Also called: Fast follower
How: Dismantle and examine a competitor's product to produce a similar or compatible product.
Why: Reduce the need for new product research and development by learning from competing products.
This business model is part of the Business Model Patterns printed card deck.
A collection of business models that will help you understand the key drivers of business model success. The card deck will be ready for purchase in the end of 2023 and is now undergoing rigorous testing.Reserve your deck!
Learning from competitors
The Reverse Engineering business model is a process by which an existing technology or competitor’s product is analyzed and the information obtained is used to develop a similar or compatible product. This method of product development requires little investment in research and development, and as a result, the products produced can be offered at a lower price than their market equivalents.
Reverse Engineering is not limited to products or services. In fact, it can also be applied to whole business models, when competitors’ value chains are analyzed and their principles applied to the focal company.
Main advantages are:
- Streamlined features. By analyzing the structure and components of established products, businesses can eliminate unnecessary features and improve overall efficiency.
- Cost-effective materials. Reverse engineering allows businesses to identify and use cheaper materials in their own products, reducing production costs without compromising quality.
- Wider market reach. By offering imitation products at a lower price point, businesses can expand their customer base to include segments that may not have been able to afford the original.
- Optimization potential. By studying the successes and failures of pioneering products, businesses can optimize their own offerings and achieve comparable levels of success.
- A strategic approach. The primary goal of reverse engineering is not to be the first to market, but to improve upon existing products and achieve long-term success.
Potential benefits could be:
- Uncovering hidden opportunities. Reverse engineering allows businesses to explore existing designs and find ways to adapt them for new uses and applications.
- Revitalizing outdated products. By understanding the inner workings of older systems, businesses can redesign and modernize them, improving their performance and reliability.
- Identifying vulnerabilities. Through reverse engineering, businesses can identify and address any potential safety or security issues in their products before they reach the market.
- Streamlining production. By analyzing existing products and finding ways to make them more efficient and cost-effective, businesses can improve their bottom line and remain competitive.
- Building a digital reference. Many reverse engineering processes result in a CAD file of the product, which can be used for future reference and to make improvements or modifications.
- Sparking creativity. Reverse engineering can inspire new ideas and approaches to design, as engineers may discover systems or concepts that can be adapted for other projects.
- Reducing the time required for R&D activities. By studying and analyzing existing products, companies can gain valuable knowledge and know-how that can be used to improve their own offerings. This allows them to focus their resources on areas that truly require innovation, rather than spending time and money on areas that have already been explored.
- Recreating lost products. Use Reverse Engineering to recreate products whose manufacturers or documentation no longer exist. This can be especially valuable for companies in the pharmaceutical and software industries, where knowledge of legacy products can be critical for maintaining and updating existing systems.
- Extending top-brand products. Reverse Engineering can be used to learn how to build add-ons that extend existing popular brand products. An example is Reform, who has specialized in manufacturing and selling beautifully designed fronts to extend IKEA kitchens.
However, it is important to note that such imitations might infringe the original inventors’ and developers’ intellectual property rights. Therefore, it is paramount to have a full grasp of patents and licenses in order to be sure of staying within the bounds of the law and avoiding time-consuming and costly litigation. Additionally, it is important to keep an eye on patent expiration dates, since imitations of goods based on expired patents cannot be attacked by initial patent holders.
Where did the Reverse Engineering business model pattern originate from?
Reverse Engineering, in its earliest form, was primarily utilized in military contexts. Specifically, it was applied for the first time during the First and Second World Wars as a means of understanding enemy troop armaments and transportation systems. At this time, rapid technological progress made it a strategic necessity to learn from acquired or stolen enemy equipment and make this information available to one’s own armed forces.
After the Second World War, researchers in the German Democratic Republic (DDR) took a similar approach in trying to reconstruct and copy certain computer and hardware technologies. This approach was also adopted by Japanese manufacturers such as Toyota and Nissan, who bought and systematically analyzed western cars in order to learn how to build high-quality vehicles. Each car was disassembled and its components analyzed in respect of their functionalities, structures, and characteristics. This is how the Japanese car industry began to imitate western industry in the 1970s and 80s.
The Japanese automotive industry’s success in this endeavor can be attributed in part to the culture’s emphasis on learning and improvement. By using systematic methods such as Kaizen and quality control, Japanese manufacturers were able to replicate and improve upon the technologies they studied, leading to the emergence of a formidable domestic car industry.
Applying the Reverse Engineering business model
Reverse Engineering is a versatile technique that has a wide range of applications. Depending on the product or equipment in question, the uses of Reverse Engineering may overlap or intersect.
