Disintermediation means in economics, the removal of intermediaries in a supply chain. Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor, wholesaler, broker, or agent), companies may now deal with every customer directly (source: wikipedia.org).

In other words Disintermediation is a nice word for cutting out the middlemen.

Or you can also it different “Don’t Cut Out the Middleman–Become One” like Brian Chesky and Joe Gebbia from AirBnB did.

If you put cutting out the middlemen on the perspective of disruption like in my previous posts Disruptive Innovation: Flexwork and staffing in 10 years and How does Disruption work?, the quote from Clay Shirky can be added:

Institutions will try to preserve the problem to which they ​​are the solution.

In other words the solution of having being the middlemen needs to be preserved but actually with present mobility and technology the middlemen is hardly needed. In other words the company who is the middle men tries to preserve the problem that there is a middlemen needed.

cut out the middleman edited

Some interesting examples:

Banks are trusted companies that store your money for a small interest and provide this money to somebody or company who pays a little higher interest rate. If you solve the trust between the lender and the borrower you don’t need a bank anymore. The bank can be replaced by software and a trusted organization (like a central bank). For more info read Peer-to-peer lending (Wiki).

The most famous middlemen is the trading. Importers, exporters, wholesales etc. they all had its function in the chain. As long as traders don’t add value in the distribution chain, probably you don’t need them so much. In practice there are already many marketplaces that cut the middleman for trading. Ream more about it in my post Two sided online marketplaces

Taxi business
The taxi business was organized by local organisations that “negotiated” a taxi for you, when you called. Now companies as Uber and Lyft are global taxi providers who replaces the middlemen by an app that covers a lot cities worldwide.

Hotel industry
To be honest, I almost don’t remember how I was organizing my trips 20 years ago. If I remember well, I visited a travel agency and booked a hotel. Now you can use Booking.com or if you are interested to bypass the hotel and share a place to stay, you can use AirBnB.

Staffing is still organized by companies with big offices and people who organize that employees will come on request. The question is why? It is an expensive way for something that can be easy organized via an app. For some innovative companies that are changing the world of staffing read my post 6 marketplaces as an alternative for a staffing office #FreelancersTakeOverWorld.

Buying and selling advertising space was something that was be done by people from mostly specialized companies. Step by step it is automatically done by Real Time Bidding (RTB). Actually Google always sold their advertising space via a Do It Yourself Internet tool called AdWords.

Agencies are like staffing companies middlemen in providing strategists, project managers, designers etc. If you will be able to organize teams that can deliver the same or a better result. you don’t need an agency anymore. Maybe working according a Holacracy would make it possible to exchange the agency by peer to peer or freelancers to end users. We will see what the future will bring.

2 Responses to “Innovation: Don’t Cut Out the Middleman – Become One”

  • Whity

    HiYwan van Loon,
    I really like your summary here about “Don’t Cut Out the Middleman – Become One”.
    But could I ask you one question?

    What do you think, how companies like “Taxi uber”, “lyft” or ” AirBnB” surviving in the market? I mean, “taxi uber” get their revenues through fees what clients pay for the ride, but how AirBnB get their revenues? because at Booking.com I don’t need to pay any fees for example.

    Many thanks,

    • Ywan van Loon

      Hi Whity,
      Thank you for your interest.
      I expect Uber, Lyft, AirBnB and Booking.com charge a percentage of the total transaction. Surviving is a matter of creating and keeping a certain critical mass (see my post Why (not) to Build A Two-Sided Online Marketplace?) in combination with convenience for the users.

      I hope it answers your question.


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