Yesterday during the Apple keynote, I noticed that most of the “innovation” in iOS 5 seemed to come from lifting ideas from popular third party app developers:

It’s easy to get all indignant about this, and I was for a few tweets in a row.

But then I read this blog post from Marco Ament, founder of the must-have app Instapaper, on how Apple’s appropriation of his idea would affect his business, and I gained a useful perspective on things. He writes:

Today, fewer than 1% of iPhone, iPad, and iPod Touch owners are Instapaper customers, despite Instapaper spending a lot of time (including today) at the #1-paid-app spot in the App Store’s News category for both iPhone and iPad. The potential market is massive, but most people don’t know that they need it yet.

When iOS 5 and Lion ship, Apple will show a much larger percentage of iOS-device owners that saving web pages to read later is a useful workflow and can dramatically improve the way they read.

If Reading List gets widely adopted and millions of people start saving pages for later reading, a portion of those people will be interested in upgrading to a dedicated, deluxe app and service to serve their needs better. And they’ll quickly find Instapaper in the App Store.

There’s a seedling of an idea in here on how copying affects innovation that I’ve been ruminating on for a while. In the physical world, we have erected elaborate barriers to prevent copying at all costs (copyright laws, patents, etc.) because rampant stealing of product designs would deter the investment necessary to create them. But it works the opposite way in the technology world. The threat of someone — particularly an Apple — ripping off your idea only forces you to get better and drives innovation forward.

In the tech world, every company copies every other company and this is rarely grounds for a lawsuit. Facebook blatantly ripped off Twitter for a while. Google Buzz also took on Twitter. Facebook Places was supposed to spell the death of Foursquare. Remember iTunes Ping, the Facebook for music?

Rarely does a technology behemoth move into a space occupied by small, smart, and focused team working on a single idea, and win.

There’s a rule in technology that to disrupt an incumbent, your product doesn’t have to just be better. It needs to be dramatically (like 10 times) better. The switching costs are too high for people to switch away to something that’s only slightly better.

Competition from big players forces smaller players to refine their product and fight for the loyalty of their customers.

And because the barriers to entry in designing a web app are so low, and the product cycle so fast, the threat of your innovation instantly becoming commoditized — rather than deterring invention, can actually spur the next wave of innovation by forcing you to move onto the next idea. Oftentimes, this idea is located in what science author Steven Johnson calls the “adjacent possible” — the place where a slight tweak to an existing idea fuels the most meaningful innovations.

Pharmaceuticals are the archetypical example used to defend the current patent system. But even here, there’s a recognition that businesses eventually have to move on to something new once the generic equivalent comes on the market.

Copying as an exclusive strategy rarely works. Look at all the big, huge companies with billions of dollars that have failed at it. But its continued threat is a catalyst for keeping entrepreneurs on their toes and the Internet constantly churning with different players and new models.