Two, to extract profits from your ecosystem, you need to find what Iansiti and Levin in their early, influential book on ecosystems called a “keystone.” This is some element of, or activity in, the ecosystem’s value creation system that you can own and control, on which the ecosystem’s ability to create value for customers is dependent. Without that element, the ecosystem cannot satisfy its customers—just as a dome would collapse without its keystone. 1 The keystone ensures the ecosystem will continue to need you. Part of the reason for IBM’s inability to sustainably monetize the PC-compatible ecosystem was its lack of such a keystone. While IBM provided many elements that helped the ecosystem to thrive, including the overall architecture and the specifications for many of the interfaces between components, it lacked a proprietary component that other participants would need to buy in order to serve their own customers.
To provide a sustainable flow of profits, the keystone needs to satisfy certain conditions. These are the same four conditions strategy theorist Jay Barney concluded that a resource must satisfy before it can underpin a sustainable competitive advantage: it must be valuable, rare, non-substitutable, and hard to imitate. 2 Only then can you use the keystone to extract profit reliably. […]