7 ms·

My guess is that this is a strategy for dueling giants. You look at his examples, it's MS, AOL/Time Warner, Sun, Oracle. This is not really a strategy for start

My guess is that this is a strategy for dueling giants. You look at his examples, it's MS, AOL/Time Warner, Sun, Oracle. This is not really a strategy for startups or even successfully midsize companies. Those companies are too busy working to make money off of their own products. To commoditize your compliment you have to have so much extra capacity you can develop a product at a quality level of a midsize company and then give it away for free. So it's a very interesting theory, but its also pretty much irrelevant for most of us.

WJW 6y ago
I think this hooks into the "losers game" post from a few days back: most startups are still in the phase where they are overwhelmingly more likely to die because they fuck up than because some competitor manages to outmaneuver them. Big tech is profitable and won't die just by itself, so in that theater clever tricks like commoditizing your complement becomes much more important.
- nostrademons 6y ago
  Startups are a "winner's game", in that the default state is just dead, and if you play without errors you will still end up dead. You have to have some winning move that nobody has thought of before; otherwise, why wouldn't this business already exist? Big companies get to play a loser's game: if they just avoid mistakes, they can continue making obscene profits, because they've figured out a business model that works. The "winner/loser's game" framing is still relevant. A startup is focusing intently on its one winning move and trying to hit it out of the park. A big company only needs to avoid losing moves, and so it often has resources and attention available that it can spend on commoditizing complements.
  - blacktriangle 6y ago
    Startup's are a winners game, but the software aspect of them is very much a losers game. Startup's very very rarely succeed because of high quality programming, most of them are doing very boring things from a software point of view, they just need to not have their software be unusable for long enough to test out their business hypothesis.
    - nostrademons 6y ago
      Depends on era, sub-industry, and to some extent location. I think that's been largely true of startups that have succeeded since 2004, particularly the latest crop of SF-based startups. These have largely been about the deployment of existing technologies developed at big companies (the WWW, e-commerce, and mobile phones) into new industries. But I had a mentor, back when I started my career in Boston, that said "Every startup I've seen succeed did so because some engineer did something that everybody else said was impossible." She was an early engineer and later VP at Stratus (the early-80s company that made super-redundant minicomputers for banks etc.), then later was called in to rescue Equalogic's software (multi-terabyte transactional SANs) before it was bought by Dell. There are plenty of other startups that succeeded because they did something technologically that most people thought was impossible or at least economically inadvisable - Google, VMWare, SpaceX, etc.
AnimalMuppet 6y ago
I don't see it that way. Take Bic, for example. They commoditized the razor handle in order to sell more blades. But for that to happen, they didn't need to be in a duel with some other giant who made their money selling handles. They just needed to decide that they'd make more money selling more blades than they would make selling more-expensive handles.
nostrademons 6y ago
It's relevant to startups, though, because picking a vacant market where the complements are already commoditized is a winning strategy for a startup. It was like that for most of the tech giants of today. For Amazon, books were already a commodity, shipping was a commodity, and online checkout became a commodity shortly after they started. For Google, websites and hyperlinks were a commodity. For Apple, chips were a commodity, TVs were a commodity, floppy disks were a commodity, and programmers who knew BASIC were a commodity. For Uber, drivers were a commodity, cars were a commodity, and cell phones became a commodity. The main difference between startups and big companies is the resources available to them. Startups do not have the ability to meddle in markets other than their own product, because they simply don't have enough people. They have to put all their efforts into their main product, because they don't have much effort to spare. But the most successful startups are the ones where the rest of the ecosystem already exists and they're just putting the keystone in place to change how society functions.
- wbl 6y ago
  Books are not a commodity. They are one of the most differentiated products out there, with little possible substitution among titles.
  - nostrademons 6y ago
    "Books" as a mass noun is a commodity, "books" as a plural noun is differentiated. (Somewhat by definition: anything that you think of as a mass noun is a commodity.) Amazon's goal was to get you to think of "books" as a mass noun, and among the general public, they largely succeeded. Book aficionados still think in terms of books as individual, differentiated titles, but these people are much more likely to go to small independent bookstores (where they will get individual, differentiated attention) than Amazon. The general public thinks "If I happen to need a book, I'll find it on Amazon".
- wunderflix 6y ago
  The way I understand complement like it’s defined in the article is: something you buy from different players to use with your product. Cars/gas, Hardware/SW. It’s not something you need to produce your product in the first place, like steel for car manufacturers. Thus, I don’t think your examples qualify tbh.

