Intellectual property

Imitations, knock-offs and impersonators, how to protect your Australian small business start-up, partnership, or sole trader operation from product or business practice copycats and stay a step ahead of the competition in five steps: Start-up Intellectual Property Feature By Oliver Milman

Five ways to stay ahead of the copycats

By Oliver Milman
Thursday, 23 August 2012

feature-elvis-thumbIt emerged this week that start-up retailer Lonely Kids Club deployed a novel method of combating what it perceived as a rival plagiarising its designs.


The business took to Facebook to protest over alleged rip-offs by Glue and JXcess, with founder Warwick Levy telling StartupSmart: “Overnight, I got nearly 100 people behind it, so Glue responded.”


Alas, a simple Facebook posting isn’t enough to ensure you keep one step ahead of larger rivals, who will attempt to snuff out the threat you pose by fair means or foul.


The growing trend of ‘acqui-hiring’ shows that established businesses are increasingly keen to strip talent and innovation out of start-ups, while tales of copycat behaviour and heavy-handed market domination are rife in the Australian market.


So how can you ensure that you keep your nose ahead of rivals keen to crowd you out of your niche?


We’ve spoken to the experts to come up with these top five tips:



1. Protect your IP


It may appear obvious, but the importance of protecting your intellectual property appears to have bypassed many Australian small businesses.


Recent research shows that almost 70% of Aussie firms have no IP protection, leaving their ideas and inventions ripe for the picking.


Start with your business’ name. A trademark is the only way that you will be able to prevent another business infringing upon your brand, even with a decent trading history behind you.


It may cost around $1,600 and take seven months to process, but that initial outlay will be more than worth it if you’re faced with the prospect of having to tear up all of your marketing material because someone else got there first.


“Most businesses think they don’t generate IP but they actually do,” explains an IP Australia spokesman.


“Tradesmen are always inventing things that solve little things. Unless they protect their IP, they’re not going to benefit from that.”


“A classic example is [appliances retailer] Kambrook – the guy developed a multiple power adaptor board. He invented that and didn’t patent it.”


“He lost millions of dollars of potential income. Other companies copied it because he didn’t realise the IP had value.”


Analyse your brand and product names, slogans, taglines and logos. Can you trademark these in Australia at least?


Also look at the reproduction and distribution of your product. You may be able to copyright it. In some cases, you may even be able to get a patent.


Don’t be in the dark about the IP you create. It’s the very essence of your business’ proposition. If you’re unsure where you stand, speak to an IP lawyer as soon as you can.



2. Don’t stop innovating


The initial bright spark that helped create your business really shouldn’t be the start and end of your innovation.


If you’re to not get swallowed up by the pack, creativity needs to be at the heart of your start-up. There is always a better way of doing things or a customer inconvenience that needs to be fixed, so don’t let the grey matter slack off.


Tom McKaskill, serial entrepreneur, angel investor and author, says: “To be successful in a sector you need to have some degree of competitive advantage. This doesn’t have to be across the whole sector but it should at least provide an advantage in the niche you target.”


“However, just having a competitive advantage is not sufficient to drive continuing profitability or growth.


“For that you need to create a sustainable competitive advantage. Even formal IP such as patents expire so you can’t sit back and rely on any form of competitive advantage over time.


“Basically, you need to create a culture, process or strategy which continually updates your competitive advantage over time.


“The answer lies in developing an innovation capability. Whether it is incremental innovation or radical innovation, the only certainty you have of survival, profitability and success is to ensure that your innovative capability continually updates your competitive position.


“Don’t wait until you are desperate to reclaim territory; take the initiative and ensure you stay in front. Innovation is the only sure way to do that.”

3. Lock in your customers


The biggest fear of a large rival setting up camp on your turf is, of course, that your customers will desert you in droves.


This can be combated in several ways. Play on your strengths as a small, personable enterprise that cares about your customers’ experience – engage with them via email and social media and reward your best buyers with freebies and special events.


It’s also worth going further than this and make it hard for your customers to go elsewhere. If you are providing a good product and service and it’s a hassle to switch to a rival, your attrition rates should remain fairly low, depending, of course, on your industry.


McKaskill says: “Where you can, you should create a situation where your customers willingly give up their rights to engage with your competitors.”


“You might find this a bit confronting but, in fact, we as individuals willingly enter into agreements all the time where we commit for extended periods of time to one supplier.


“Think of your mobile phone, mortgage, life insurance, car lease, internet service and office rental agreements.


“There are penalties for early termination but also, usually, concessions or benefits for signing up long term. We can often create some form of ‘lock in’ in our customer agreements.


“These can be preferred supplier agreements, maintenance and service agreements, cumulative rebates or discounts, joint ventures or strategic partnerships.


“The objective is to engage with the customer on a longer term basis and to entangle the customer with your business so that there are disincentives for them to terminate the agreement or change suppliers.


“Customers are usually reluctant to switch suppliers if there is a ‘switching cost’ associated with moving suppliers.


“This might be the risk of making the wrong decision or simply the delays, costs, hassles and stress of moving. Our task must always be to make it easier to deal with us than to switch.”



4. Work on your company culture


Sure, you may take the time to build up a small, talented workforce, but they will jump ship as soon as a big business waves a fat paycheque in front of their noses, right?


Well, not quite. By working on creating a positive, engaged working environment, you can reduce the chances of your best talent being poached.


“Basically, people need to be paid fairly for their efforts but money is often well down the list in motivating them to stay,” says HR guru Vicki Crowe.


“What is your EVP (employee value proposition) in regards to rewards and benefits that would entice an employee to stay?


“Your first step is finding out what intrinsically motivates each person and then linking his or her motivation to the benefits you could afford.


“Once you know their key motivators, you can creatively explore some inexpensive benefits like monthly supermarket vouchers, a gym membership, contributing to household cleaning, bringing a mobile remedial masseuse weekly/monthly into the office, providing a weekly fresh fruit platter or a coffee machine.”


Martin Nally, founder of HRAnywhere, adds that start-ups can offer the kind of employee flexibility that large corporates struggle to achieve.


He says: “It’s a powerful lure in today’s economy. So, where a large corporate might be compliant you can go further.”


“Flexibility is sought after by many, so if you can offer employees a different arrangement it may well be the advantage you are looking for.”



5. Don’t panic and drop your prices


If you find a rival is eating into your customer base, it’s important that you stick to your strengths and win them back.


What you should avoid doing is getting into a price war because larger, well-resourced businesses are the only winner in this scenario. Hold your nerve, improve your offering and you’ll stand a chance.


“Price is a very small part of the buying proposition, but a critical one in terms of developing a sustainable business model,” explains Startup Tasmania founder Polly McGee.


“Price is part of a complex emotional reaction by a buyer. Sure, in a commodity market like supermarket goods, price is a major factor, but in niche and service based offerings, the experience and brand values play a major part.


“When you have spent a significant period of time building a value to your brand, why would you take a knife to it?


“Discounting and price dropping to attract market instantly tells your customers that either you were charging too much to start with, or your product is inherently less valuable than you were putting it to the market as. Both of these cause confusion and distrust in the consumer.


“If your sales are slow or slowing, go to your customers and your potential customers and ask them about your price-point. Better than discount, consider offering something extra, rather than taking away some of your profit by discounting.


“With this approach, your customers get more, not less, and they still have the great product or service they originally came for.”


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