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Innovation as a form of Cheating?
by Peter DeJager

If someone creates a faster, cheaper, better or generally more efficient way to produce the same product as you, allowing them to sell their product at a price significantly less than yours, or securing a great market segment... are they cheating?

Before you answer the question, consider its flip side. If your company found a faster, cheaper... you get the general idea... are you guilty of cheating?

These are important questions for any business -- and even for entire industries -- because they determine how our organizations react to the 'threat' of emerging competition. If you think innovation is 'cheating', then you'll respond with some form of costly legal action in order to protect your market from the interloper. On the other hand, if you consider innovation a fair business practice, then you'll rise to the challenge and find a new (innovative) way to compete on the new playing field.

Strangely enough, people who have their lawyers answer "Yes!" to the question in the opening paragraph, often have no qualms about having those same lawyers answering "No!" to the second. I wonder why?

To start with an obvious example, there's Napster, an innovative way to distribute music that originally had the Music Industry crying foul.

To their belated credit, the music industry has at long last accepted the inevitable and is beginning to find ways to take advantage of the Internet. It took a while, and the transition isn't complete, but they're moving in the right direction. The success of ITunes trumpets the sound of reluctant capitulation.

Here's another, more recent and ongoing example. Canadian Vintners are renowned for their production of Ice Wine. Ice Wine is the result of having a late harvest of grapes still on the vines during a deep freeze. The frozen grapes lose the bulk of their water through sublimation, leaving behind a high sugar content juice which is extracted by crushing the grapes at -8 degrees Celsius. This results in a sweet, delicious, very expensive, exclusive, limited quantity dessert wine. A small bottle of this nectar of the Gods costs around $100. (This writer will eagerly accept all samples for a future review article.)

The notion that grapes on the vine, "destroyed" by a snap freeze could be made into an extremely profitable product was a stroke of genius. It is the ultimate extension of the old adage of turning lemons into lemonade. Canadian Ice Wine is recognized as the best in the world, and we "own" the global market.

Or we did. There's a group of upstarts on the horizon, with innovative thinking up their upside down sleeves. Vintners in Australia and New Zealand have decided that relying on the weather to randomly decide when to freeze the grapes was, in a word, "inefficient". They decided that the refrigerator was a much more reliable way to freeze grapes... besides; they could use it in areas without ice storms and blowing snow. They gather regular grapes, and then freeze them for the "same" effect. Once frozen, the natural sublimation process increases the sugar content; they then proceed to make their 'Ice Wine'. Naturally(?) Canadian Vintners are crying foul.

How good is this new product? A TV reporter on a news show could not distinguish between the two glasses in front of her. She did notice however, that the "phony" Ice Wine cost about $10 a bottle, while the real McCoy cost a staggering $100. (Note. Samples of Faux Ice Wine are equally well appreciated by the writer - I won't be able to tell the difference either.)

In a response to this innovation, the Canadian Vintners are attempting to define what can, and cannot be legally labeled "Ice Wine". They have even given a contract to Brock University worth about $1M, to prove that genuine Ice Wines are chemically different from the new product... But, as the great sage Spock once said, "a difference that makes no difference is no difference". If the average consumer cannot tell the difference as demonstrated by our thirsty reporter, then the faux Ice Wine is the better, and the only logical choice.

These aren't the only examples of where we attempt to use lawsuits to stifle innovation.

In the early years of car manufacturing, cars were individually hand built, expensive and affordable only by the very rich. Then along came Henry Ford with his underhanded idea of using the assembly line to build thousands of cheap, affordable automobiles.

His legal problem was the Selden Patent. Owners of this patent had the right to produce, and the right to license the production of self propelled vehicles using the internal combustion engine. Since Ford could out-produce, out-sell, out-perform and under-price every existing car manufacturer - the consortium in control of the patent refused him a license to manufacture his automobiles. They considered his production methods as "un-fair trade practices" - a euphemism for "cheating".

He ignored his lack of rights to put a combustion engine on wheels and went ahead to build the Model-T. He then fought a long legal battle from 1903 to 1911 and finally won the right to build automobiles using the sneaky, innovative assembly line. Innovation always wins out. Another recent example is Hollywood's response to Clearplay (www.clearplay.com). Clearplay provides a safe way for families upset by violence, sex and coarse language to safely view DVDs rented from their local video store. The Clearplay solution is ingenious, simple and generates a "Why didn't I think of that?" response.

Subscribers to the Clearplay service watch a normal, unmodified DVD and the service essentially 'skips' over the naughty bits. How? Simply by accessing the pre-tagged time codes from a Clearplay filter dataset.

The best way to think about this service is to pretend that Mom or Dad watch the movie first and then they use the remote to mute or skip over the objectionable bits when watching it with the kiddies.

Hollywood, rather than capitalize on the desire of a market segment to watch movies in this way, has decided to sue Clearplay. Their stated premise is that Clearplay is in some way violating copyright, censoring or interfering with the artistic integrity of movies viewed in this fashion.

Hollywood seems to be saying that the only right way to watch a movie is to never blink, or walk out of the room, or cover your eyes with your hands and peek through your fingers, or turn your head away from the screen... brings to mind that violent image of Malcolm McDowell in Stanley Kubrick's, "A Clockwork Orange" where he is being 'conditioned' against violence by being forced to watch incredibly violent images- eyes taped wide open. (You might have missed that scene as you turned away to avoid the violence. Your personal lawsuit is being delivered as your read this.)

All businesses are threatened by innovation. How do we respond to it? By seeing innovation as unfair competition and wasting resources in legal battles that inevitably fail? Or by accepting that the world changes and then deciding we are best served by finding our own innovations?

(c) 2004 Peter de Jager - Peter is a Keynote Speaker, writer and consultant focusing on issues relating to Change Management and the Future. All Rights Reserved.

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