Today, many companies operate within a complex network of firms that all depend on each other for success. In this book, authors Marco Iansiti and Roy Levien use the powerful example of biological ecosystems to show how companies can leverage these emerging business networks for long-term success. The book's title, "The Keystone Advantage", is taken directly from biology - it refers to "keystone species", which proactively maintain the healthy functioning of their entire ecosystem for a simple reason: their own survival depends on it. In the same way, say the authors, companies can protect and ensure their own success by deliberately fostering the combined health of the network they operate in.
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About the Author
Marco Iansiti is an HBS professor and the co-chair of Harvard's PhD program in Information Technology Management.
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17 of 19 people found the following review helpful
Format:Hardcover
As this book's subtitle correctly indicates, Iansiti and Levien explain "what the new dynamics of business ecosystems mean for strategy, innovation, and sustainability." They are quite correct when pointing out that, in recent years, in industries as different as personal computers and personal care products, "companies [have] leveraged multiple organizations in distributed supply chains, integrated technological components from a variety of business alliances, collaborated with a number of channel partners to distribute their products, and leveraged complementary services from banks, insurance providers, or retailers." As a result, many industries have been forced to create or become involved in a fully networked structure, one "in which even the simplest product or service is now the result of collaboration among many different organizations." (In fact, decades ago, American Airlines devised his "hub and spoke" strategy. However, this really is not what Iansiti and Levien have in mind.) For example, Microsoft and Wal-Mart have a decisive competitive advantage in large measure because they are "keystone" companies in their respective ecosystems. More specifically,
Both "of these firms understand that their fate is shared with that of the other members of their business network. Rather than focussing primarily on their internal capabilities (as many of their competitors did), they emphasize the collective properties of the business networks in which they participate, and treat these more like organic [in italics] ecosystems [end italics] than traditional supply chain partners. They understand their individual impact on the health of these ecosystems and the respective impact of ecosystem health on their own performance...[For that reason] "a new, holistic approach to strategy is critical to an increasingly broad range of firms in our economy as they face the new set of challenges and responsibilities created by competing in business ecosystems."
How? Given the evolution of business ecosystems which are analogous to biological counterparts, organizations today, regardless of their size or nature
(1) must decide if they are a keystone or niche "player" (Please see Part I)
(2) then formulate strategies appropriate to that role (Please see Part II)
(3) and finally, establish and build on one of three "foundations of sustainable performance in a business ecosystem" (Please see Part III)
"Keystone" companies such as Microsoft, Wal-Mart, Dell, and eBay create value within their respective ecosystems which is shared with other participants in that system. More specifically, they create high-value, sharable assets; leverage direct customer connections; create and manage physical and information hubs; support uniform information standards; create, package, and share state-of-the-art tools and building blocks for innovation; establish and maintain performance standards; build or acquire financial assets for operating leverage; reduce uncertainty by centralizing and coordinating communication, and reduce complexity by providing powerful platforms.
Obviously, few organizations can be (or should even attempt to be) a "keystone" or "dominator" company. According to the authors, keystone wannabes tend to pursue two quite different: "hub landlords" (e.g. Enron) extract as much value as possible from an ecosystem or ecosystem domain without integrating forward to control it whereas "hub dominators" (e.g. Apple) integrate vertically or horizontally to manage and control an ecosystem or ecosystem domain. Most organizations will correctly a strategy as a "niche" player by specializing in capabilities which differentiate them within an ecosystem domain. "Niche players are naturally dependent on other businesses. The essential step in defining a good niche strategy is therefore to analyze the firm's ecosystem and map out the characteristics of its key stone and dominator players." (Please see Chapters Six and Seven for a complete explanation of all this.)
All organizations involved in a given ecosystem must, of course, rigorously monitor but also take an active role in nourishing that system's health so as to promote and facilitate the leveraging of an enduring and evolving core. However, it remains for keystones to provide both the vision and the leadership needed, especially in response to market design, operation, and competition. They must also facilitate and support integration, innovation, and adaptation within their ecosystem. "This is the price that keystones must pay for their privileged position at the hub of a business network and as owners of enduring assets: Keystones [in italics] must [end italics] manage the health of their ecosystems as a key business strategy. The challenge for each niche player is to decide in which ecosystem to become actively involved with which keystones to be associated in a strategic alliance.