WJW 6y ago

I think this hooks into the "losers game" post from a few days back: most startups are still in the phase where they are overwhelmingly more likely to die because they fuck up than because some competitor manages to outmaneuver them. Big tech is profitable and won't die just by itself, so in that theater clever tricks like commoditizing your complement becomes much more important.

nostrademons 6y ago
Startups are a "winner's game", in that the default state is just dead, and if you play without errors you will still end up dead. You have to have some winning move that nobody has thought of before; otherwise, why wouldn't this business already exist? Big companies get to play a loser's game: if they just avoid mistakes, they can continue making obscene profits, because they've figured out a business model that works. The "winner/loser's game" framing is still relevant. A startup is focusing intently on its one winning move and trying to hit it out of the park. A big company only needs to avoid losing moves, and so it often has resources and attention available that it can spend on commoditizing complements.
- blacktriangle 6y ago
  Startup's are a winners game, but the software aspect of them is very much a losers game. Startup's very very rarely succeed because of high quality programming, most of them are doing very boring things from a software point of view, they just need to not have their software be unusable for long enough to test out their business hypothesis.
  - nostrademons 6y ago
    Depends on era, sub-industry, and to some extent location. I think that's been largely true of startups that have succeeded since 2004, particularly the latest crop of SF-based startups. These have largely been about the deployment of existing technologies developed at big companies (the WWW, e-commerce, and mobile phones) into new industries. But I had a mentor, back when I started my career in Boston, that said "Every startup I've seen succeed did so because some engineer did something that everybody else said was impossible." She was an early engineer and later VP at Stratus (the early-80s company that made super-redundant minicomputers for banks etc.), then later was called in to rescue Equalogic's software (multi-terabyte transactional SANs) before it was bought by Dell. There are plenty of other startups that succeeded because they did something technologically that most people thought was impossible or at least economically inadvisable - Google, VMWare, SpaceX, etc.

AnimalMuppet 6y ago

I don't see it that way. Take Bic, for example. They commoditized the razor handle in order to sell more blades. But for that to happen, they didn't need to be in a duel with some other giant who made their money selling handles. They just needed to decide that they'd make more money selling more blades than they would make selling more-expensive handles.

nostrademons 6y ago

It's relevant to startups, though, because picking a vacant market where the complements are already commoditized is a winning strategy for a startup. It was like that for most of the tech giants of today. For Amazon, books were already a commodity, shipping was a commodity, and online checkout became a commodity shortly after they started. For Google, websites and hyperlinks were a commodity. For Apple, chips were a commodity, TVs were a commodity, floppy disks were a commodity, and programmers who knew BASIC were a commodity. For Uber, drivers were a commodity, cars were a commodity, and cell phones became a commodity. The main difference between startups and big companies is the resources available to them. Startups do not have the ability to meddle in markets other than their own product, because they simply don't have enough people. They have to put all their efforts into their main product, because they don't have much effort to spare. But the most successful startups are the ones where the rest of the ecosystem already exists and they're just putting the keystone in place to change how society functions.

wbl 6y ago
Books are not a commodity. They are one of the most differentiated products out there, with little possible substitution among titles.
- nostrademons 6y ago
  "Books" as a mass noun is a commodity, "books" as a plural noun is differentiated. (Somewhat by definition: anything that you think of as a mass noun is a commodity.) Amazon's goal was to get you to think of "books" as a mass noun, and among the general public, they largely succeeded. Book aficionados still think in terms of books as individual, differentiated titles, but these people are much more likely to go to small independent bookstores (where they will get individual, differentiated attention) than Amazon. The general public thinks "If I happen to need a book, I'll find it on Amazon".
wunderflix 6y ago
The way I understand complement like it’s defined in the article is: something you buy from different players to use with your product. Cars/gas, Hardware/SW. It’s not something you need to produce your product in the first place, like steel for car manufacturers. Thus, I don’t think your examples qualify tbh.