Complementor Relationship Management

The Missing Link in Business Relationship Management

Prof. Reiss: Complementor relationships – a revival of weak ties

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Weak ties in social network analysis

In social network analysis “weak ties” constitute an intriguing concept: they are both efficient (low maintenance) and effective (avoiding structural holes, creating small worlds). So weak ties have considerable strength, e.g. they serve as facilitators of change.

 

 

Complementor relationships represent a renaissance of the weak ties-approach, although in a significantly more sophisticated version. Compared to (“strong”) contractual relationships along the supply chain, complementor relationship are in fact “weak”: as a rule, they do not rely on formal contracting nor do they imply transactions.

Weak ties 2.0: complementor relationships

The “weak ties 2.0”-version contains several “upgrades” or modifications of the original model. In order to meet the factual complexity of relationships the “new” weak tie-approach is more complex:

Triads 2.0

In contrast to social network analysis, the new relationship approach is not focused on inter-personal relationships amongst individuals (friends, acquaintances), but on inter-organizational business relationships amongst business units, e.g. companies. In a business network model (e.g. the value net) node A is a customer, B and C are complementors, for instance B a PC company and C a printer company. The strong ties between A & B and A & C derive from selling/ buying contracts. They mediate a weak tie between A&B in terms of cross selling, i.e. PC users also buy printers.

 Embeddedness 2.0

The original embeddedness model emphasizes that business relationships rely on social relationships. The refined relationship model operates on a three layer model of relationships.

The layer of emergent connections comprises the weak ties. They are not the result of organized, planned or engineered activities of relationship management, but rather the unintended result of other business activities. On this layer, not predominantly the complementors themselves but their (shared) clientele creates connections between them. Connections are the starting point of all complementor relationships and many of them do not get organized on community or commerce layers at all. They primarily develop according to the laws and patterns of co-evolution, e.g. by anticipating actions of complementors and by reacting to their activities.

Community relationships are based on the logic of organized bartering (e.g. give and take information) and resource sharing among complementors: like in other cooperative endeavors consensus about reciprocity constitutes a critical success factor.

Commercial relationships focus on joint configuration businesses: to provide an all-round offer in IT-management PC companies will offer printers (delivered by complementors).

Strength 2.0

In social network analysis, having “close” friends (strong ties) or “loose” acquaintances (weak ties) is a result of “interaction”, “affection”, and “duration of relationship”. However, the connections between these determinants remain unexplained. In contrast, the strength of a business relationship in the weak ties 2.0-model is measured by two indicators: interdependency (pooled, reciprocal or serial relationships) and integration (harmonious positive versus disharmonious negative relationships). The performance of a relationship primarily depends on the fit between the two dimensions:

Whenever a misfit between the level of interdependency and integration occurs, the relationship is destabilized and its performance impaired. Congruence can be either reached by contracting the relationship (reducing the level of association) or expanding it (increasing the level of association via more interdependence and integration).

Managed ties

In the 2.0 model complementor relationships do not simply emerge, their strength is an object of management interventions. The organizational design of complementor relationship management predominantly focuses on the optimal dosage of the level of association between complementors. The overall scope of organizational options is provided by the generic market-hierarchy continuum from transaction cost theory. It contains arrangements that rely on both heterarchical market governance and hierarchical corporate governance in various proportions. Integration by customer generates the weakest relationship between complementors whereas relationships between complementing divisions in a diversified corporation relies in strong relationships, i.e. congruent high levels of interdependency and integration.

Integration by customer: Due to the triad design of complementor relationships customers carry out a market based coordination of complementors automatically by their respective buying activities. The customer is in charge of all activities of integration and configuration complementary offerings.

Partnership: Coordination between complementors is accomplished by participative and cooperative organizational arrangements, either on a contractual basis or by installing an organizational unit. On the commercial layer consortia, project companies, joint ventures or virtual enterprises serve this purpose of a single point of entry for customers.

Brokering: An agency is in charge of coordinating complementary offerings and complementors, also acting as the “one face to the customer”. This job is carried out by third parties like system integrators, value added resellers, solutions providers or companies running shopping malls, portals or computer reservations systems.

General contracting: The company offering a primary product serves as a focal coordinator of complementors who play the roles of subcontractors. Original equipment manufacturers coordinate the after-market-services for their products furnished by independent service providers.

Diversified corporation: This is the most hierarchical option. Inter-organizational specialization is replaced by intra-corporate offerings. A corporate center manages a diversified portfolio of related businesses. This governance is frequently applied in bancassurance, facility management, contract logistics and telecommunication (e.g. triple play). Whenever diversification is supported by divisional structures (“m-form”) that are coordinated by a holding, the rules of the integration game become significantly less hierarchical: In these “federations” the portfolio manager coordinates comparatively independent “intrapreneurs” or intra-corporate complementors, e.g. financial service subsidiaries inside automotive corporations. This role resembles the general contracting or even brokering governance structures.

 

Granovetter, M.: The Strength of Weak Ties: A Network Theory revisited, in: Sociological Theory, 1 (1983), pp. 201-233. http://rfrost.people.si.umich.edu/courses/SI110/readings/In_Out_and_Beyond/Granovetter.pdf

Reiss, M.: Complementor Relationship Management – Missing Link in Supply Chain Management, in: Samson, R. (ed.): Supply-Chain Management: Theories, Activities and Problems, New York 2011, pp. 139-156.

Wasserman, S.; Faust, K.: Social Network Analysis: Methods and Applications. Cambridge 1994.

The Author: Prof. Michael Reiss holds the Chair of Organizational Design and Behaviour, University of Stuttgart.

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1 Kommentar

  1. Dear Reiss,
    I am currently working on a research article addressing the competitive forces in Indian aquaculture industry for a potential vaccines business. Using the Porter’s five plus two forces (complementors and distribution channels), I am trying to understand the forces in this industry. I came across the abstract on complementors that you have authored. Could you kindly share with me a PDF copy of the following chapter?

    Complementor Relationship Management – Missing Link in Supply Chain Management, pp. 139-156
    Michael Reiss, Faculty of Management, Economics and Social Sciences, Institute of Business Administration, Universität Stuttgart, Germany

    Your help is highly appreciated!
    Thanks,
    Mahendra Pallapothu

     

     

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