It’s pretty simple really – disintermediation cuts out the middle man. We could do a high level lesson in economics or KISS. As the U.S. economy matured, more and more parties handled goods and services from source to consumption. That is all changing, and many traditional businesses are following suit.
The Good Old Days
Great Grand Father (GGF) wanted bacon, eggs, cheese and a biscuit for breakfast. GGF was the consumer; the cow and the chicken were producer – and you know the fate of the committed pig. The two middle people from source to table were Great Grand Mother (GGM) and the butcher.
Fast forward a couple of centuries. You drive into McDonald’s and order a number three – that’s a bacon, egg and cheese biscuit. The number of players involved in the supply chain for your number three? All of the above plus purchasing agents, meat-packing plant, rancher, poultry producer, processing plant, loaders, truckers, un-loaders, preparers and servers. (McDonald’s cut out a bunch).
Let’s step out of the number three example and move to the “time of the internet,” when you can click to buy nearly anything you want. There are some different middle men involved but the ones who used to play significant roles have been “disintermediated” (cut) out of the picture. When you hit the button, the retailer is gone, the wholesaler is gone, and robots do the picking in Amazon’s massive distribution center.
We are already living in the future and small businesses feel the challenge of competing in this new world every day. Here are a few ideas to prevent your business from being cut from your supply chain.
1. If you can’t beat them, better join them. If you are not already aggressively selling on the internet, start yesterday and become really good at it. i.e. DIRECT to the Buyer Thinking
2. Do your own disintermediating and trim out unnecessary steps in your supply chain. Get with a good financial analyst and cut high impact items from your P&L – Don’t waste time with paper clips – i.e. Expense MANAGEMENT
3. Explore new revenue opportunities – what are you better at than the low-cost internet provider? Shift the buying decision from price to value. People do still appreciate value and are willing to pay for it. – Change the Rules of the Game
4. Resist being all things to all people and zero in on your highest margin opportunities. It may mean divesting of some things but it is worth it in the end.
There are some very valuable lessons in Jim Collins’ Good to Great on how seemingly ordinary companies transformed themselves from near death to greatness. You can click to buy it from the Amazon distribution center.
This is a time to go deep within and come out swinging. The world has changed and we all need to change with it!