Saturday, April 5, 2008

iPhone and Blackberry: Competitors and Complementors

Research In Motion (RIM), the maker of Blackberry smartphone saw its profit more than double last quarter (see news in Economic Times). And you know what is believed to be the reason for this success? iPhone.

“What?” one may ask. iPhone, after all, is the competitor of Blackberry. How can it boost Blackberry sale? Apparently, popularity of iPhone has brought attention to “smartphones” and more people are starting to use them. And then people started asking, “Why should I buy a non-smartphone like Razr when I can buy a Blackberry or an iPhone?” This has boosted the smartphone market. Of course, it has benefited Apple. But then it has benefited RIM too.

This very phenomenon is explained beautifully by Barry Nalebuff and Adam Brandenburger in their book “Co-opetition” published in 1996. Barry and Adam talk about the dual roles companies play: competitors and complementors. A complementor is the player who contributes in increasing the size of the pie (i.e. your target market) and a competitor is the player with whom you have to share the pie. Your share is typically referred to as “market share”. Many times, a single player plays dual-role i.e. the player is your competitor and complementor at the same time and you don’t know which role is making a bigger impact to your business. As in the case of Blackberry, Apple played much bigger role as a complementor than as a competitor last few quarters. As an analyst has said, “iPhone was the single biggest blessing RIM ever had.”

Barry and Adam give numerous such examples in their book. One such example which they talk about 12 years ago more as a prediction and which I believe is a reality today is that of electronic bookseller like When e-booksellers came in 90s, traditional bookstores saw them as competitors. But then the e-booksellers contributed in increasing the size of the pie significantly. And traditional bookstores benefited from it too. I, myself, purchase books from But then, I also read reviews on Amazon and then go and buy the book from Gangarams or Landmark bookstore. Thus Amazon ends up contributing to increasing overall book-readership and traditional bookstore like Gangarams benefits from it too. The way bookstores have mushroomed in Indian metros is a testimony of this phenomenon.

Won’t Tata Nano impact the sale of Maruti Alto? Of course, it will. But don’t be so sure, which way the impact will be. Don’t be surprised when you see a headline, “Nano was the single biggest blessing Alto ever had.”


  1. Vinay,

    I have heard that disruptive innovators typcially start very small and even remain small. The ones that really make benefits are the big comapnies that make use of these technology / change in a big way. Is this true?

    Netscape / Microsoft on browser, some examples on hard disk technologies (I don't remember the players here), etc are good examples. Also, can comapnies like RIM, Nokia / HTC benefit from the smartphone boom?


  2. Krishna,

    Your observation is mostly true. In fact, Markides and Geroski give several such examples in their paper "Colonizers and Consolidators: The two cultures of corporate strategy". They say following: "The skills, mind-sets, and competencies needed for discovery and invention not only are different from those needed for commercialization; they conflict with the needed characteristics"

    However, the topic of current article "competitors and complementors" is orthogonal. RIM had the product before iPhone was launched. Also iPhone did not create a new market. It enlarged an already existing market.


  3. Vinay,

    I would disagree with your argument that iPhone extended the existing market. In fact, iPhone created an entirely new market of mobile entertainment devices that run full-fledged OS. iPhone is not just a phone, but it is a mobile game processor/audio-visual player/GPS-like device that can also be used for making calls. (Yes, Nokia/Samsung also have similar products, but they don't have the same capabilities as the iPhone.) In fact, recent study in the US has shown that people use iPhome more for downloading songs via iTunes and for watching youtube.

    I would argue that BlackBerry is a successful evolutionery product, whereas iPhone is a revolutionery product.


  4. Excellent observation, Vinay, and I'm in agreement with you. I in fact just had the same insight regarding iPhone as a complementor to Blackberry rather than a competitor - and googled and found your article offering the same insight.

    Brandenburger & Nalebuff's theory of 'co-opetation' does present an interesting and different take on things. I suspect the iPhone has been a great boon for Blackberry, allowing them to enter the ordinary consumers market (i.e. non-business users) while still being the major player in the business user market. I don't have any statistics on this but I believe the majority of 'hard core' business users are still using Blackberries.