The Complementor as Orifice

by F.

A “complementor” is a business that sells a product that complements your own. For Intel, Microsoft is a complementor: the more demand for Windows, the more demand for Intel chips. Generally, you want your complementor’s prices to be low and your competitor’s to be high (so you can underprice them). The best complementor is a commodity business. Again, for Intel, it was wonderful that the PC became a commodity business because it increased demand for Intel chips.

I had a friend who was a fairly senior engineer at HP. (He’s now dead.) One day we were riding our bikes together and he mentioned how HP saw Microsoft. “You guys build the world’s biggest printer driver,” he said. In other words, to HP, we were just a means to sell printers: we were the thing the customer needed to use an HP product–the cartridge, which is where HP makes its money. The printer is just a delivery vehicle for the cartridge.

Generally, it seems people disparage their complementors, as in the above crack about Microsoft’s OS being merely a big printer driver. This makes sense. As I mentioned, you want your complementors to be commodity businesses, and perhaps this explains why folks think of their complementors as less than them, as lower on the food-chain. Of course, the reality is that the complementors are crucial. It’s symbiosis, not antibiosis.

The best example of this disparaging attitude I’ve ever heard, though, comes from Steve Jobs. For the iPhone, the cellular network operators are complementors. How does Apple view the cell companies?

Mr. Jobs once referred to telecom operators as “orifices” that other companies, including phone makers, must go through to reach consumers. While meeting with Cingular and other wireless operators he often reminded them of his view, dismissing them as commodities and telling them that they would never understand the Web and entertainment industry the way Apple did, a person familiar with the talks says.

The rest of the WSJ article from which this is taken is worth a read, though I do have a beef with the general “frame” or “template” of the story, which is “Steve Jobs Orders Powerful Cell Phone Company to Bend Over and Grease Up.” I would expect a letter to the editor from Cingular and perhaps Apple saying this isn’t so. This piece makes both sides look stupid.

There’s a lurking variable in the piece that belies this simple “Steve Jobs is an asshole” story. Remember that the iPhone is the second Apple phone. The first was the ROKR–a dismal failure that involved the same carrier (Cingular):

But the Motorola ROKR, released in the fall of 2005 and carried exclusively by Cingular, was a huge disappointment for Apple executives. As design aficionados, they weren’t impressed with the shape of the phone and felt the interface was clunky, according to people familiar with Apple’s thinking.

I think the more likely story in the new Apple-Cingular deal is that Apple had tried it Cingular’s way once already. The experiment was run and the outcome was bad. So they changed tactics and brought the hardware design in house, and took control of the deal. We’ll see if it was the right thing to do, but I think it was.