I thought this was an interesting article on how the Michellin Brothers got their Rubber business to expand by printing Travel Guides for free. Makes you think about how being focused all the time might limit your market and business.
Five Good Questions: So how do you uncover and evaluate innovation opportunities in complements? Here are five questions that can guide your thinking and help you set priorities.
1. What complements are currently constraining demand in our markets?
Examine all the products and services that are used in conjunction with your own goods. Are any of the complements in short supply? Are any expensive? Are any difficult for customers to find and use? It may be possible for your company to spur advances in the production or distribution of complements in order to make them cheaper and more plentiful. The opportunities might involve the kind of direct investment that Intel made in Wi-Fi technology. But there may be cheaper options as well. You might use creative marketing programs to raise awareness of new or alternative suppliers of complements, thus promoting the kind of competition that will drive prices down. An automaker might, for instance, partner with a new hotel chain to provide discounts to anyone who arrives at the hotel in one of its cars.
2. What new product might boost demand for our core offerings?
There may be opportunities to launch new complements that will expand the market for your core offerings — as the streetcar companies did when they pioneered the amusement park or as Michelin did with its Guide. A provider of cellular telephone service could work with retail chains to launch a text-messaging service that provides subscribers with customized “telecoupons” for use at local stores. The key here is to think beyond the current ways that customers use your products to see if new complements might spur new uses. Ask yourself if there are other contexts in which your products or services could be used. At best, this kind of brainstorming may lead to new products or services that become profitable businesses in their own right. It may also produce ideas for how you might reconfigure or reposition your existing offerings to be attractive to different sorts of customers.
3. Would our customers buy more if they had better information?
As the Michelin brothers realized, information is itself a powerful complement to many products. To boost tire sales, they didn’t go out and spend a lot of money to build their own restaurants and hotels; they simply provided information about the hotels and restaurants that were already out there. Although their guidebook was itself a complement, its greatest value came in promoting a broader set of complements. Your company may have a similar opportunity to boost sales by distributing information about the use and availability of complements. The opportunity might be very simple: A book publisher might provide a list of local reading groups on its Web site. Or it might be more complex: A window manufacturer might partner with local building contractors to give away a book of architectural drawings of common home additions. In either case, the focus should be on easing customers’ access to information that is currently expensive or otherwise hard to come by.
4. Would we learn valuable lessons by innovating in complements?
Remember that innovations in complements may help you operate more efficiently or design superior products and services as well as expand your sales. Hewlett-Packard’s expertise in formulating ink, for example, enables it to manufacture better printers, and vice versa. Don’t define complements in narrow terms. Follow the lead of the streetcar companies with their roller-coasters: Look for opportunities to enhance complements in ways that provide your employees with experience and know-how — whether in operations, marketing, or other functions — that they can use back in the core business.
5. Do we have competitors whose fortunes are tightly tied to the price of complements? The sales of complementary products usually move in tandem: Sell more of one, and you’ll sell more of the other. But the profits earned from those sales may move in opposite directions. By turning Wi-Fi chips into a cheap commodity, Intel increased the unit sales of the chips but sucked the profits out of the market, removing a potential beachhead for Intersil and other rivals. You may have a similar opportunity to use a complementary innovation as a competitive weapon. Analyze your competitors to see if any of them earns a lot of money by selling products that are complements to your own. If so, innovations that drive down the price of those complements will give you a double benefit: They’ll erode your competitor’s profits while boosting your own sales. What could be better than that?