- Out-of-Production Parts. One of the most common use cases for Reverse Engineering is when hobbyists are restoring vintage machinery, such as classic cars, or production facilities need to repair their aging equipment and have run out of spare parts stock. The original parts may no longer be available, either because the businesses that manufactured them have closed or the original equipment manufacturer (OEM) has moved on to newer models. In these cases, the only way to identify and procure the necessary parts or components may be through Reverse Engineering, either in collaboration with the OEM or with an independent service provider.
- Made-to-Fit Integrations and Upgrades. Reverse Engineering is also an essential tool for ensuring perfect fit and seamless integration of new parts and structures with existing ones. This is crucial for medical professionals commissioning patient-specific implants and prosthetics, as well as for businesses looking to modify their machinery with add-ons. Reverse Engineering helps designers understand how to match the mating surfaces of the new and existing parts. This often involves using 3D scanning technologies such as laser scanners and coordinate measuring machines (CMMs) to precisely measure the parts.
- Failure Analysis and Performance Diagnosis. Reverse Engineering can also be used to diagnose the cause of equipment breakdowns, malfunctions, or underperformance. By performing a failure analysis, engineers can identify the cause of the issue and repair the equipment, as well as potentially prevent the issue from happening again. For example, after conducting a failure analysis on a piece of pressurized equipment, an engineer might determine that a valve prematurely failed as a result of exposure to corrosives or abrasives. Rather than replacing the entire machine, only the leaky valve needs to be replaced to minimize downtime and repair costs.
- Rediscovering Lost Designs. Reverse Engineering can also be used to recover design information on obsolete legacy products. This can be particularly useful when reviving older features of a product that have been phased out over time. Additionally, when the original designers or builders of a product have moved on, Reverse Engineering can help fill the knowledge gap and ensure continuity of the product.
- Historical Preservation. Lastly, Reverse Engineering can be used to preserve historical artifacts and machinery. Engineers can use Reverse Engineering techniques to understand the design and construction of historical artifacts, which can help in their preservation and restoration. This can also provide valuable insight into the history of technology and manufacturing.
When considering applying the Reverse Engineering business model, it’s important to consider the following factors:
- Legal and ethical considerations. Reverse engineering is legal in most countries, but it’s important to check the laws and regulations in your specific jurisdiction. Additionally, it’s important to consider any intellectual property rights that may be associated with the product you’re reverse engineering.
- The intended use of the product. Consider what the intended use of the product is and whether reverse engineering is the best approach for achieving that goal.
- The availability of documentation. The availability of documentation and information about the product being reverse engineered can greatly impact the success of the project. If documentation is not available or is inaccurate, it will take longer and require more resources to reverse engineer the product.
- How can you legally get access to your competitor’s products?
- How will you deal with potential negative publicity from releasing products based on Reverse Engineering?
- How can we gain insight from established practices within our industry and leading examples from other industries?
- How can we study the techniques for functionality and cost-effectiveness employed by industry leaders?
- How can we effectively apply the knowledge gained through Reverse Engineering to improve our products and company?
Lavazza Coffee Capsules
Its coffee is also sold in cheaper capsules compatible with Nespresso machines.
Sandoz / Novartis
The generic drug manufacturer begins its Reverse Engineering process of drugs several years before their patents expire.
Source: Norvartis on Wikipedia
Tesla reverse engineered the battery technology used in laptops to create the batteries for its electric cars. This allowed the company to create a product that was not only more efficient but also more affordable than its competitors.
Instead of investing in R&D, the company focused on studying the features and functionalities of high-end smartphones, and then creating similar products at much lower prices. This approach helped the company to quickly establish itself as a leading player in the smartphone market, particularly in Asia.
In the early 1990s, the company began manufacturing ink cartridges in imitation of models for popular printers and selling them at very competitive prices. This was made possible because Pelikan did not have to commit to substantial research and development costs, or cross-subsidize low-cost printers. The cartridges offered a similar quality to the branded products, thus presenting an attractive option to customers, and the competitive pricing strategy boosted sales and increased revenue for Pelikan.
Denner Reverse Engineered and distributed coffee capsules that were compatible with Nespresso machines. These were offered at lower prices and were accessible to a larger customer base. Through analyzing, redesigning and filling Nespresso capsules with various types of coffee, Denner was able to sell them at a lower price than the original Nespresso versions. Furthermore, without being bound by an exclusive distribution system, Denner was able to reach a wide customer base through its discount stores, thus increasing sales and revenue.