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Forget The Innovators, Buy This Well-Funded Copycat Instead

 May 22, 2012 02:43 PM
 


(By Dave Goodboy) The business world is full of examples of innovators being left in the dust by imitators. Think Apple (Nasdaq: AAPL) was the first company to think of the tablet PC? Microsoft (Nasdaq: MSFT) first developed the idea a decade prior to the advent of the iPad. Think Mark Zuckerberg came up with the idea for Facebook (Nasdaq: FB) all on his own? As anyone who's seen The Social Network (the movie loosely based on Facebook's early days) can tell you, that isn't quite the case.

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

The point is, many, many times, the person or company who is first to the market with a new concept doesn't even approach obtaining the full value of the idea. In fact, many creative innovative companies fail, whereas the companies that copy the idea go onto great success.

In other words, being first to market isn't a criterion to successfully implementing the service, idea or product. Often it is the second or third generation of the innovation that changes the industry forever. Steve Jobs understood this. So did Mark Zukerberg and countless others before him.

It appears that this phenomenon of a copy cat company beating the innovator may be starting to play out in the highly competitive automobile rental industry.

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There is no question that the traditional car rental model is outdated, cumbersome and makes things way more difficult for the consumer than they need to be. If you have ever rented a car, you know what a serious pain in the butt it can be. Not only do you have to get to the rental agency to pick up the vehicle, you need to fill out the same contract every time, have a large hold placed on your credit card, basically get interrogated by the rental agent, and return the vehicle to the same location you rented it from or face extra fees and costs.

Sensing this disconnect from what the market demands and the traditional car rental model, an innovative upstart named ZipCar (NYSE: ZIP) launched an on-demand car rental service. This model does not rely on a central location, but rather has cars scattered about in garages, parking lots and basically anywhere one can be squeezed in urban areas. Users pay a one-time membership fee and then are provided access to any of the vehicles in the program, which are then rented by the hour.

This is absolute brilliance, in my book.


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