Co-Opetition - Adam M. Brandenburger [10]
The complements mindset also helps explain why some businesses fail. Alfa Romeo and Fiat had trouble selling their cars in the United States, because people knew they’d have trouble finding spare parts and qualified mechanics. Both have exited the U.S. market. The Sony Betamax videocassette recorder, though technically superior to the VHS in some respects, was ultimately undone by the lack of rental movies in the Betamax format. In many cities, downtown shopping has lost out to suburban malls because of a lack of convenient parking. If these enterprises had provided the necessary complements, they might have fared much better.
The problem of missing complements is multiplied a thousand times over in the case of a new economy. This is the situation in much of the third world and in many of the former communist countries. There the fate of everything—not just the company or industry but often the whole country—depends on complements. One industry will need complementary industries so it can get going, but those complementary industries will need the first industry so they can get going. It’s a chicken-and-egg situation everywhere you look. Everything has to happen all together, or nothing might happen at all. That’s why some developing economies take off while others stall.
Thinking complements is a different way of thinking about business. It’s about finding ways to make the pie bigger rather than fighting with competitors over a fixed pie. To benefit from this in sight, think about how to expand the pie by developing new complements or making existing complements more affordable.
Intel is the ultimate competitor. Andy Grove, the CEO, is known for saying: “Only the paranoid survive.”3 But competitors aren’t the only thing on Grove’s mind; Intel is also on the lookout for complements.
Inside Intel We started this chapter by explaining how Microsoft benefits when Intel develops a faster chip and how Intel benefits when Microsoft pushes forward in software development. But from Intel’s perspective, Microsoft doesn’t push hard enough. According to Andy Grove: “Microsoft doesn’t share the same sense of urgency [to come up with an improved PC]. The typical PC doesn’t push the limits of our microprocessors.… It’s simply not as good as it should be, and that’s not good for our customers.”4
If software applications don’t push the limits of existing microprocessor chips, then Grove has to find something else that will. Otherwise, his customers won’t feel the continued need to upgrade. If they don’t keep upgrading, not only will the market become saturated but the other chip manufacturers—AMD, Cyrix, and NexGen—will be able to catch up.
This is not a new problem for Intel; processing capabilities have always led the software applications. For example, although 32-bit processing has been a technological reality since 1985, Microsoft’s first 32-bit processing system—Windows NT—didn’t appear until 1993.5 Intel has always been on the lookout for applications requiring massive processing capabilities.
One of the most CPU-intensive applications is video. Even the Pentium chip will not handle full-screen, 24-frames-per-second output. But the next-generation chip, the Pentium Pro, will. What Intel wants, therefore, is a cheap and widely used video application. To that end, it has invested over $100 million in ProShare, a videoconferencing system that sits atop a desktop computer.6 ProShare is an ideal complement to Intel’s chips.
But Intel faced the same problem that makers of fax machines faced a decade earlier: what’s the point of having a desktop video-conference system if there’s no one to call? Fax machines only took off in 1986, when their price came down to under $500. How could Intel establish a market presence for ProShare and get the price down without shelling out another $100 million? Intel’s strategy was to look for