Digital Disruption and Disintermediation – Key Drivers for B2B Companies
One of our super-smart clients sent me a really interesting article titled The Battle is for the Customer Interface. The article talks about how the customer interface (usually web-based) is where the action and the big profits are. To quote from the article: “The new breed of companies are the fastest-growing in history. Uber, Instacart, Alibaba, Airbnb, Seamless, Twitter, WhatsApp, Facebook, Google: These companies are indescribably thin layers that sit on top of vast supply systems (where the costs are) and interface with a huge number of people (where the money is).”
So what does this trend have to do with “disintermediation” and “disruption,” and why should you care? Disintermediation is basically the removal of brokering entities between producers and consumers. Disintermediation occurs every time someone clicks a website order form instead of talking to a person. Here are several more examples of B2C disintermediation:
- You book your travel online, hence fewer travel agents.
- You handle much of your banking online, hence fewer bank tellers.
- You book your next vacation at AirBnB, hence fewer hotel staff.
- You buy your office supplies at Staples.com or Amazon, hence fewer retail personnel.
Disruption goes hand-in-hand with disintermediation. By “disruption” I am referring to a major change in the way products are marketed, sold and delivered to the customer. Retail sales are replaced with online sales; in-person sales are replaced with telephone sales; direct sales are replaced with channel sales; telephone sales are replaced with online sales. You get the picture.
Disruption can be major (e.g. changing your entire business model) or minor (e.g. using online techniques to shorten the sales cycle). But the relevant point is, as former Cisco CEO John Chambers was fond of saying, is that you either disrupt yourself or your competitors will do so. For some great ideas on how to be intentional in disrupting your business, read James Hardy’s Success Magazine article: 6 Ways to Disrupt Yourself & Grow Your Business.
One of the reasons that companies have claimed that disintermediation and digital disruption can’t occur in their industry is that customers would never allow technology to be a barrier between them and the companies they want to do business with. There are many companies who once believed this and are now also-rans because they failed to get in front of the disruption cycle. The secret to success is to use technology in a way that brings your customers closer to you, not chase them away. As you can see from the following chart, some relatively new companies have gained massive valuation on their ability to accomplish this goal.
Chances are you will not be creating a venture that competes with the likes of Uber, Facebook or Netflix. However, regardless of your industry, digital disruption — and possibly disintermediation — are factors you will probably need to contend with. And it is better to be out front in addressing this than to wait for the marketplace and your competitors to determine your fate.