# Complements *Commodity as an anchor* --- You make locks. Mechanical cylinders, handles, strike plates. There's nothing to differentiate one from another at the product level, so margins compress as competitors bid each other down. Operating margins run in single digits. The market is fragmented across thousands of local manufacturers, each with their own standards, their own regulations, their own local customer loyalty. Switching costs are almost zero. You're in a commodity business. You could try to differentiate. But a lock is a lock. Nobody is paying a premium for a better tumbler mechanism when six competitors make one that works just as well. You could invest in design, in materials, in branding, and your competitor down the road will match you within a year at a lower price point, because their cost base is the same as yours and they have nothing to lose. You could try to grow organically. But in a fragmented market with thousands of local incumbents, each with decades-old customer relationships and local certifications, taking share costs more than it returns. You'd be spending to acquire customers who generate 6-8% margins. The maths don't compound. You're stuck inside a product that can't support premium pricing, in a market too fragmented to consolidate from within, serving customers who see no reason to switch. --- But the same fragmentation that traps you also creates an opening. Thousands of small, local champions. Many family-owned. Many approaching a generational transition, where the founder is sixty-five and the children don't want the business. Each one is the number one or number two in its geography, with relationships built over decades. If you buy the strongest player in each market, you get something none of them have individually: scale. Purchasing power across suppliers, manufacturing efficiencies across plants, distribution reach across borders. The same lock that earned 6% margins as a standalone business earns closer to 12% inside your group, because the overhead is spread across a base many times larger. You're still selling locks. But you're selling them with economics nobody else can match. --- Now look at what your customers actually buy. A building manager choosing an access system doesn't evaluate locks in isolation. They evaluate a system: the lock, the electronic credential that opens it, the software that manages who gets access, the reader that authenticates, the automatic door operator, the integration layer that connects it all to their building management platform. Each component raises the value of every other piece, and the software and electronics carry margins north of 20%, two to three times what you earn on the lock. So you start acquiring into the system around it. Each acquisition makes the whole more valuable, and you already own the anchor — the lock, installed everywhere, with the widest customer base in the market. A competitor selling a standalone component is pitching a product against a system. And the building manager who's already bought into yours evaluates the next piece against the cost of making their existing setup work with someone else's. --- And because your margins now come from the system rather than the lock, you can do something the standalone manufacturers can't: make the lock cheaper. You already have the lowest cost base from the consolidation. Push the price down further and the competitors still fighting the commodity battle can't follow. They're running on single-digit margins with no complementary revenue to absorb the hit. You're funding the price cut from the 20%+ margins on everything around the lock. The cheaper the lock, the wider your installed base. The wider the base, the more customers flow into the system where the real margins sit. The commodity business you started in is now your moat, and every price cut makes it harder for anyone still stuck in it. --- That's [[ASSA ABLOY]]. Revenue grew from SEK 3 billion to over SEK 100 billion across three decades. Over 250 brands, more than 50,000 employees. Most of that growth followed the same logic: acquire the adjacent piece, integrate the workflow, capture the value that accumulates between the components. The lock hasn't changed, but everything around it has. ---