Ben Kepes: The growing problem of copycat ‘Kiwi’ businesses

One of my favourite TV shows is HBO’s Silicon Valley, a parody (and an exceptionally accurate one) of the madness that is Silicon Valley and the technology industry generally.

In one of the later episodes of the show, Jin Yang, one of the show’s characters, is seen simultaneously starting multiple companies, all of which have, as a business model, copying a successful existing company at their core.

Basically, append “new” to the name of the most successful tech businesses and you have the thrust of Jin Yang’s strategy.

It was pretty funny to watch, but I hadn’t spent a lot of time thinking about the impacts of this model of business development on the companies that were being copied – all their investment, hard work and missteps would be ripped off at a lower cost basis. Pretty distressing, really.

I’ve been thinking about Jin Yang this week, not in the context of technology, but rather in the context of R&D, or what we’ve seen constituting R&D of late, rip off and duplicate. My initial thought was a result of a conversation with a person the other day who had been offered a role at a company in vaguely the same space as one of the organisations I’m involved with.

During the interview, my acquittance was told that said company has a very clear product development strategy – they purchase an existing product that is doing well in the market and send it to a low-cost factory in China with one instruction – to copy it. The product comes back, ripped off and duplicated, and is sold to consumers as a good option.

On top of that, said company has the gall to say on their website that their entire operation is here in New Zealand, apart from the manufacturing which just happens to be done in China. It’s like Fonterra’s South American salespeople saying that Fonterra is a South American company, oh apart from the fact that the dairy products actually come from New Zealand! Provenance matters.

This is all made easier by the fact that you buy a New Zealand internet domain name no matter where you are and trade as if you are based here.

As I started looking into provenance-based trickery, the examples kept coming.

High profile situations like Amazon knocking off Allbirds – which naturally riled up those who want Allbirds, at some level a “Kiwi company” to do well.

But there’s also the whole ‘Made in Italy’ controversy where designer brands were understandably called out for using Chinese factories to make their products. Their response? To simply transplant the staff at those factories into Italy just so they could get away with saying that their products were made in Italy.

There’s another side to this debate beyond simply a parochial one. The fact is that keeping an industry vibrant, of leveraging the incredible skills of people like those employed in my business, of increasing the resilience of our economy, of de-risking an already crazily precarious supply chain are all important outcomes. Heck, given Rod Carr only recently presented the final report from the Climate Change Commission to the Government, I can tell you all about how sourcing closer to home has a positive impact on your carbon footprint and that using a product that lasts many times longer than other options does more for the planet than purchasing your new Audi e-tron.

But this isn’t about buying our thing versus someone else’s thing. It’s not about helping Allbirds achieve an eye-watering valuation. It’s about playing fair. If your business model involves sourcing product from factories that pay people a few dollars a month and discharging toxic waste into their local river, then have at it. If you care about nothing more than making a buck whatever the cost to people or the planet, do your best. But if your model is ripping off the hard work and investment of real people who deeply care about what they do, that’s crossing a line and I’m pretty certain that one day Karma will come back to bite you.

– Ben Kepes is a Christchurch based investor and business owner.

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