Economics

Managing Our Hub Economy

Strategy, ethics, and network competition in the age of digital superpowers

by

Marco Iansiti

and

Karim R. Lakhani

by

Marco Iansiti

and

Karim R. Lakhani

From the Magazine (September–October 2017) · Long read

Thomas M. Scheer/Eyeem/Getty Images

Summary.

A small number of digital superpowers—Alibaba, Amazon, Microsoft, and others—have become “hub firms” because they control access to billions of mobile customers coveted by all kinds of product and service providers. These hubs drive increasing returns to scale and claim a disproportionate share of the value being created in the global economy.

The authors argue that the hub economy will continue to spread across more industries, concentrating more power in the hands of a few. As an example, they take an in-depth look at the auto industry and how Apple and Alphabet/Google are poised to become the main beneficiaries as cars turn into digitally connected spaces for work, entertainment, and shopping.

As hubs proliferate and expand their reach, the danger is that they will exacerbate economic inequality and threaten social stability. It is thus incumbent on all stakeholders—traditional companies, start-ups, institutions, and communities—to make certain changes in the ways they do business. Moreover, hub firms themselves must lead responsibly for the good of all, not just creating and capturing value but doing more to sustain other players in the ecosystem.

The global economy is coalescing around a few digital superpowers. We see unmistakable evidence that a winner-take-all world is emerging in which a small number of “hub firms”—including Alibaba, Alphabet/Google, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent—occupy central positions. While creating real value for users, these companies are also capturing a disproportionate and expanding share of the value, and that’s shaping our collective economic future. The very same technologies that promised to democratize business are now threatening to make it more monopolistic.

A version of this article appeared in the September–October 2017 issue of Harvard Business Review.

Marco Iansiti is the David Sarnoff Professor of Business Administration at Harvard Business School, where he heads the Technology and Operations Management Unit and the Digital Initiative. He has advised many companies in the technology sector, including Microsoft, Facebook, and Amazon. He is a coauthor (with Karim Lakhani) of the book Competing in the Age of AI (Harvard Business Review Press, 2020).
Karim R. Lakhani is the Charles Edward Wilson Professor of Business Administration and the Dorothy and Michael Hintze Fellow at Harvard Business School and the founder and codirector of the Laboratory for Innovation Science at Harvard. He is a coauthor (with Marco Iansiti) of the book Competing in the Age of AI (Harvard Business Review Press, 2020).

Managing Our Hub Economy

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