Scale or Replicate: The Case for Copycats

The problem of poverty is large and intractable. As the concepts of multiple bottom-line (ESG) returns and impact investment have gained traction, we have become enamored with the notion of scale. If we could only find the right #socents and scale them up, we could conquer all of the world’s problems. Or could we?

Scale isn’t easy. In a New York Times interview, Ken Rees, CEO of @ThinkFinance, explains how the skills that served him well as CEO of a small company made it harder for him to succeed as CEO of a larger company. Noting that startup CEOs have to do everything, he comments that he was used to “being a bulldozer” and had to learn “how to be a bus-driver” instead. Ken is smart and self-aware enough to overcome the challenge of scale, but that isn’t always the case. In some ways, the principles we ascribe to social entrepreneurship make it harder than average for small firms to attract both the human and financial capital they need to scale.

I’ve written before on the topic of scale versus replication. Given the vast cultural, political and economic differences across countries and regions, it’s easy to make a case that adapted replication could outperform ‘scaling up’ as a model for achieving rapid dissemination of responsible social business models.

The pros and cons of different growth models came to mind recently as I was reading in @Wired about Germany’s Samwer brothers, titled “Inside the Clone Factory”. The Samwer brothers are replicators par excellence, but the specific case that caught my eye is the saga of Birchbox and the Samwer brother’s clone Glossybox.

In 2010, Katia Beauchamp created Birchbox, a subscription service that sends monthly boxes containing a curated mix of beauty, health and grooming products. Early in 2011, the Samwer brothers launched Glossybox, which follows a very similar model. Clearly the subscription sample model has appeal, since the second half of 2011 also saw the launch of Joliebox and MonCoffretBeaute in France, Glamourum in Spain and Carmine in the UK. Flash forward to 2012 and we find Joliebox acquiring Glamourum in February and Birchbox acquiring Joliebox in September, while Glossybox acquired MonCoffretBeaute.  Giving a slight twist to the model, Klutchclub, which sends out boxes of healthy and sustainable products was also founded in 2011.

Katia and Birchbox were the innovators and they’ve worked hard to build scale. Glossybox and others are replicators and like it or not, their existence creates scale of a different type. Not only are copycat models thriving, the recent spate of acquisitions suggests that “buy” can be as good a path to growth as “build”. On the minus side, replicators can make it hard for innovators to survive and grow. On the plus side, replicating a viable model can help alleviate some of the difficult changes of achieving scale.

Child wellness programs have a strong positive impact on overall poverty reduction and economic empowerment. If this were a model for delivering nutritional and health-related products to expectant and new mothers, we’d want to see the model deployed as broadly as possible on a global basis. Would we be better off helping the innovating company achieve scale? Or should we be investing in as many viable copycat businesses as we can find? Which tactic would result in faster coverage of “the target market”? Do we have a hidden bias against mergers and acquisitions as a path to growth when it comes to social business?  Does pushing scale help our innovators or does our desire for scale overwhelm the specifics of individual businesses or entrepreneurs?

Achieving scale is a macro level goal that may or may not be relevant to the success of a particular enterprise. Let’s separate our desire to achieve massive social change from our views of what an appropriate social business model should look like. Figuring out what goods and services are useful and desirable at the base of the pyramid is one problem. Deciding how to widely distribute those goods and services may be an entirely different one.

by Lauren A. Burnhill aka @LaurenOPV

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6 responses to “Scale or Replicate: The Case for Copycats

  1. Not only do copy cats cover the target market faster, it is also worth mentioning that they could expand the innovators customer base. Copy cats expand the market for a product or service. Assuming the innovator has the best product/service and markets itself effectively, the new consumers could potentially seek out and find the innovator even though they were turned on to the product by the copy cats.

  2. Using Financial Intermediation to Achieve Social Impact.It is very relevant information for us.i search the more information about finance.Thank you very much you can update the latest information.

  3. Nice column, Lauren. This topic also puts us squarely in front of the question of intellectual property attitudes. As a social entrepreneur who wants to maximize the social impact of my product, I might be perfectly happy to be copied, but the investor who funded my product’s development might be expecting a more proprietary attitude. This is a tension between impact and profit that is not so easily resolved.

    • Good point, Anais! I wasn’t thinking about the IP angle here, mostly because the idea for this post came from reading about one of the Birchbox copycats where IP wasn’t the issue. Where there IS intellectual property, I’m in favor of inventor’s rights, although I’d also be happier if a greater number of equitable licensing deals were arranged. Thanks for raising this point. I’m going to have to look for copy vs replicate stories with an IP angle and see if, given careful study, my views change 🙂

  4. Nice post, and it connects to some of the ideas most recently articulated by Omidyar Network in their “Priming the Pump” series on the need for impact investing to focus on building industries and sectors, not just firms. Despite all of the talk of “blue oceans” in social enterprise, building industries means there will be competitors, and copycats.
    As to your point about M&A in the social enterprise space, there does not appear to be a market, much less an efficient one, with respect to licensing, roll ups, etc. The paradox, as you point out, is that there is still a proprietary aspect to wanting credit… although a few open source approaches have obtained traction. Perhaps this is due to the nature of how these ventures are funded, as Anais points out.
    What I find intriguing is whether the rules have to be the same, or whether positive copycats may emerge. I am amazed at the number of startups trying to do the “next” solar light or cookstove, rather than focusing on the massive sizes of these markets, and figuring out how to partner to reach one of the unserved regions faster/sooner.
    I will wait (but not hold my breath) to hear someone proudly proclaiming at SoCap/Skoll/TED that s/he is a copycat, and has had a meaningful impact on a global challenge.

    • Thanks for commenting Paul. Those solar lantern and cookstove companies are the perfect example of pockets of would-be innovators focused on their tree rather than the forest. You would think a roll-up or collaborative merger would make sense, but somehow ego and optimism seem to prevail. We seem to have some rigid ideas about what is appropriate and what works in the multiple bottom line investment world. As the saying goes, do what you’ve always done and you’ll get the results you’ve always gotten. Trying new business models is great, but I wish we’d try some new investment models too!!

      Maybe we can get the Samwer brothers to tackle the BOP solar market ;o)

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