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Complementors: Alliances Built for Speed

(originally published by Booz & Company)

As traditional companies move toward the dot-com space and the dot-coms build toward the physical space, the sweet spot lies where they meet — the combination of dot-com capabilities in a traditional organization. But the speed with which companies get to that point is critical and demands a new kind of business partner we call a complementor.

A complementor is a company outside your industry that has a significant influence at a certain moment over your customers. Complementors can lead you to crucial customer information before the customers actually have to make a buying decision, giving you a great opportunity to influence their decision.

The Century 21 Real Estate Corporation is a great example of a complementor to the telecommunications industry. Why is Century 21 important to telecoms? Century 21 knows when people are moving, knowledge that, when shared with a telecom, gives it the first opportunity to retain an existing customer or attract a new customer in its service area.

Other complementor relationships might include real-estate developers and electrical equipment suppliers; service-station owners and direct satellite vendors who can beam content to the video screens on new gas pumps; baby gift registries and college investment plans; home gym manufacturers and vitamin supplement suppliers. But companies shouldn’t look too far afield for complementors, or they will miss those right in front of their face. A complementor is basically any firm that has information that will lead to a deal.

Why are these partnerships so important? The answer is speed. Putting a world-class dot-com capability online takes traditional companies, on average, 5,000 hours of planning and an additional 28,000 hours for the first release, according to Netscape research.

Dot-com entrepreneurs can operate far more quickly. One I met on a plane cemented a deal with our company and began operations in 100 days; 65 days later he was offered $4.2 million for his company. All this after an investment of only $217,000. Alliances are the only way to operate at that speed. (However, with dot-com valuations significantly reduced since early 2000, many potential complementors may make more tempting acquisition targets.)

America Online Inc. does three to four major deals — and another dozen or so of a smaller size — every quarter. It’s all a part of rounding out the experience for and providing a scope of services and capabilities to our customers that we couldn’t do by ourselves.

The whole idea of looking inside your own industry for partners is pretty much passé. You need to look outside your industry, determine who complements your offering by influencing your customers’ decisions on an ongoing basis, and develop relationships with those companies that can help you deliver more innovative products and services faster.

Kevin G. Coleman,
Kevin G. Coleman is chief strategist of the Netscape Division of America Online Inc. He holds three U.S. patents, three Excellence in Design awards from Design News, and the 1991 Bronze IDEA Award from Business Week.
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