Iansiti & Lakhani - Managing Our Hub Economy
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Questions and Answers

Which companies are poised to benefit from the commercialization of free time for commuters?

  • Netflix and Hulu
  • Alphabet and Apple (correct)
  • Twitter and Snapchat
  • Samsung and Microsoft

What does the term 'domino effect' refer to in this context?

  • A chain reaction of changes across various sectors (correct)
  • A decline in consumer interest in mobile applications
  • A series of failures in technology
  • An increase in investment in traditional media

What is one potential feature for autonomous vehicles mentioned in the content?

  • A built-in game console
  • A car customization tool
  • A 'Drive there' button linked to ads (correct)
  • A manual driving option

Which company is known for its acquisition of Whole Foods?

<p>Amazon (B)</p> Signup and view all the answers

How might traditional telecom services be challenged in the future?

<p>By messaging giants like WeChat and Facebook (B)</p> Signup and view all the answers

What market have companies like Alibaba and Amazon moved into recently?

<p>Traditional brick-and-mortar groceries (D)</p> Signup and view all the answers

Which of the following represents a key asset for companies like Alphabet and Apple?

<p>Advertising networks and maps (A)</p> Signup and view all the answers

What is the potential financial impact of a new hour of free time for car commuters?

<p>Hundreds of billions in the U.S. alone (A)</p> Signup and view all the answers

What is the primary reason automotive companies might need to join together?

<p>To meet the scale required to be competitive (B)</p> Signup and view all the answers

What type of services does Here Technologies provide?

<p>Precision mapping data and location services (A)</p> Signup and view all the answers

What was the cost implication for automotive companies when acquiring Here Technologies?

<p>The price tag may have been too high for single companies to afford (A)</p> Signup and view all the answers

What is meant by a 'federated' platform in the context of automotive companies?

<p>A collaboration model among multiple entities to share resources (C)</p> Signup and view all the answers

What is a potential competitive threat that automotive companies are trying to neutralize?

<p>A competitive bottleneck controlled by Google and Apple (C)</p> Signup and view all the answers

What significant role might the consortium play in the automotive industry?

<p>Preventing automotive value capture from shifting towards hub firms (A)</p> Signup and view all the answers

What factor is essential for successful collaboration among automotive companies?

<p>A common, strongly felt commitment (B)</p> Signup and view all the answers

What does the assembly of a 'federated' platform enable automotive companies to do?

<p>Collaborate effectively to counter large tech firms (C)</p> Signup and view all the answers

What happens to the value creation curve in traditional product and service businesses as the number of consumers increases?

<p>It flattens out after reaching efficient levels. (A)</p> Signup and view all the answers

What is a key characteristic of increasing returns to scale in digital technologies?

<p>More users enhance the platform's value through network effects. (C)</p> Signup and view all the answers

Why can multiple competitors coexist in traditional service industries?

<p>The competitive advantage diminishes as user bases grow. (C)</p> Signup and view all the answers

Which of the following is an example of a business that benefits from increasing returns to scale?

<p>A local advertising platform (B)</p> Signup and view all the answers

What effect do network effects have on the value of ads in a digital platform as user numbers increase?

<p>Ads become more valuable through better targeting. (A)</p> Signup and view all the answers

What is a primary concern of regulators regarding Google in Europe?

<p>The dominance of its search advertising business (C)</p> Signup and view all the answers

Which of the following companies claims millions of marketplace sellers?

<p>Amazon (D)</p> Signup and view all the answers

What must hub companies incorporate into their business models according to the content?

<p>Value sharing (C)</p> Signup and view all the answers

What happens if hub firms do not work to sustain the entire ecosystem?

<p>We are all in serious trouble. (C)</p> Signup and view all the answers

Which companies earn significant revenue from third-party apps?

<p>Google and Apple (B)</p> Signup and view all the answers

What are hub firms expected to observe for both strategic and ethical reasons?

<p>New principles of ecosystem management (D)</p> Signup and view all the answers

What is the potential consequence of the centralizing forces of digitization?

<p>Threats to global economic well-being (B)</p> Signup and view all the answers

Who is the David Sarnoff Professor of Business Administration at Harvard Business School?

<p>Marco Iansiti (C)</p> Signup and view all the answers

What is a significant risk associated with the hub firms mentioned in the content?

<p>Worsening income inequality (B)</p> Signup and view all the answers

Which statement best reflects the nature of hub firms in the economy?

<p>They create connections and own access to resources. (D)</p> Signup and view all the answers

How might companies respond to the concentration of hub power?

