In a piece for the September-October issue of Harvard Business Review, Karim Lakhani and Marco Iansiti explore the “competition in the age of online giants.” These representatives of the “hub economy” – like Facebook, Google, Amazon, Alibaba and others – often take a network-driven rather than product-driven approach to competition and expansion, resulting in growing challenges. Lakhani and Iansiti argue:
“If current trends continue, the hub economy will spread across more industries, further concentrating data, value, and power in the hands of a small number of firms employing a tiny fraction of the workforce. Disparity in firm valuation and individual wealth already causes widespread resentment. Over time, we can expect consumers, regulators, and even social movements to take an increasingly hostile stand against this concentration of value and economic connectivity. In a painfully ironic turn, after creating unprecedented opportunity across the global economy, digitization—and the trends it has given rise to—could exacerbate already dangerous levels of income inequality, undermine the economy, and even lead to social instability.”
Fostering complementary communities, they argue, is one path to avoid the worst economic impacts of the hub economy:
“Building and maintaining a healthy ecosystem is in the best interests of hub companies. Amazon and Alibaba claim millions of marketplace sellers, and they profit from every transaction those merchants make. Similarly, Google and Apple earn billions in revenue from the third-party apps that run on their platforms. Both companies already invest heavily in the developer community, providing programming frameworks, software tools, and opportunities and business models that enable developers to grow their businesses. But such efforts will need to be scaled up and refined as hub firms find themselves at the center of—and relying on—much larger and more complex ecosystems. Preserving the strength and productivity of complementary communities should be a fundamental part of any hub firm’s strategy.”
Read more here.