Yaneek Page | Planning for competition from internal copycats
Should entrepreneurs always anticipate and plan for copycats, particularly those who were once trusted insiders?
It's a question that arose after my recent column titled "Copying Your Employer's Business" in which I advised a prospective business operator that launching a near replica of their current employer's business model was a clear conflict of interest and that the more appropriate course of action would be to resign first and pursue such interests thereafter.
It was a column that stirred mixed views, with some proposing that rivalry originating from within an organisation is best placed to enhance competition, while others were adamant that the worst disincentive to innovation and enterprise is flagrant disregard for intellectual property and IP rights of entrepreneurs.
Almost every major summit of global leaders in recent years has ended with a joint communique positing enhanced entrepreneurial ecosystems and an entrepreneurial drive as key pillars to advance economic growth.
The fundamentals of a sound entrepreneurial ecosystem, to nurture and drive entrepreneurship, include education and training, policies, and infrastructure that promote ideation, innovation, risk-taking capital, human capital, market access, ease of doing business, competition, and property rights, among others. The nexus between the latter two - competition and property rights - continues to prove challenging for entrepreneurs and governments worldwide.
COMPETITION IS KEY
On one hand, entrepreneurs are critical actors in the development of any economy. they usually work assiduously and undertake substantial financial and other risks in executing a business idea they hope, but have no guarantee, will return a profit. Locally, the vast majority who start businesses rely almost exclusively on their ingenuity, intellectual property, grit, ambition, and modest savings to transform an idea into a viable business.
On the other hand, as a general principle, every entrepreneur and business owner should anticipate and plan for competition in the form of copycats. Fair competition is not only healthy, but necessary and highly desirable in order to promote innovation, efficiency, productivity, lower prices, greater value for the consumer, and much-needed choices.
Fair competition should also ensure continuity, prevent complacency, improve customer service and the overall customer experience, among many other benefits.
Fair competition must, therefore, be encouraged and welcomed, and progressive entrepreneurs should embrace the challenge as an opportunity to be stretched to great potential.
However, a copycat competitor who was once a trusted insider - such as a former employee or contractor - is a completely different animal from the typical outside competitor, which is the crux of the matter. For those driven to succeed as quickly as possible, by any means necessary and with the least risk and investment of their time, sweat equity, and capital - blindsiding your employer by copying their business and launching a more competitive model with the inside knowledge and experience gained may be a winning strategy.
It's akin to acquiring the rights and receiving the training needed to operate a tried-andproven franchise in any territory without executing any agreement, paying any franchise fee or royalties, etc. Though this may be unsavoury for many, there are others who see nothing wrong with such a guerrilla approach.
For the entrepreneur unlucky enough to employ such a person, it is unwittingly welcoming a trojan horse into the organisation - a calculating adversary cloaked in the veil of camaraderie seeking to plunder the intellectual property that is hardest to protect - marketing strategy, customer lists, key partners, and trade secrets, among others.
Trade secrets are strategic information not generally available to the public, gained at significant investment and expense to the owners, which is often the strategic and competitive heart of a business. This would include operational procedures, strategic alliances or partnerships, techniques, formulations, know-how, application of technology, and research findings, among many others.
The networks and contacts an internal copycat would have gained as a trusted team member of their employer will also propel them to enjoy significant strategic advantage that an external competitor would not.
Another critical issue entrepreneurs should anticipate is that employees tend to form stronger bonds among each other than they do with management or the owners of the business. The risk, therefore, of having key employees being poached or providing inside information or even referrals given to the new rival is significant.
SECURING INTELLECTUAL PROPERTY
In light of the considerable, unfair advantage and potential perilous impact they can have on entrepreneurs' businesses, it is critical to anticipate and plan for unfair competition from internal copycats. In reality, it's very difficult and costly to protect and enforce IP rights.
Notwithstanding, protection requires learning about intellectual property, fair competition and supporting legislation, and safeguarding IP through business name registration, trademark, copyright, and patents.
Creating supporting internal policies and procedures to protect trade secrets is essential. Contracts of employment, non-compete and nondisclosure agreements, and restricting access to proprietary information are also helpful proactive actions.
However, among the most critical ways to fend off any competitor is to stay faithful to meeting your customers' needs, unique value, relevant innovation, efficiency, diversification, and building a strong brand known for ethical business practices and sound core principles that include trustworthiness.
People prefer to do business with those they know, like, and trust.