I wholly agree with Iansiti and Levien that "We are bound together by the nature of the relationships among products, technologies, markets, and innovation. Leveraging these relationships is critical to enhance firm productivity, to protect organizations from disruption, and to enhance their ability to innovate, evolve, and adapt. This means that no firm, product, or technology can be an island: No firm can afford to act alone, and no products can be designed in isolation." Those who share my high regard for this book are urged to check out Christensen, Anthony, and Roth's Seeing What's Next: Using the Theories of Innovation to Predict Industry Change as well as Kaplan and Norton's The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment.
Both "of these firms understand that their fate is shared with that of the other members of their business network. Rather than focussing primarily on their internal capabilities (as many of their competitors did), they emphasize the collective properties of the business networks in which they participate, and treat these more like organic [in italics] ecosystems [end italics] than traditional supply chain partners. They understand their individual impact on the health of these ecosystems and the respective impact of ecosystem health on their own performance...[For that reason] "a new, holistic approach to strategy is critical to an increasingly broad range of firms in our economy as they face the new set of challenges and responsibilities created by competing in business ecosystems."
How? Given the evolution of business ecosystems which are analogous to biological counterparts, organizations today, regardless of their size or nature
(1) must decide if they are a keystone or niche "player" (Please see Part I)
(2) then formulate strategies appropriate to that role (Please see Part II)
(3) and finally, establish and build on one of three "foundations of sustainable performance in a business ecosystem" (Please see Part III)
"Keystone" companies such as Microsoft, Wal-Mart, Dell, and eBay create value within their respective ecosystems which is shared with other participants in that system. More specifically, they create high-value, sharable assets; leverage direct customer connections; create and manage physical and information hubs; support uniform information standards; create, package, and share state-of-the-art tools and building blocks for innovation; establish and maintain performance standards; build or acquire financial assets for operating leverage; reduce uncertainty by centralizing and coordinating communication, and reduce complexity by providing powerful platforms.
Obviously, few organizations can be (or should even attempt to be) a "keystone" or "dominator" company. According to the authors, keystone wannabes tend to pursue two quite different: "hub landlords" (e.g. Enron) extract as much value as possible from an ecosystem or ecosystem domain without integrating forward to control it whereas "hub dominators" (e.g. Apple) integrate vertically or horizontally to manage and control an ecosystem or ecosystem domain. Most organizations will correctly a strategy as a "niche" player by specializing in capabilities which differentiate them within an ecosystem domain. "Niche players are naturally dependent on other businesses. The essential step in defining a good niche strategy is therefore to analyze the firm's ecosystem and map out the characteristics of its key stone and dominator players." (Please see Chapters Six and Seven for a complete explanation of all this.)
All organizations involved in a given ecosystem must, of course, rigorously monitor but also take an active role in nourishing that system's health so as to promote and facilitate the leveraging of an enduring and evolving core. However, it remains for keystones to provide both the vision and the leadership needed, especially in response to market design, operation, and competition. They must also facilitate and support integration, innovation, and adaptation within their ecosystem. "This is the price that keystones must pay for their privileged position at the hub of a business network and as owners of enduring assets: Keystones [in italics] must [end italics] manage the health of their ecosystems as a key business strategy. The challenge for each niche player is to decide in which ecosystem to become actively involved with which keystones to be associated in a strategic alliance.
I wholly agree with Iansiti and Levien that "We are bound together by the nature of the relationships among products, technologies, markets, and innovation. Leveraging these relationships is critical to enhance firm productivity, to protect organizations from disruption, and to enhance their ability to innovate, evolve, and adapt. This means that no firm, product, or technology can be an island: No firm can afford to act alone, and no products can be designed in isolation." Those who share my high regard for this book are urged to check out Christensen, Anthony, and Roth's Seeing What's Next: Using the Theories of Innovation to Predict Industry Change as well as Kaplan and Norton's The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment.
4 of 4 people found the following review helpful
By Mike Okney
Format:Hardcover
This book does an unusually good job of transferring some insights from biology and the study of complex systems and networks to the domains of business management. This is a tricky task that can't be accomplished without doing some insult these sciences, but the authors succeed by and large in suggesting important insights for managers and others with an interest in business practice.
But as the New York Times's Steve Lohr notes, this book is causing an "admiring stir within the not-inconsiderable cottage industry of academics and consultants who study innovation, competition and corporate strategy" mostly because of its argument that "antitrust policy needs to be rethought": that our simplistic view that big always equals bad simply does not apply in highly networked complex industries. Because of this, The Keystone Advantage should interest a much wider audience than a traditional business book.
