Need for Complements

Strategy+Business writes:

Tourist guides and automobile tires are what economists today call complements. Simply put, complements are products that tend to be consumed together. Think of movies and popcorn, or plywood and nails, or personal computers and digital cameras. Economically, complements have an interesting symbiotic relationship. If you expand the supply or reduce the price of one product, demand for its complements tends to go up. Cut the cost of electricity, and youll increase sales of vacuum cleaners and washing machines. Make it easier for motorists to find a decent hotel room, and theyll take longer trips in their cars and, in turn, replace their tires more frequently.

Innovation in complements is an important exception to the commonly heard command to focus on the core. Sticking to your knitting has become a popular rule for good reason, but as the Michelin brothers experience shows, its not ironclad. Although its important for innovation to be disciplined, focused on earning a return on investment and gaining a competitive advantage, theres a danger in narrowing your sights too much.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.