Complements as a sixth force (Brandenburger and Nalebuff)

Complementors are organisations whose products or services increase the value of another company’s offer. They are often proposed as a sixth influence alongside Porter’s five forces because their availability, quality and bargaining position can materially change demand and profitability.

When to use it

• Use the extension when complements are a major driver of demand, continuity or profitability. Airlines depend on airports and air-traffic systems; mining companies may own roads, rail links or transport operators because the route from mine to port is essential to the economics of the product.

Origins

Adam Brandenburger and Barry Nalebuff translated ideas from game theory into business strategy and developed the role of the complementor in Co-opetition. Their value net placed complementors beside customers, suppliers and competitors: a player is a complementor when customers value your product more in the presence of its product. Later strategy discussions positioned complements as a possible sixth force alongside Michael Porter’s framework. Porter acknowledged their importance but argued that their economic effect can usually be analysed through the original forces.

What it is

The central question is: Do complements materially alter demand or profitability in this industry? A complement can enlarge the total value available while still capturing a disproportionate share of it. Analysis must therefore consider both value creation and bargaining over value capture.

Treat complements as a sixth force only when separating them reveals an important mechanism that the five-force analysis would otherwise obscure.

How to use it

Begin by defining the customer outcome and mapping the products, infrastructure and services required to produce it. For each candidate complementor, ask whether its presence makes your offer more valuable, whether your presence makes its offer more valuable and which party controls scarcity, standards, access or customer relationships.

The value of a Toshiba PC, for example, can be tightly linked to the performance and reputation of its Intel processor. In that product line Intel is more than an ordinary input supplier: the two offers reinforce one another. The relationship differs in an Apple Mac built around a different architecture. Although the parties jointly create value, the participant with stronger bargaining power may capture more of the resulting profit.

Look beyond direct suppliers. Airline economics depend on uninterrupted operation across airports, air-traffic control, aviation-fuel providers, ground handlers, inclusive-tour operators and global distribution systems. A failure, capacity constraint or price increase at one of these complementors can affect the airline’s demand, cost and reliability.

Assess the relationship under different scenarios: complement availability, integration quality, pricing, ownership of standards and the complementor’s ability to integrate forward or favour a competitor. Then consider responses such as joint marketing, technical integration, alliances, joint ventures, multi-sourcing, ownership or development of an alternative complement. The growth of formal alliances and looser joint-marketing arrangements since the 1990s makes this ecosystem view particularly useful.

Finally, test whether the separate sixth force adds explanatory value. A complementor’s effect may already appear as supplier power, rivalry, entry or substitutes. Porter’s objection is not that complements are irrelevant, but that they often modify one or more existing forces rather than constitute an independent force in every industry.

Top practical tip

Map every product, service and piece of infrastructure that makes the customer outcome work. For the most important complementors, examine joint value creation and relative bargaining power separately.

Top pitfall

Do not add a sixth box automatically. Where complements have little economic effect, or where their influence is already fully explained through one of the original five forces, a separate force adds complexity without insight.

Further reading

Brandenburger, A.M. and Nalebuff, B.J. Co-opetition. New York: Currency Doubleday.

Porter, M.E. “The five competitive forces that shape strategy.” Harvard Business Review.