Senior Client Partner
How to lead your business ecosystem
To succeed in today’s complex market, CEOs must look beyond their own company and focus on shaping the business ecosystem in which their company operates.
How to lead your business ecosystem
Every ecosystem is a series of symbioses. From tide pools to tropical forests, every organism in an ecosystem depends on the others to remain in harmony. The slightest change can disrupt its delicate balance.
But ecosystems don’t only exist in nature. They also exist in business. A business ecosystem is a network of organizations cooperating to deliver a product or service. Given this broad definition, a business ecosystem could include customers, community, suppliers, distributors, competitors and more.
All of these ecosystem stakeholders look to CEOs to shape their company and the ecosystem where they operate. That means the CEO role has shifted considerably. Today, CEOs have to appease more than just their directors and shareholders. They have to address demands from many sectors of society, from employees and customers to government agencies and activist investors.
To understand what this shift means for the CEO role, we spoke with 105 board directors, many of whom are also CEOs. They represent 311 North American companies and 11 industries. Given the vast stakeholder landscape, we discovered that the playbook for successful leadership has changed. The risks are high, as CEOs must decide who and what to prioritize.
To navigate these risks, CEOs need skills that go beyond the traditional daily demands of the position. They need to master a new, softer set of skills. In other words, they have to become a new type of CEO: an enterprise leader who can guide their ecosystem through complexity.
Here are five steps CEOs can follow to start evolving towards ecosystem leadership.
Before attempting to lead a business ecosystem, CEOs have to study its members. They have to understand how each member of their ecosystem operates independently and collaboratively (or competitively) with each other. For example, CEOs must learn the strengths and weaknesses of their members. They must understand how members contribute to the ecosystem and how they link together.
Next, CEOs must understand the external forces operating within their ecosystem. They must recognize outside threats that might compromise the ecosystem’s ability to work together. They also need to consider whether their ecosystem partners can adapt to changes in their environment. Finally, they must look for business opportunities that are mutually beneficial to all within the ecosystem, regardless of the risk of competition.
As they move forward, CEOs need to find a way to unite their business ecosystem partners around a single objective. That objective must benefit the ecosystem as a whole and each partner. For example, the objective could be a shared interest or challenge. An effective way to organize is to form a mission-driven partnership that coincides with your business strategy and serves the greater good.
In order for the CEO to expand their role, they need help from a network of leaders. CEOs need to be able to step back from the day-to-day management of running the business. Instead, they need to focus on setting a clear sense of direction for the organization. While CEOs remain responsible for this direction, they must look to their executive team for help in carrying out their strategy.
These executives must be prepared to help run their business function while contributing to the business ecosystem. In other words, they must be experienced enterprise leaders. They need to step up as thought partners and successors and should be capable of holding their own in conversations with investors, board members and employees.
When CEOs surround themselves with high-caliber executive talent, they’re better positioned to fulfill their role as an ecosystem leader. The good news is that many CEOs have already built an empowered network of leaders. During the pandemic, the speed of disruption demanded that executives make decisions faster than ever before and handle new responsibilities. For these reasons, this current group of leaders is well prepared to act as a partner with the CEO.
Today’s CEOs have to think beyond their organization’s success. Instead, they must consider the role they should play in building a healthy business network that will promote not only their organization’s interests but those of society as well.
This enterprise mindset and business ecosystem skillset came to the forefront during the pandemic. Take, for example, the elite hotels that opened their doors, free of charge, to first responders in New York City. This was both the right thing to do and a benefit to the hotels’ ecosystem.
As a result, healthcare professionals were able to get much-needed rest, keeping them healthy so they could continue treating COVID-19 patients. Treating patients helped address the risks to the public and allowed pharmaceutical companies to pursue vaccine research and trials. As the risks became more known and finite, people became less fearful of going into public and traveling. And, in turn, businesses in the hospitality industry benefited from the public resuming their lives as normally as they could.
To cultivate an ecosystem skillset, CEOs must build four core capabilities:
Companies are built for collaboration. They’re designed with structures and teams that are focused on reaching a goal.
However, business ecosystems tend to be disconnected, consisting of individual parts that lack formal organization or governance structures.
CEOs need to figure out how to fill the organizational void in business ecosystems. Options include industry coalitions, public-private partnerships and other organizations that serve as an overarching structure for coordinating ecosystem actions. Examples of these groups include the CEO Water Resilience Coalition, the Global Food Safety Initiative, the Network for Greening the Financial System and CEO Action for Diversity & Inclusion.
It is clear through the efforts of CEO Action that there are many benefits of formally organizing a business ecosystem. This organization is “the largest CEO-driven business commitment to advance diversity and inclusion in the workplace.”
The coalition consists of more than 2,200 CEOs and presidents from more than 85 industries who are all acting toward a singular purpose: the “shared belief that diversity, equity and inclusion is a societal issue, not a competitive one, and that collaboration and bold action from the business community — especially CEOs — is vital to driving change at scale.”
This large-scale involvement from global CEOs has led to:
CEO Action’s steering committee, composed of CEOs and leaders from several organizations that compete with each other — Accenture, BCG, Deloitte US, The Executive Leadership Council, EY, General Atlantic, KPMG, New York Life, P&G and PwC — has enabled the coalition to take bold action to drive change.
There’s inherent risk when CEOs respond to the demands of stakeholders beyond their four walls. They may have to deal with issues that are new and unfamiliar, with no easy answers. They may be challenged by activist investors who talk about social responsibility and ESG matters but still expect organizations to maximize short-term gains instead of taking a long-term approach toward creating value.
When they step outside their company’s bubble, CEOs must navigate a complex web of social and political matters. No matter which stance they take on these issues, they’re likely to disappoint, if not outright alienate, some stakeholders.
And when CEOs bite off more than they can chew, between handling matters for their own company as well as their business ecosystem partners, there’s a risk that they’ll engage in a lot of activity but have minimal impact.
This requires careful consideration of potential risks. Ecosystem CEOs should consult their trusted partners before tackling multiple ecosystem issues. Their trusted advisors, board, peers at other organization and industry experts can advise which efforts may have the biggest payoff. And, to make sure they uphold their responsibility to their own organization, they must remain mindful of the impact on their day job.
Of course, there’s also the potential upside of taking on these issues. At least some segments of society will embrace the CEO’s efforts and this in turn will improve public sentiment about the company. A stronger reputation in the community can attract more customers and employees who welcome a community-minded approach to business.
The company may also enjoy the benefits of deeper, more productive relationships with governments and societal institutions. And when diverse coalitions work together to solve pressing problems, they’re more likely to come up with innovative solutions.
The most effective CEOs know that they cannot act alone. No company, and no industry, is an island. Every organization is a member of an ecosystem. The most successful organizations are likely to be led by ecosystem CEOs who recognize the unique opportunity of this moment to become a force for good and build a more sustainable business that simultaneously serves all stakeholders.
To learn more about our perspective on the leadership of business ecosystems, check out the full article in the Harvard Business Review. And to learn more about becoming an enterprise and ecosystem CEO, check out our professional development for leaders.