Entrepreneurs are often mistaken for inventors. They are not.
There are some very entrepreneurial inventors, but they are an
exception. Most entrepreneurs take another person's technological
breakthrough and use their skills in mobilizing resources, publicity,
salesmanship, and financial management to create a viable business.
Inventors create the technology, but entrepreneurs turn it into
something of economic value. It is possible to go a stage further than
this, however, because people do not just invent things, such as cars or
personal computers, they come up with ideas for new services that
people need and ways of providing them.
Many successful entrepreneurs have built great businesses by doing
what someone else has done, only better. This demonstrates that
originality in entrepreneurship is actually an over-rated virtue.
Imitation, on the other hand, is not just the sincerest form of
flattery. It is one of the shrewdest ways to become a successful rebel
entrepreneur.
Take
Lovefilm,
the highly successful
UK-based startup that has made renting DVD films
and television box sets across Europe as easy as going to the post box
or getting online. In January 2011, barely 12 years after it was
founded, the company had over 1,500,000 members, each paying a monthly
subscription of about £8, a catalogue of over 67,000 film and television
program titles, and over 4 million rentals per month across five
countries.
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Amazon founder Jeff Bezos starts his High Order Bit presentation. (Photo credit: Wikipedia) |
The premise of Lovefilm's business model is simple. Customers pay a
monthly fee to receive a number of
DVDs or games discs in the post, or
the right to download a given quantity over the
Internet to a TV or
tablet device. They can play the games and watch the films as much as
they like, and keep them as long as they like, but they will not get a
new one until they return the ones they already have. Lovefilm is able
to do this because in most western European countries there are two very
reliable delivery mechanisms--one very modern (the Internet) and the
other Victorian (the postal service).
Lovefilm's customers pay a subscription to the company, log onto the
website and set up lists of favorite films or games, which are ranked as
high, medium or low priority. Lovefilm then picks one or two of these,
depending on the customer's price plan, and according to availability in
the warehouse, and pops them in the mail. Both the old and the new
technology work.
Since its creation, Lovefilm has developed its offering to allow
customers to bypass the old-economy postal system entirely by streaming
video over the Internet to get films 'on demand' on their home computer,
games console, TV, tablet computer or smartphone.
Pretty neat, huh? Yes, except Lovefilm is completely unoriginal.
Reed Hastings pioneered the idea of
DVD rental by post in California
back in 1997, allegedly after his shock at receiving a bill for $40 in
late fees from Blockbuster. Hastings had to fine-tune his original idea
to make it work. Initially the business model for his company,
Netflix,
was for customers to pay for each rental individually. In September
1999, he changed this and Netflix started offering monthly
subscriptions. The pay-per-rental model was dropped completely a few
months later.
It was not for another three years that Lovefilm began trading in
Europe. There were advantages to this. By that time, people had been
able to see that the idea worked, helping Lovefilm's founders to put
their case when they needed backing from investors or to recruit key
personnel.
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Founder and CEO of Netflix, Reed Hastings, class of 1983 (Photo credit: Wikipedia) |
Amazon bought Lovefilm in 2011, making multimillionaires of its
investors. This brought the links with Netflix full circle, given that
Lovefilm is now part of a U.S. company.
Amazon had seen the potential of the
online DVD rental market at
first hand with Netflix. Its founder, Jeff Bezos, has a reputation for
constantly trying to stretch the Amazon brand into new areas. His
approach has often been to try things himself before buying one of the
best players in the market--another way of grabbing someone else's good
idea. This is exactly what he did with the online DVD rental model.
Amazon tried building its own video rental service, based on people
downloading titles from its website. This was not as successful as Mr.
Bezos would have liked, so he bought Lovefilm instead.
Imitator brands have clearly been a benefit for Amazon. In a way they
have acted as the research and development function of Amazon, honing
the service until it was ready for Amazon to acquire.