changing so fast, copying a competitor or set of competitors without deeply understanding the long-term implications of your decisions could land you in a very bad spot.
Don’t get me wrong, it can be very tempting to follow the herd. As a rational person you figure, “Hey, all of these companies are making money – and I think we can do what they’re doing better.” At the time, it honestly feels like a no brainer, especially if you’re operating in an industry with lots of other players. How could all these other companies be wrong? It’s sometimes not until you see the whole herd running off the cliff that you realize you were right not to follow them.
When you’re on the side of disruption you have to make decisions every day and consider the impact for the next five years. It’s tempting to take the easy way out and copy other players in the market – especially if those competitors are making lots of money today. However, you still need to think long and deep about the prospects for the next five years.
In some ways, that’s the secret to running a disruptive company: you have to make decisions every day in service of the next five years.
If you do a good job – by the time your decisions reach maturity – all of those competitors, who at one point you were tempted to copy, will no longer be in business.