In the digital economy, the race is often won by imitators who turn out to be more agile and creative than even the most successful first movers. Take the case of Snapchat. Created in 2011, it quickly reeled in millions of teenagers and young adults with a standout app on which shared photos disappear after 24 hours. Facebook reportedly tried, but failed, to buy Snapchat. So it did the next best thing: copy.
Facebook-owned Instagram simply replicated the main features of Snapchat Stories, rolling out Instagram Stories in 2016. Within a year, Instagram had crossed Snapchat’s daily active user (DAU) numbers – and then some – while the latter faltered. Although Snapchat has since regained some of its early influence, its experience shows that barriers to entry in the digital realm are low, even for established platforms that have already captured a significant user base.
How TikTok outsmarted Facebook
TikTok’s growth and (near-term) sustainable competitive advantage comes from its ability to combine and recombine products and services from different categories. On the consumer side, TikTok’s algorithms quickly learn individual preferences by capturing users’ likes, comments, and time spent on each video. On the producer side, AI simplifies video editing and suggests music, hashtags, filters, and other enhancements that are trending or have been proven popular. Essentially, TikTok has recombined elements of these different technologies and applications to create a new category of bite-sized amateur entertainment, distinct from the chronicling of real life offered by Facebook.
Outracing imitators the Spotify way
Another good example of using complex continuous innovation to stave off copycats is Spotify. Its seemingly simple music-streaming service is in fact a complex combination of a dynamically changing user-interface, behavioral prediction algorithms, and an ever-expanding catalog of music. Spotify learns a customer’s preferences and uses population-level predictions to suggest content that will ensure stickiness.
Taken from Harvard Business Review: How Spotify and TikTok Beat Their Copycats by Jason Davis and Vikas A. Aggarwal. Read the full article at hbr.org