What to do if a competitor orders your product

This is part two of What to do if a competitor in Asia orders your product whereby I pontificate on tear downs (competitive assessments), a much cherished activity by adults and children alike. How can you build a better mousetrap if you haven’t taken existing mousetraps apart? Here’s a case in point: the iphone. While the iphone is universally acknowledged to be the third most significant masterpiece of human technology (behind mastering fire and inventing the wheel), it is not perfect. Before stoning me for blasphemy, ask yourself this question: can it scramble eggs? I think not. Okay, so I’m being silly but you won’t know the root problem until you do a competitive assessment and tear something down -preferably your own products first. I’ve written much about this in the reverse engineering series (tutorials page) and this one on copying processes.

The fact is your competitor can buy your products anyway so you’re better off facilitating the transaction than creating impediments. Doing so is working from a position of strength and confidence. Refusing to do so is acknowledging the other party is a threat. If they can get it anyway, it’s better to have a record of the transaction in the event something untoward arises because it is illegal to copy another party’s trade secrets. If you didn’t know that you should read up on the Economic Espionage Act of 1996. Using a trade secret belonging to a competitor is a felony, not a civil matter like copyright and subject to jail time and a fine of up to 10 million dollars. A trade secret is defined as “protected information” and means anything a competitor doesn’t want you to know.

Moving on, as I mentioned yesterday, the very first new model cars that roll off the assembly line are knowingly shipped directly to the automaker’s competitors. Surprisingly, there’s a lot of advantages to this. Before I get to the advantages, you should realize you may have less to worry about than you think. I know you’ve assessed competing products; could you figure out how they did all they did? Of course not. And neither will your competitors be able to do the same if your processes are valuable enough to copy.

1. Community & Professionalism
First of all it’s a matter of community. You’re all colleagues and all boats float in a rising tide. You must keep abreast of trends in the trade or you won’t last. It is a smaller community than you imagine, everybody knows everybody. How can you learn standard practices in your industry and be taken seriously unless you conduct and participate (however passively) in mutual competitive assessment? No man is an island.

2. Income
This should really be number one. Engineered products from one manufacturer to another create the option of licensing technology between competitors. This is very common. You don’t see it often in sewn products but I’m always pleased when I find one DE has licensed a pattern from a competitor. How else will you know a competitor has something you want to buy and use unless you’re open about it? Licensing your technology to a competitor is lucrative and trust building. You have more options in how they use it than if it were under the table. If everyone has access to everyone’s results (#1), everyone will know who’s playing by the rules and who isn’t.

3. Benefits of shared innovation
There’s three parts to this, income, professionalism, and consumer benefits. If everyone knows who originated something, it makes it harder to steal. If it comes to litigation, one of your competitors can testify your technology is proprietary, particularly if they resent this other guy is using something they bought from you. Central to this argument, this increases professionalism in the industry as a whole and consumers benefit. For example, cars used to be much crappier than they are now, it was a big deal if you hit 100K miles but these days, the car is barely broken in. But most of all, the industry is creating a united front to consumers, improving the industry as a whole for their benefit. Look at the apparel industry, I believe there is so much rancor and apathy from consumers because we don’t care about their interests sufficiently to lay aside our differences to work productively together amongst ourselves.

4. Putting your best foot forward
Filling orders from your competitors allows you to tightly control the sample product, packaging and presentation they get. If they buy from you through a friend of a friend, you can’t be mindful of minor details that may go awry. You can bet that cars shipped from one competing automaker to another are spit shine polished. I can only imagine the situation inspires a few harmless inside pranks that I’m not privy to.

Some consumers are savvy enough to buy your products because of technology you’ve licensed from other parties (ex: Intel chips). Here’s an example that relates to books. One very good way to judge the quality of a book is to check the bibliography. While it’s not licensed technology per se, that is where the tear down of a book’s content is found. A bibliography is a list of books the author read or consulted (called a survey of the literature) in the preparation of their book. If the author hasn’t listed any titles that compete with theirs or the titles listed are in themselves suspect, they’re either intellectually dishonest or have failed to read up on their industry. In short, how could you trust the veracity of the author’s information? Note: my bibliography lists about 50 books. No competing titles were listed because there weren’t any at the time. I haven’t read all my competitors books but I certainly intend to -and even cite them as the situation requires it.

