This week, Stephen
Ibaraki, I.S.P., has an exclusive interview with noted technology and
operations management authority, Marco Iansiti, David Sarnoff Professor of Business
Administration at Harvard Business School (HBS).
Professor Iansiti is a faculty member in
the Technology and Operations Management Unit. Originally a physicist, Dr.
Iansiti created two courses, Starting New Ventures (with Prof. Myra Hart) and
Managing Product Development, and has taught a variety of Executive and MBA
courses on Innovation, Entrepreneurship and Operations.
He is a world-renowned expert and prolific
author/researcher who defines with new perspective the critical elements and
the strategic and innovative approach that companies such as IBM, Wal-Mart,
Microsoft, Hewlett Packard, AT&T, Dell, and eBay, along many others, have
adopted to outperform their competitors.
His recent works have generated
considerable interest including, "The
Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for
Strategy Innovation, and Sustainability" (with Roy Levien, Harvard
Business School Press), and the article, "The Ecology of Strategy" (also with Roy Levien, Harvard
Business Review). The New York Times was particularly impressed with the
"admiring stir" that "The Keystone Advantage" was causing
in among those who study innovation, competition and corporate strategy;
Strategy & Business Magazine selected it as the "Top Book in IT &
Innovation for 2004."
In his book,
"The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean
for Strategy, Innovation, and Sustainability," Keystone Strategies founder
and CEO, Dr. Marco Iansiti, sheds new light on the network of partners, suppliers
and customers that make up a businesses’ ‘ecosystem.’ It details how companies
have succeeded or failed based on the strength or weakness of their
ecosystems. Dr. Iansiti’s
research on innovation, operations and strategy, which focuses on the impact of
information technology on strategic capabilities, dates back 15 years, with
studies of hundreds of companies across myriad industries.
Q: Can you summarize the key
theme(s) of your latest book, “The Keystone Advantage: What the New Dynamics of
Business Ecosystems Mean for Strategy, Innovation, and Sustainability"?
A: My book, The Keystone Advantage, summarizes my
findings after years of looking at various company’s ‘ecosystems’ and
understanding how they had been able to thrive and grow, or struggle and fade.
Through my work with Fortune 500 companies, I came to recognize that biological
ecosystems can be a powerful analogy for business networks. And that a
company's success depends on the success of its ecosystem – its suppliers,
customers and partners.
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, utilizing the collective competencies of an entire network in order
to achieve a competitive advantage.
Q: In “The Keystone Advantage" you describe
two categories of clientele. Please describe these two categories and address
A: In my book, The Keystone Advantage, I sought
to address the unique and rapidly changing needs of two audiences. The first
audience, or Group A, is made up of key decision makers and executives in the
IT industry who have a sense of their company or product’s ecosystem, but seek
a deeper understanding of how to effectively impact and manage it.
Specifically, Group A is looking to be more structured and analytical on their
business decisions in order to develop a systematic strategy to manage their
audience, Group B, also includes key decision makers and/or executives, only
this time they are not solely from the IT industry, but other industries as
well (e.g., operations and manufacturing). Group B understands its business
processes and their reach outside of their own enterprise. This group is
primarily interested in the dramatic impact IT tools and applications can have
on its business in order to help them compete and collaborate more effectively
with other organizations.
Q: How do companies go about understanding their
dependencies and relationships, identifying critical assets internally and
externally, and building strength throughout the business ecosystem
A: Understanding your company’s dependencies is
critical to knowing and gauging the health and potential of the ecosystem in
which your business lives. In my book I outline three steps that a company may
apply to better understand its relationships, dependencies, strengths and,
ultimately, its weaknesses.
The first step is
to analyze and understand your ecosystem. This means an in-depth analysis of
its structure, key players, the competition, and the overall health of its
market. Through this process, key issues, strengths and weaknesses are
identified and so too are potential partners. With the analysis complete, it’s
time to develop metrics aimed at tracking and analyzing the performance of the
most critical domains and partners in the ecosystem. This is critical as 50% or
more of the value added to most products and services are a function of
external organizations through partnerships, collaborations and/or joint
ventures. Yet, most companies do not measure these external metrics.
The second step is
about developing a strategy based on this analysis. Through the collected
insights, it’s time to determine the company’s ‘role’ in the ecosystem. As my
book lays out, there are four (4) roles a company may take, including: an
Enabler; a Keystone; a Dominator or a Niche player.
Third in the
process is the building out the business around the company’s new strategy.
From a CIO’s perspective, this is the time to ask a list of questions aimed at
ensuring you can build the business out. Question such as “what technologies
will I need to implement?”, and “what are the processes I need in place?” are
typical, and will get you to the next level. Competing in an ecosystem,
managing a complex set of relationships requires new capabilities and is a new
role for CIOs. With the increased reliance on
outsourced services, even for key assets and capabilities, for example, the
execution of an ecosystem strategy, and the CIO’s role
in that strategy becomes paramount to a company’s competitiveness.
These three steps
will lead your company to a better understanding of its relationships,
dependencies and strengths and weaknesses.
Q: Do you have particular views on
outsourcing, innovation and its implications?
A: More and more we see businesses – big and
small – focused on outsourcing. Organizations are not only outsourcing non-core functions such as HR or
IT infrastructure, but they are also starting to rely on partners for crucial
business functions, such as innovation and critical strategic partnerships.
From healthcare to financial services, the market for outsourcing has grown to
nearly $1 Trillion with no slow down in sight. The attraction is obvious --
companies continue to outsource not only for the inherent cost savings
associated with low cost (and often times highly skilled) labor pools, but also
to enhance their strategic capabilities and improve innovation by moving
non-core strengths to a third-party vendor.
Take hospitals and
hospital systems for example. With the care of patients, Research and
Development and teaching considered ‘core’ strengths of many hospitals, it
makes sense to move back office functions to a specialized operational firm.
Leave the care of patients to the hospital and move operations to a highly
skilled, technical vendor. The good news is that we’re starting to see the
market bear these kinds of specialized services and service providers. Of
course, outsourcing is a lightening rod for issues surrounding privacy, so I
think the issue will be played out in the media and through public policy.
On this topic,
it’s also worth mentioning that with any decision to outsource, a company must
look at what it’s giving up. Inherently, something is lost by outsourcing work,
so it’s key to decide what that is and then weigh the risks associated with
Q: (Speaking of outsourcing…) What specific business ecosystems examples
do you see developing in China?
A: No doubt - China is
a major presence in the global economy. And already we’re seeing just how
dominant they can be as they become a greater part of the IT ecosystems of
several manufacturing and technology companies.
I don’t see
business ecosystems in China. What I see instead is Chinese organizations playing a major role
in increasingly global ecosystems. In industries ranging from aerospace to
semiconductors, and from electronics to software, Chinese organizations are
playing an ever increasing role.
Q: Bill Gates has endorsed your
work. Please comment on what he said.
A: In the early stages of Microsoft, Bill Gates
understood the idea of being a Keystone Player and seems to have been keenly
aware of the ecosystem his company was growing within. As a result, Microsoft
is built on many of the foundations outlined in my book. One of the most
obvious is its role as an ‘Enabler’ focused on facilitating the activity of
other (software) developers. As you know, Microsoft was started with tools and
not DOS/Windows, but the company’s role as an Enabler in the community
eventually led to Windows.
more about business ecosystems and Dr. Iansiti, or to order a copy of his
upcoming book, visit www.key-inc.com
or contact email@example.com.