An egocentric approach to defining ecosystems undermines the ability of everyone involved leaders, followers, and partners alike to see alignment hurdles and craft appropriate strategies. The authors discuss successful ecosystem strategies for companies positioning themselves as leaders, as well as key considerations for those that choose followership. Real-world examples from the mobile payment, electronic health record, and e-book ecosystems provide additional context.

Why do some transformative technologies dominate the market quickly, while others take decades to catch on? It's a function not just of the technologies themselves, say the authors, but also of their broader ecosystems (electric cars, for example, need a network of charging stations). The ecosystems of the legacy technologies matter too--they can sometimes be improved enough to prolong the life of the old technology. Analyzing the ecosystem dynamics in your industry can help you predict how quickly technological change will occur. For example, if the new technology is surrounded by viable complements and there's little room to improve the old technology's ecosystem, substitution is rapid ("creative destruction"). When the opposite conditions hold--the new technology's ecosystem needs work and the old technology can capitalize on improvements in the established ecosystem--the pace of substitution is very slow ("robust resilience"). The authors describe two other possible scenarios: "robust coexistence" of the two technologies, and the "illusion of resistance" (the old technology seems competitive for some time but quickly succumbs once the new technology's ecosystem is ready to roll). If you understand which scenario applies to you, you can better assess the threat of disruptive change--and use the authors' insights to respond effectively.

A superior new technology emerges on the horizon, threatening your existing business. Do you strive to make a seamless transition to it or, perhaps, try to fight and defeat it? Both of those responses can be losing strategies. A third, frequently superior, option is one of "bold retreat," whereby your company cedes most of the established market to the new, dominant technology and instead pursues less vulnerable positions - not as a "turn tail and run" reaction but as a proactive, strategic alternative to head-on competition. There are two types of bold retreats: (1) retrenchment to a niche of the traditional market, where the old technology has an advantage over the new one in addressing customer needs; and (2) relocation to a new market, where the old technology is the inherently superior offering. You can even incorporate both moves into an effective strategy. Like a transition to a new technology, a bold retreat requires significant organizational change. That includes revamping your cost structure and talent base, not to mention selling the very idea of "retreat" to your internal stakeholders. Despite such challenges, a bold retreat that is carried out with foresight can be both a survival strategy and a success story.

High-definition televisions (HDTVs) should, by now, be a huge success. Philips, Sony, and Thompson invested billions of dollars to develop TV sets with astonishing picture quality. From a technology perspective, they've succeeded: Console manufacturers have been ready for the mass market since the early 1990s. Yet, the category has been an unmitigated failure because critical complements such as studio production equipment were not developed or adopted in time. Underperforming complements have left console producers in the position of offering a Ferrari in a world without gasoline or highways--an admirable engineering feat, but not one that creates value for customers. The HDTV story exemplifies the promise and peril of innovation ecosystems--the collaborative arrangements through which firms combine their individual offers into a coherent, customer-facing solution. When they work, innovation ecosystems allow companies to create value that no one firm could have created alone. The benefits of these systems are real. But for many organizations, the attempt at ecosystem innovation has been a costly failure. This is because, along with new opportunities, innovation ecosystems also present a new set of risks that can brutally derail a firm's best efforts. Innovation ecosystems are characterized by three fundamental types of risk: initiative risks--the familiar uncertainties of managing a project; interdependence risks--the uncertainties of coordinating with complementary innovators; and integration risks--the uncertainties presented by the adoption process across the value chain. Firms that assess ecosystem risks holistically and systematically will be able to establish more realistic expectations, develop a more refined set of environmental contingencies, and arrive at a more robust innovation strategy. Collectively, these actions will lead to more effective implementation and more profitable innovation.

What is discontinuous about the moment of radical technological change? Discontinuity typically does not lie in a radical advancement in technology itself; rather, it stems from a shift of an existing technical lineage to a new domain of application. Seeming revolutions such as wireless communication and the Internet did not stem from an isolated technical breakthrough; rather, their spectacular commercial impact was achieved when an existing technology was reapplied in a new application domain. The biological notion of speciation events, which form the basis for the theory of punctuated equilibrium, can reconcile the process of incremental technical change with the radical change associated with the shift of an existing technology to a new application domain. This concept can assist managers to cope with, and potentially exploit, such change processes.

iMotors was an online used car retailer. Its business model reconfigured the industry value chain and allowed it to create significant new value for consumers. The case highlights the tension between value creation and value appropriation, limits to growth and the importance of establishing legitimacy in creating new categories. It also raises the question of the sustainability of competitive advantage.

This is an MIT Sloan Management Review article. The Internet has created new markets, customers, products, and modes of conducting business. But it also has given currency to some dangerous half-truths. Subramanian Rangan and Ron Adner, professors of management and strategy at INSEAD in France, explain why seven popular strategies are not the path to profitable growth. First-mover advantage, for example, gets too much credit for e-business success. Companies believe that they can lock in customers and trigger a winner-take-all dynamic, but there is no guarantee that those benefits will go to first movers. The allure of reach--increasing the number of customer segments--causes many companies to ignore fit, the coherence with which their activities reinforce one another. Another tempting growth strategy is to provide customer solutions, offering products or services that complement a company's core offering. But offering solutions can dilute a company's focus. Targeting the right Internet sector is one way to maintain focus. When companies view the Internet as an undifferentiated landscape, they are less able to distinguish the drivers of customer value and performance--or the metrics to measure them. Some companies see best-of-breed-partner leverage as the secret of profitable growth. But although the Internet makes it easier and cheaper to align activities across company boundaries, it does not do much to align interests--a requirement for the creation of joint value. Another misconception is the belief that an Internet business will automatically be successful abroad. The last, and perhaps most dangerous, misconception is managers' belief that technology can substitute for strategy. Companies that understand their technology better than they understand their customers and competition won't succeed in any economy, old or new.