Should you replicate a successful business model?
“People are going to copy your product if you build great stuff. Just because Yahoo has a search box doesn’t make it Google.” - Evan Spiegel
From a very young age, humans learn by copying; it’s a totally natural and common behaviour to mimic and mirror what others do. So, it’s perhaps no surprise that we fall into copying others in business too. However, in the context of the world of business, the results tend to be a little less predictable.
If you look at business magazines, they are usually packed full of stories sharing features of how successful companies achieved what they did. But there are a couple of points worth considering about these stories:
1. Stories are often a dramatised linear narrative, written in the past tense.
2. The story is often the “best face” of what happened and elides much that went wrong that could be vital to understand
3. You rarely get much, if any, of the context that matters. You are forced to make a lot of assumptions
A quote attributed to Sun Tzu is, “All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.”
And this is very much the case when you are reading stories about how other business models work. You can see the results and some of the more obviously successful moves. But you don’t really see how and why they did what they did.
Here’s a concrete example from my own experience:
I worked with a company a few years back that set out to raise several hundred thousand pounds. This is a task that typically takes an early stage company anything from 3-6 months, assuming they can do it at all. In this case, the bulk of the raise took less than a week.
Brilliant! Can you do that? Should you plan to raise money like this? Should you judge your own efforts against that standard?
The missing context was the founders’ personal network of high net worth individuals. So, you can ‘copy the move’, but you maybe don’t see (and probably can’t copy) the context that made this move successful for them.
You should definitely take a step back and ask a few questions before you consider copying someone else’s business model. You can see what they did, but do you know why they did it? Can you see the underlying context? Do you know the assumptions it was based on and which were good/bad? Can you see what they see that makes their choice of tactics make sense?
An extremely important aspect of context is timing. You see, when you copy a business model you are, by definition, changing the timing. What impact is this going to have on how the model will play out for you?
Developing a robust understanding of context is crucial before copying a business model and establishing exactly how important the context was to success. Can the elements of the context, the underpinning assumptions, be replicated?
Sometimes the answer is obvious. These days, who would copy a business model of renting video tapes to people for £2.99 a go? It’d be daft, right? Well, perhaps, but did you know that as recently as 2018, Netflix was making over $60m profit per-quarter from it’s mail-order-DVD business? That’s a pretty decent business right there, so perhaps there are still opportunities in this kind of business model?
The valuable context here is that the needs of the 3.4 million people still subscribed to that a mail-order service at a point where pretty much everyone I (and probably you) know has been on a digital service for years? Why haven’t they made the switch yet? What needs are sustaining that business model? Because there is something there. Something that could potentially still be exploited.
Now, I’m not suggesting that people set out with the intention of directly replicating a business model but it’s fair to say that we all tend to look at successful businesses and think “that could be us”. That’s why it’s very useful to understand how to do it well and to see how a business model was put together.
The Business Model Canvas is a great tool for doing this because it operates at a high-enough level of abstraction to, hopefully, keep you out of details that could be very fuzzy or hard to appreciate. This becomes an even more powerful tool when coupled with something like David Bland’s Assumption Mapping.
Another powerful approach is to understand the underlying profit drivers behind successful business. A good starting point is The Art of Profitability by Adrian Slywotzsky. Combining this with the analysis above would be a great starting point for understanding which parts of a business model make sense to copy.
So, can you copy a business model? Yes.
Should you copy a business model? Only if you understand the context in which was successful, how to replicate the useful parts of that context in your own situation, and how it has made - and will continue to make - money.