<p>By transforming their core businesses and utilizing assets differently (D)</p> Signup and view all the answers

Which of the following platforms is mentioned as having a significant user base that facilitates access for businesses?

<p>WeChat (D)</p> Signup and view all the answers

What effect does digitization reportedly have on economic relationships?

<p>It reinforces the power of hub firms. (D)</p> Signup and view all the answers

What long-term outlook is presented regarding the hub economy?

<p>It will continue to expand and persist. (D)</p> Signup and view all the answers

What is suggested as insufficient for companies to maintain competitiveness?

<p>Digitizing operating capabilities (B)</p> Signup and view all the answers

What type of social change is hinted at as a consequence of the hub economy?

<p>Potential social instability (A)</p> Signup and view all the answers

What is a key characteristic of network-based markets as described?

<p>They can tip toward a narrow set of dominant players. (C)</p> Signup and view all the answers

What strategy might traditional firms adopt to resist hub firms with increasing returns?

<p>Create multiple hubs and integrate with various services. (A)</p> Signup and view all the answers

In the context of competition among hub firms, which of the following statements is true?

<p>Companies like Microsoft strive to balance the power held by other hubs. (D)</p> Signup and view all the answers

What challenge do traditional businesses face when competing with firms benefiting from increasing returns to scale?

<p>The threat of being overshadowed by those creating bottlenecks. (D)</p> Signup and view all the answers

Which of the following companies is mentioned as attempting to create a new hub in the market?

<p>Facebook with Oculus (C)</p> Signup and view all the answers

How has Sonos responded to the challenge posed by hub firms?

<p>By ensuring compatibility with multiple music services. (B)</p> Signup and view all the answers

What market characteristic is highlighted through the competition for voice-activated home technology?

<p>Multiple companies are attempting to establish new hubs. (D)</p> Signup and view all the answers

Which describes the importance of making products available on multiple hubs?

<p>It prevents reliance on a single dominant player. (B)</p> Signup and view all the answers

Flashcards

Decreasing Returns to Scale

In traditional industries, the value a company gains from each additional customer levels off after a certain point.

Hub Firms

Companies like Google, Amazon, and Alibaba that control essential connections in networks used by businesses and consumers.

Increasing Returns to Scale

Some businesses, like online platforms, become more valuable with more users, creating a snowball effect.

Increasing Returns

The value a company gains from each additional customer continues to increase as the number of customers grows.

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Hub Economy

The dominance of hub firms in various markets, creating a concentrated network effect.

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Network Effects

The value a business creates increases as the number of users grows. This is common in platform businesses like Amazon and Facebook.

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Competitive Bottleneck

A situation where a company exclusively controls access to a large group of users, making it difficult for competitors to reach them. For example, Google owns Android, giving it significant control over access to mobile users.

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Decreasing Returns

When the value a business gains from each additional customer starts to slow down or even decrease.

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Data and Information Control

The ability of hub firms to collect data and influence information flow within their networks, potentially impacting the behavior of consumers and businesses within their ecosystem.

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Concentration of Hub Power

The increasing concentration of power among hub firms, potentially leading to negative consequences such as increased income inequality and social instability.

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Digitizing Operating Capabilities

The ability for companies to leverage digital technologies to enhance their operations and improve efficiency.

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Threats to Traditional Industries

The potential impact of hub firms' dominance on traditional industries, such as telecom and financial services.

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Responding to Hub Firms

Strategies that companies can adopt to adapt to the changing landscape dominated by hub firms, such as transforming core businesses and developing new revenue models.

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Domino effect

A situation where the success of one thing leads to the success of many other related things.

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Shifting market power

Companies like Apple, Google, and Amazon are gaining market share in various industries, moving away from traditional companies.

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Disruption in telecom

The growing dominance of apps like WeChat, Facebook, and others is challenging established telecom companies.

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New Hour of Free Time

The potential value of the extra time people will have from self-driving cars, which can be used for activities like shopping or entertainment.

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Hub firms in autonomous driving

Companies like Alphabet and Apple are well-positioned to capitalize on the opportunities presented by self-driving cars.

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Super-relevant ads

Personalized advertisements that are displayed based on the car's location and the passengers' interests.

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Drive there button

A feature in self-driving cars where an ad can lead the car to the advertised location with a single button press.

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Commercial potential of self-driving cars

The potential for companies to earn significant revenue from the hour of free time consumers will have in self-driving cars.

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Hub Companies

Companies like Google and Amazon who exert significant influence over their respective ecosystems.

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Value Sharing

The concept of sharing the benefits of an ecosystem among its participants.

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Value Creation

The process of creating new value within an ecosystem.

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Value Capture

The process by which a company captures value from its ecosystem.

