Admired companies such as Airbnb, DoorDash and Alibaba reinvented the rules of strategy by deploying a new model: the business ecosystem. An ecosystem can be defined as 'a dynamic group of largely independent economic players that create products or services that together constitute a coherent solution.' Traditional companies have started to understand the threat, embrace the opportunity and launch their own business ecosystems. For example, John Deere, founded in 1837, is leading the race to building the most comprehensive smart-farming ecosystem. And retailer giant Walmart has become a serious competitor of Amazon with its Walmart Marketplace. The authors present eight major shifts (four in mindset and four in operating model) that traditional companies must embrace to become successful ecosystem players.

Good governance supports an ecosystem's ability to create value, manage risk, and optimize value distribution among its partners. Based on the governance models of more than 80 business ecosystems, the authors outline five building blocks of an effective governance model and share four foundational recommendations for using ecosystem governance as a source of competitive advantage.

Business ecosystems provide valuable access to external capabilities, scale fast, and can be very flexible and resilient. But only 1 in 7 ecosystems achieves sustainable success. The metrics and red flags described in this article can help you track the key drivers of ecosystem health and ensure that your company beats the odds.

Scholars have argued for years that high levels of diversification harm company performance and value creation. But multi-business companies can do quite well. Those that thrive tend to do three things: They limit the number of business models in their portfolio and support them with a cohesive operating model. They tailor the corporate parenting strategy to the needs of individual business units. And they allocate resources according to the role played by each business unit.