Piracy is a common phenomenon (better said, crime) in developing countries. First of all, because of low enforcement of intellectual property laws and scarce punishment for those who sell and buy copied products. Second, it is a good business, especially in countries with “informal” markets and micro-enterprises. You don’t require major investments to copy products (forget about R&D and marketing and which are already done for you) and some products don’t need knowledge, ability or expensive tools to copy (like music or movies). Developing countries have a big demand on piracy caused by low income customers with needs and desires of brand status who are not going to get in trouble if they buy it.

How does piracy affect innovation? For starters, companies that invest in innovation become less profitable, and have less incentive to keep innovating, which would be negative for everyone. Also, if the product is being sold as an original, quality and other attributes that are not well copied affect the brand’s value. Companies that innovate also have to invest in law enforcement and in developing products with anti-piracy security which are elements that do not bring direct value to the customer. Expenses increase, so does the price.

But can there be positive effects?

Piracy IS in fact competition. Competition as we know encourages innovation. If a company does have a play-to-win strategy, then they will keep investing even in order to outrun piracy.

Piracy also makes customers question themselves about the price-value (or benefit) relationship of a product. If the original product is “just not worth the price” people could prefer buying piracy to keep the brand’s status attributes, such as Lui Vuitton bag. In that sense, companies with the original product have to make sure it is worth the price and to create differential value elements that are hard to copy. This also concerns quality. As piracy becomes more accurate in quality then people do not distinguish the difference, therefore companies that own the original products should worry more about quality. For example, after Napster and iTunes I think music artists are more worried in creating several good tracks since sales are no longer driven by two-hit CDs, but by individualy downloadable songs.

Piracy creates brand presence and can enhance wanting an original product (even if it is not the target market). Maybe you see someone in the streets with fake Armani jeans but that makes you want to buy a pair of original ones for yourself. The effect of wanting the original brand can also be kept by those who buy piracy in one point of their lives. When we were in high school, a friend of mine drove a small Ford Fiesta but modified the seatbelts with doubtful-Ferrari racing team protectors. We called the car the “Fiestarri”. I’m sure he, and those of us who he always drove around, keep Ferrari as an aspiration brand that if we reach economical acquisition capacity now that we are professionals, we would buy the products.

Piracy can be an indicator of your success and therefore brand value. The other day I saw a South Parks episode where Mr. Garrison felt “unwanted” by his father since his dad never abused of him as a child, as all “caring” parents do today (of course being this a satire of a severe and shameful social problem). What I want to say is that if I was Nike and my newest sneakers haven’t been copied in a relatively short period of time, I would definitely think something was wrong. As the Trash Indicator I proposed in an earlier post, there could also be a Piracy indicator (metric). A well known brand has greater value.

Although these “positive” side effects can occur, as a firm promoter of innovation, I value originality and intellectual property. As an innovation consultant in developing countries one of my main objectives is to make company owners or entrepreneurs to understand: IF YOU HAVE THE TOOLS, KNOWLEDGE AND ABILITY TO CREATE A COPY, OR TO FOLLOW INSTRUCTIONS AS IT HAPPENS IN MANUFACTURING, WHY NOT CREATE SOMETHING OF YOUR OWN??

Innovation Job Opportunities?

Two weeks ago I attended ITESM’s “EmpleaTec Nacional 2010”, which is the university’s national employment expo for students and alumni to hand out their CVs to medium size and large companies participating in the event. ITESM (Tec) is one of the main private universities in Mexico, with its main Campus at Monterrey, and one which has the best relationship with national corporations such as Cemex , Lala, AlEn, and Femsa as well as international companies such as Microsoft, PEPSICO, Kraft, Whirpool, LG, among others. There were some consulting firms in the event too, such as Accenture. I printed a few of my own CVs and wondered around the place asking for a job opportunity in innovation management just to do some market research.

These were some of the answers I got:

At Kraft Food, they told me in Monterrey they had no job opportunity for innovation but they were going to send my CV to Mexico City. The girl doing the interview was very kind but I could notice a glimpse of condolence in her eyes as in “this guy won’t find what he is looking for”.

At Lala, one of the biggest dairy products's companies in Mexico (or the largest) that was started in my home town, they told me all innovation and investigation was done by Food Engineers or Chemists. I am sure this is true for R&D where you need the technical knowledge of the processes and ingredients to create new products. The girl immediately asked me “do you have any other area of interest?” as if discarding my profile. I told her, “Although food process knowledge is important, I think you don’t need to be a Food Engineer or Chemist to manage innovation as it is also an administrative or project management skill, joining marketing, production, sales and finance together”. The girl was intrigued and asked me more questions, such as the products I’ve developed, but I think more as personal curiosity rather than a job interview. Finally she scribbled innovation and marketing in my CV and told me “I’m going to accept your CV although the particular area doesn’t exist.” She said the word 'accept' as if they revoked all crazy guys like me but that I had a good point.

I went to Accenture’s stand and asked “Accenture has Innovation Management Consulting, right?” I could see the guy wasn’t really sure, since I’ve only seen job offers for other traditional consulting services here in Mexico, but he still said “sure” and gave me a link to upload my CV. I once read not so long ago that Accenture opened innovation services in Taiwan, investing in an innovation center, and asked him about it. He had no idea. This could mean there is no direct contact between consultants from different countries and their activities. No other consulting firms in the expo had innovation management services, which is good for Chromatic Works as an Innovation Consulting Firm. Even if there is no great demand for competition to emerge, we believe in the need as our own client's satisfaction proves. It's a tough job but sombody has to do it.

Whirpool and LG did receive my CV and I know those companies do have investment in new product development in our location. Thanks for international companies that do understand innovation importance and believe in outsourcing talent from other countries! Most national companies wrote either marketing or production in my CV, and were not pretty sure in which area I could be placed. I should say Sigma Food and AlEn were national examples that did talked about innovation areas.

But the comment that made me ponder the most came from a young interviewer at PEPSICO. After asking him if there was some kind of innovation management at PEPSICO in Mexico he told me “Of course we have. Unluckily right now there’s no one from that area to interview you. I’m from finances. We are the ones that always tell you guys NO”, and he laughed. He received my CV and was really kind and helpful. After I left the stand, I couldn’t stop thinking that those kind of jokes are funny because they are true (as a Mexican saying states “entre broma y broma la verdad se asoma” – that would translate something like: between jokes and jokes , truth pokes” ). As a consultant I’ve learned that the language used, as well as humor, is an indicator of the organization’s culture. I don’t know what the people in PEPSICO in charge of innovation are presenting to Finance in order for him to say that to a total stranger nor if the Finance Department is being close-minded, but that single sentence gave me some hints about how it would be working there.

Let’s see how many companies respond to my CV to measure their interest or present needs; I’ll keep you in touch.