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Secrecy

At the most basic level, deterring imitation by reducing the diffusion of information to competitors about how to introduce a new product or service generally involves keeping things secret. For example, suppose you that you have discovered a chemical that makes an excellent fertilizer. If you intend to start a fertilizer company, you might not want to disclose to other people that you have identified this chemical. If competitors and potential competitors do not know that the key to developing your new product lies in the use of a particular chemical, then they will not understand that they need to gain access to that chemical to compete with you successfully. Therefore, they will not seek to obtain access to that resource, and they will not be able to copy your product successfully.

When Does Secrecy Work?

Efforts to mitigate imitation by keeping information about the new product or service secret work best under certain conditions. Secrecy works better when there are few sources of the information about the new product or service other than the entrepreneur. To imitate your product or service, a competitor needs access to the information that makes creation of the copy possible. While the competitors can obtain this information from you, they can also gain it from third parties. The effectiveness of your efforts to keep things secret is not going to be very high if third parties readily provide that information. This is why it is often easier for Coca-Cola to keep other companies from copying its soft drink formula than it is for your local dry cleaner to keep its dry cleaning formula secret. Even if your local dry cleaner never told anyone the formula for its dry cleaning solution, you could obtain it from any of thousands of other dry cleaners. However, if the executives at Coca-Cola do not tell you the formula to classic Coke, you are going to have no way of knowing what it is.


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