Based on the book "Machine Platform Crowd - Harnessing Our Digital Future" which written by Andrew McAfee & Erik Brynjolfsson that two products are complements if a drop in the price of one pushes out the demand curve for the other.
The value of complementary products is especially high if one of the complements is a digital good whose price can be zero or near-zero. If a complement is free, and attracts a lot of customers as a result, it can drive sales of a complementary product that is very profitable for your business.
Benefits of digital complements to a physical product,
- The value that digital complements add to a physical product, and the value of an open platform.
- The value of the physical product (iPhone) increases as the number of digital complements (iPhone apps) increases.
- The number of digital complements increases much more rapidly because the physical product benefits from two-sided network effects, with positive feedback between the number of physical product owners and the number of digital complement developers.
- The number of digital complements increases at much lower cost. These outside digital complement developers are, in essence, providing free work to the platform because it is in their own interests to do so.
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