But as the New York Times's Steve Lohr notes, this book is causing an "admiring stir within the not-inconsiderable cottage industry of academics and consultants who study innovation, competition and corporate strategy" mostly because of its argument that "antitrust policy needs to be rethought": that our simplistic view that big always equals bad simply does not apply in highly networked complex industries. Because of this, The Keystone Advantage should interest a much wider audience than a traditional business book.
5 of 6 people found the following review helpful
By John Matlock
Format:Hardcover
As no man is an island, businesses do not operate in a vacuum. There are suppliers, customers, employees and of course the government. More and more, these outside influences are banning together in a perhaps unofficial but no less real ecosystem.
In the computer industry, which everyone reading this must have some at least sideline awareness, there are two principle 'keystone' players: Microsoft and Intel. Around these companies there are literally thousands of other companies somehow creating a business around their core technologies. This works pretty well, so long as you are very careful. If you sleep next to an elephant, you'd best sleep with one eye open, just in case he decides to roll over. Just ask Netscape.
These authors have attempted to provide a framework for analyzing such business ecosystems, drawing on examples from biology where such systems have been studied for many years.
Most of the examples used in the book are from the American market. Next, I'd like to see the authors do a book comparing the American and the Japanese systems. It appears that the Japanese started this philosophy but that we have taken it into new and different directions, certainly less formal (the Japanese methods would be illegal here) but seemingly headed in much the same direction.
In the computer industry, which everyone reading this must have some at least sideline awareness, there are two principle 'keystone' players: Microsoft and Intel. Around these companies there are literally thousands of other companies somehow creating a business around their core technologies. This works pretty well, so long as you are very careful. If you sleep next to an elephant, you'd best sleep with one eye open, just in case he decides to roll over. Just ask Netscape.
These authors have attempted to provide a framework for analyzing such business ecosystems, drawing on examples from biology where such systems have been studied for many years.
Most of the examples used in the book are from the American market. Next, I'd like to see the authors do a book comparing the American and the Japanese systems. It appears that the Japanese started this philosophy but that we have taken it into new and different directions, certainly less formal (the Japanese methods would be illegal here) but seemingly headed in much the same direction.
Most Recent Customer Reviews
5.0 out of 5 stars
A book worth reading
The book highlights the strong parallels between business networks and biological ecosystems. The ecology examples used in the book of eBay, Microsoft, Walmart are useful to review... Read more
Published on December 28, 2010 by P. Jarvis
5.0 out of 5 stars
Thought provoking use of ecological metaphors
The book gets high marks for creativity, but I'm left wondering if the analogies between business and ecology bear up under scrutiny. Read more
Published on November 4, 2006 by Mark Mills
5.0 out of 5 stars
A New Strategic Dynamic
The authors highlight the importance of these networks in the strategy creation process. Their discussion provides organizations with a roadmap that points out the importance and... Read more
Published on January 11, 2005 by Craig L. Howe
4.0 out of 5 stars
A good book -- but could go further
The Keystone Advantage is a good book. It uses a biological metaphor to discuss and explain the success of various companies within a larger business 'ecosystem'. Read more
Published on December 8, 2004 by Finn Jackson
4.0 out of 5 stars
The foundational book for modern business networks
Business networks represent the future for many organizations as capabilities and competition move beyond the individual firm. Read more
Published on September 22, 2004 by Mark P. McDonald
5.0 out of 5 stars
A rendition of powerful modern business dynamic forces
The Keystone Advantage: What The New Dynamics of Business Ecosystems Mean For Strategy, Innovation, And Sustainability by Marco Iansiti (David Sarnoff Professor of Business... Read more
Published on September 11, 2004 by Midwest Book Review
Front Cover | Front Flap | Table of Contents | First Pages | Index | Back Flap | Back Cover | Surprise Me!
Citations (learn more)
This book cites 33
books:
See all 33 books this book cites
- Technology Integration: Making Critical Choices in a Dynamic World by Harvard Business School Press in Back Matter (1), and Back Matter (2)
- Technology Integration: Making Critical Choices in a Dynamic World (Management of Innovation and Change) by Marco Iansiti in Back Matter (1), and Back Matter (2)
- Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal by Charles A. O'Reilly III in Back Matter (1), and Back Matter (2)
- The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems by James F. Moore in Back Matter (1), and Back Matter (2)
- A Piece of the Action: How the Middle Class Joined the Money Class by Joe Nocera in Back Matter
See all 33 books this book cites
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