The common urban myth is that industrial espionage is covert but it rarely is (in industries other than ours). As this article concurs (great article), most tear down analysts are engineers or accountants, not guys in a trench coat stealing another firm’s trash.

There’s plenty of books written about the process of tear down analysis. Probably the most readable one is The Machine that Changed the World (the dry Cliff Notes® version is here). It’s about automotive manufacturing, something I care nothing about but I love this book. I’ve read it three times and started reading it again last night. This book is one of great optimism, hope and promise. I don’t expect you to believe me but if you’re interested in the sorts of things I write about, you will like it too. A lot of visitors have read it after my frequent urgings and they enjoyed it too.

Related entries: All are better than they sound from the titles
Problems in problem prevention
Be corrigible
Copying processes
For hands on examples, see the Copying Processes and Reverse Engineering series on the tutorials page.

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8 comments

  1. This is a great post. We always try to work with our competitors. If they’ll be civil to us, we’ll be civil to them. Unfortunately, you occasionally get someone who doesn’t want to play nicely, but most people will behave.

  2. lorraine says:

    Intersting post. I’m surprised I haven’t see this question arise here before now.
    I’m going to assume the Rebecca’s “widget” is a garment and go from there. It is very likely that her competitor likes the fit of the garment and wants to also take a look at the grading. It is common practice for businesses to buy size runs of product to compare the grade against theirs and other competitors. The company I work for spends thousands of dollars every season buying and assessing other players product. One of the most common garments companies look at is the men’s polo shirt. Some businesses even pay money to subscribe to a service that does this comparison for them and posts it online. Just my two cents.

  3. Renee says:

    @lorraine, the only thing is, Kathleen said the firm that placed the order is just a distributor for the competitor, not the manufacturer. So it doesn’t really solve the riddle of what they might want the widget size set for, unless to evaluate it as an add-on brand to sell to their current accounts. Still fascinating.

  4. Kathleen,

    This a terrific post and one I’ll definitely link to for my readers.

    Back in my Swaddleaze days, a BIG competitor ordered one from my site. When I saw her order, I emailed her to acknowledge the order and asked what her intentions were–I wondered if they were interested in licensing the product (as you mentioned) or simply curious. She said they “always do a thorough review of any competitive swaddling/sleep sack products on the market”.

    Guess what? About 6 months later, they came out with a brand new swaddling blanket/sleep sack product that was a combination of my product and another popular swaddler.

    That’s the risk you run as a small business owner (like I was) that creates an innovative product–the big guns can easily copy, produce and bring to market QUICKLY, even if you have patents.

    Anyway, thanks for the great article.
    Heather

  5. Holli Harris says:

    Wow, this article was incredibly timely since I recently launched a clothing line for breastfeeding/pumping new mothers returning to work. I always thought clothing was impossible to patent, but this makes me want to at least get a preliminary consultation. Thaks so much for posting!

  6. Paul says:

    Clothing designs are patentable and patterns can be copy protected. Just look at the US Patent and Trademark site or do a search for “Corset Patents” or “swim wear”. The trick is to get an international patent that is enforceable in places like China. US Patents may not be enforceable in countires like China and you will not get any help from the Chinese government, if there is a profit to be made. If you remember the 1950’s and 60’s when we were flooded with Japanese copies – well China copies virtually everything and many times they cut corners and do not realise they are making an inferior product and many times don’t care. There are many recent examples – toys, food additives, milk, etc.

    I make made-to-measure corsets here in China (used to make them in the US when I lived there), but not due to cheap labor. The materials available for corsets made in China are not at all suitable for the real McCoy and the quantities they want you to buy stagger the imagination. So I import what I need from Europe and the US, at considerable expense. The biggest expense is shipping. Shipping from China is cheap compared to shipping to China. So much for free trade and a level playing field.

    As I stated in my post to part one, be careful in dealing with Chinese manufacturers. If you are dealing with a rep in HK and they are serious about doing business with you also talk to the trade people at the US Consulate in HK. You will need to have someone that can followup in determining intentions of the other party and if they want your product “made in USA” find out how much needs to be made in US to qualify.

    The Economic Espionage Act of 1996 only applies to actions in the US. If the copying is done overseas and marketed overseas it will be nigh impossible to bring any charges against a foreign manufacturer without a foreign government’s cooperation. If it is a clothing line you can probably forget about getting any action from the US Justice Dept too.

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