How competitive is your ecosystem? I started asking this question several years ago when I began to realize that networks of companies function in a way that is similar to biological ecosystems, that a companys success depends on the success of its ecosystem—the large number of organizations, suppliers, customers and partners that influence the value created by the companys products and services.
The closer I looked at a companys ecosystem, the better I understood the strengths and weaknesses of the companys competitive position. I found that traditional business models, which are prone to place emphasis on internal competencies, are no longer adequate in a world of massively interconnected business ecosystems. Today, successful companies use what I call the "keystone advantage," using the collective competencies of large networks of organizations for competitive advantage.
Consider Dell. In its essence, Dell is a powerful hub in a business ecosystem that connects IT suppliers and customers. But it made an early decision that its business model would retain the fewest internal assets necessary to build and operate the platform that makes up this hub.
Dell wins by orchestrating the collective capabilities of its network of suppliers and partners. Dells IT platform makes up a critical component of its keystone strategy, connecting its customers to its network of suppliers and aligning the efforts of thousands of organizations.
As a result of this strategy, Dell maintains the greatest supply chain velocity in its industry, responding to market demand much faster than its competitors. In addition, it has successfully illustrated that it does not have to house the capabilities that give it this speed to market in-house.
IBM and Microsoft also frequently use keystone strategies. The technology platforms they offer, such as WebSphere and .Net, respectively, are aimed at orchestrating the capabilities of thousands of software application companies and at fostering the health and sustained performance of their ecosystems. The collective innovations of these massive networks of companies have built a virtually unchallengeable competitive advantage for both companies.
Other successful keystone strategies can be found in a variety of settings, from retail to household appliances to telecommunications to apparel distribution. Theres no doubt that in todays business climate, more and more companies have come to depend on their business networks. In a world of shared fates and values, the keystone advantage is a reliable approach to achieving sustainable competitive performance.
Marco Iansiti is David Sarnoff professor of business administration at Harvard Business School and co-author of the recently published "The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability." He can be reached at email@example.com. Free Spectrum is a forum for the IT community. Send submissions to firstname.lastname@example.org.