Q: I understand the concept of a keystone in architecture, but what's a keystone in biology?

A: Let me explain it this way. Biological ecosystems are characterized by a large number of loosely connected participants who depend on one another for their mutual effectiveness and survival. Within most of these systems—as in business systems—you find another group of more richly connected participants who've created a hub. The behavior of these hubs can have profound effects on the health of the entire network. These hubs are known as keystones of the larger network. Again, as in business, their interests are closely aligned with those of the rest of the ecosystem as a whole. In fact, they serve as critical regulators of the ecosystem's health.

If you look at highly evolved biological systems, you find these keystones are common. They're either embodied as a member of the system or encoded into the system as universally agreed-to protocols, rules, and goals. All of these enhance characteristics that keep the system healthy because other network members can rely on this keystone for stability and predictability.

Q: Is this a way that businesses should look at themselves and their partners and suppliers?

A: Not necessarily. I'm not arguing that industries are ecosystems, or even that it makes sense to organize them as if they were—just that you can use the metaphor to get some vivid insights and useful terminology. When we looked across industrial sectors using this metaphor, it became clear that almost all healthy business ecosystems are characterized by some kind of keystone function, and that efficiency, innovation, and robustness are linked to the keystone's behavior.

Q: You use Wal-Mart and Microsoft as examples of keystones, yet interestingly, they're in completely different industries.

A: That doesn't matter. Here's how they're similar. Wal-Mart, through a combination of technology, capabilities, and policies, organized a massive network into a collective force that provides customers with the products they need when they need them, at the lowest possible cost. This strategy gave the company performance advantages in every retail metric—cost, operating margin, and sales per square foot—and it has even widened the gap with its competitors over time.

More important, Wal-Mart provided tools and technological components, such as its Retail Link system for disseminating real-time sales information, that its partners have integrated into their own respective supply chains, further amplifying the impact of the consumer information Wal-Mart provides. In this way, thousands of individual companies have shared in the value created by Wal-Mart's information infrastructure, and have built their own technology and business processes to leverage Wal-Mart's information assets.

At the same time, Microsoft created and actively maintained a technology platform that a vast number of companies could leverage to increase productivity, enhance stability, and use as building blocks for innovation. Both companies were successful because they appreciated the impact these platforms could have, and took steps to create real opportunities for other businesses. These other companies, in turn, made more investments to leverage the platform and began to depend on Microsoft and Wal-Mart for their success. This created a virtuous cycle in their respective industries, through which a wide variety of businesses achieved increasing levels of productivity, stability, and innovation.

Q: Of course, sometimes Wal-Mart and Microsoft aren't particularly well-liked, even by their suppliers, partners, or customers.

A: That doesn't matter either. Regardless of the tenor of individual encounters, both companies understand they can win only if they continue to sustain the collective health of their vast networks of business partners.

Q: Is this a new phenomenon brought on by the Internet?

A: Absolutely not. Take the apparel industry in Italy. For hundreds of years, it has been a loosely connected network of many organizations, some as small as one person. The local autonomy of this system enabled focus, flexibility, and quick reaction. In fact, this autonomy and coordination let the network become robust enough to survive hundreds of years of technology and market changes, achieving the productivity and innovation it needed to triumph over competitive systems. Even today, it's a remarkably distributed operation in which organizations, such as Benetton, function as keystones to help coordinate network behavior.

Its heritage isn't obvious because during the 20th century, the mantra of modern business was vertical integration, exemplified by DuPont, Ford, and IBM. Creating distributed business networks was too difficult and costly, so vertical integration dominated. But during the last decades of the century, we made significant changes to our legal, managerial, and technological capabilities, which made it easier for companies to collaborate and distribute operations over multiple organizations. Now large, distributed networks are the established way to do business. But just because they're ubiquitous doesn't mean they're easy to manage.

Q: It sounds like there are a limited number of companies that can play the keystone role.

A: Yes, but that doesn't mean others don't have a critical role to play in the health and stability of the ecosystem. These other companies constitute the bulk of the ecosystem, and, in fact, are responsible for the lion's share of its value creation and innovation. These companies need, for their own good and the good of the entire system, to learn to effectively manage what the network provides.—Howard Baldwin, contributing Web editor