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Ecosystem

The network of interconnected elements that contribute to a company's success.

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Ecosystem Vitality

The importance of maintaining a thriving ecosystem.

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Serious Trouble

The potential consequences of neglecting ecosystem vitality.

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Digitization

The continuous development and expansion of digital technologies and their impact on businesses.

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Growing Customer Base

The ability of a company or service to attract and retain a large number of users, which in turn, increases the value of the service for existing users.

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Federated Platform

A digital platform that allows for the shared use of resources and data, creating a collaborative ecosystem.

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Here Technologies

An online map company that provides location services to businesses and developers, aiding in the creation of navigation apps, location-based advertising, and other map-related services.

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Collaboration

The process of companies joining forces to achieve a common goal, often to increase their market share or address a shared threat.

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Automotive Value Capture

The ability of a company to capture and profit from the value it creates, often through its products, services, or technology.

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Common Commitment

A strong commitment from all parties involved in a collaboration effort, essential for achieving success and ensuring shared goals are met.

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Market Tipping in Increasing Returns Markets

In markets where companies experience increasing returns to scale, a few dominant players are likely to capture most of the market share. This means that smaller companies will have a hard time succeeding.

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Microsoft's AR Strategy

Microsoft's investment in augmented reality is meant to create a new hub to compete with Google and Apple's dominance in the mobile space.

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Facebook's Oculus Acquisition

Facebook's acquisition of Oculus was a strategic move to gain control in the virtual reality market, challenging established players.

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Competition in Smart Home Technology

Google, Apple, Microsoft, and Samsung are competing to become the leading provider in the smart home technology market, challenging Amazon's early lead.

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Traditional Firms Becoming Hubs

Traditional companies can resist being pushed out by hub firms by becoming hubs themselves, creating their own interconnected networks.

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IoT and Hub Formation

The Internet of Things (IoT) offers opportunities for traditional companies to become hubs by connecting their products and services to a larger network.

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Sonos's Multi-Platform Strategy

Sonos, a wireless speaker manufacturer, ensures compatibility with multiple music services to avoid being dependent on a single dominant player.

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Study Notes

Managing Our Hub Economy

  • The global economy is consolidating around a few dominant digital firms (hubs)
  • These hubs (Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent) are capturing a disproportionate share of value creation
  • Technologies that promise democratization are creating monopolies
  • Hubs control essential connections in networks crucial for the economy
  • Examples include: Google's Android, Amazon and Alibaba's marketplaces and Tencent's WeChat
  • This trend leads to value and economic power concentration
  • Increased income inequality and potential economic instability is possible

The Challenge

  • Hub firms threaten already existing dangerous levels of income inequality
  • They undermine the economy and destabilize society

The Answer

  • Companies dependent on hubs need strategies to defend their positions
  • Hubs need to share economic value and sustain stakeholder interests
  • Companies need to digitize core business operations for adaptability
  • Find new revenue opportunities and develop diverse strategies to mitigate hub power

Digital Domino Effect

  • Digitization accelerates hub firm dominance
  • Network effects drive increasing returns in scale
  • Digital technologies enhance connectivity, leading to value aggregation
  • Hub firms leverage existing network assets in new industries
  • Existing competitors with smaller scale struggle to compete

Profiting from a Growing Customer Base

  • Traditional businesses often see diminishing returns to scale
  • Digital platforms (Increasing Value) exhibit increasing returns to scale
  • This results in more value to users as the ecosystem and its users grow
  • Companies need to adapt and find ways to leverage the growing value created
  • Examples include Facebook's reaction to fake news and Google's YouTube's efforts in combating misinformation

Companies Should Make Their Products and Services Available on Multiple Hubs

  • Companies should distribute their products across multiple platforms to avoid being dependent on a single dominant player
  • This mitigates the risk of being held hostage by a single hub
  • Diversification across various platforms reduces dependence
  • Examples include Sonos and its ability to integrate with multiple music services

The Ethics of Network Leadership

  • Hub firms are de facto stewards of the economic system's long-term health
  • Leaders need to realize their responsibilities to all network members
  • These firms should incorporate value-sharing into their business models in addition to value creation and capture
  • There is responsibility on companies to uphold standards and ethics
  • Actions and strategies of such companies must be scrutinised for ethical implications

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Related Documents

Managing Our Hub Economy (2017) PDF

Description

This quiz explores the dynamics of the global economy influenced by dominant digital hubs such as Amazon and Google. It evaluates how these hubs impact income inequality and economic stability while discussing potential strategies for companies to adapt. Discover the implications of concentration in value creation and its effects on society.

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