I was having lunch yesterday with a business friend and he remarked on some new eyeglasses I’d recently bought.
I told him about the purchase process and how the next time I bought some new specs (these were an emergency purchase due to a misplaced foot) I’d be doing so online. I talked about Warby Parker and how they are selling high quality frames and lenses for under $100. I went on to talk about an article in the Times this week on how there were companies like W/P who are cutting out the middlemen in areas such as bedding (Crane and Canopy), office supplies (Poppin), nail polish (Julep), tech accessories (Monoprice), men’s shoes (Beckett Simonon) and shaving supplies (Harry’s).
As I drove back from lunch I thought about how that process really should raise a question for each of us and every business: what value are we adding? The reason the above companies are successful is that they’re offering the same high-quality products at lower prices by cutting several layers out of the business transaction. Obviously, if the quality of the end-product remains the same, all of those layers were adding nothing of value but were adding to the costs.
Disintermediation is probably the biggest effect the internet has had over the last twenty years. It’s not just in the retail chain either. Video on demand services such as Netflix cut out the local video store. The ability for program creators to access audiences directly has cut out distributors such as TV networks and even cable systems. The easiest way for any of the middlemen to remain a part of the equation is for them to define the value they bring to the sale and make that value very apparent. This is true, perhaps even more so, if you’re in a service business.
There is a tendency to think that the technology is simply making things more efficient. If clarifying the value chain means “efficient” then I guess I agree. If you are a middleman of any sort, you need to be doing that clarification yourself, both internally and externally. Does that make sense?