"Finding Meaning in Strategy: The Connection Between Growth and Complements"

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Hatched by Glasp

Sep 21, 2023

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"Finding Meaning in Strategy: The Connection Between Growth and Complements"

To live a meaningful life is to seek happiness and joy, to wake up with excitement and enthusiasm. One way to find meaning is through growth, experiencing life and the challenges of new journeys. However, not everyone seeks growth; some find meaning in stability and comfort. It is up to each individual to determine what is meaningful to them.

In the world of business strategy, the concept of complements plays a crucial role. Every product has substitutes and complements. Substitutes are alternative products that consumers may choose if the original product is too expensive. Complements, on the other hand, are products that are usually purchased together with another product.

When the price of complements decreases, demand for a product increases. This principle applies to open source software as well. Many companies invest in open source software not because they suddenly stopped believing in capitalism, but because it is a good business strategy. By supporting open source software, these companies are able to lower the price of complements, thereby increasing demand for their own products.

However, there are limitations to the "free-as-in-beer" argument often used to promote open source software. While the initial cost may be zero, there are still intangible costs to consider, such as the time and effort required to set up and convert existing processes. Additionally, there is a finite amount of volunteer programming talent available for open source work, and different projects compete for the same limited resource.

Large companies, with a responsibility to maximize shareholder value, invest in supporting open source software by paying teams of programmers to work on it. This is because their strategic interest lies in getting the price of their complements as low as possible. By commoditizing complements, companies can increase demand for their products and charge more.

IBM is a prime example of this strategy. They designed the PC architecture using off-the-shelf parts and carefully documented the interfaces between them. This allowed other manufacturers to join the party and commoditize the add-in market, a complement of the PC market. Microsoft also employed a similar strategy with the licensing of PC-DOS to multiple OEMs.

Commoditizing complements can have its drawbacks, as seen with the declining price of commodity PC hardware. It becomes harder to make a profit, and companies like Microsoft face challenges in their efforts to decrease the cost of producing products like the XBox.

In some cases, companies support open source software to commoditize certain markets. IBM, for example, is becoming an IT consulting company and needs to commoditize enterprise software. By supporting open source, they can achieve this goal and benefit their consulting division. AOL/Time Warner, an entertainment company, aims to make entertainment delivery platforms, such as web browsers, a commodity.

The competition between Microsoft and Netscape in the web browser market is an example of preventing a monopoly and increasing the cost of web browsing. If Microsoft were to have a complete monopoly, they could potentially increase the price of Windows and other related services.

The concept of complements extends beyond software into hardware as well. CPU companies like Transmeta and hardware companies like Sun and HP seek to commoditize operating systems and windowing systems, respectively. By making these complements a commodity, they can drive demand for their own products and expand the market.

Ultimately, the connection between growth and complements is evident in both personal and business contexts. Just as individuals seek growth and meaning in their lives, companies strategically invest in supporting open source software to commoditize complements and increase demand for their products.

Actionable Advice:

  • 1. Embrace growth and change: Just as finding meaning in personal growth is important, businesses should also seek growth opportunities and adapt to changing markets. By recognizing the potential of complements and investing in open source software, companies can position themselves for success.
  • 2. Consider the total cost of ownership: When evaluating the benefits of open source software, it is essential to look beyond the initial cost. Consider the intangible costs, such as time and effort required for implementation and conversion. Understanding the total cost of ownership will help make informed decisions.
  • 3. Collaborate and compete strategically: Companies can learn from the strategies employed by IBM, Microsoft, and other industry leaders. By collaborating with competitors and commoditizing complements, companies can increase demand for their products and drive market expansion.

In conclusion, finding meaning in life and in business strategy both involve seeking growth and embracing complements. Whether it is through personal growth or investing in open source software, the common thread is the pursuit of happiness and success. By understanding the connection between growth and complements, individuals and businesses can find their own paths to meaning and fulfillment.

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