The increasing success of Uber, the direct-to-driver taxi service, has led me to reflect on the most recent trends in business strategy. I believe we’re now witnessing the demise of intermediaries.
In everything from retail, to entertainment, travel, event management, taxis, and classified ads, businesses that have traditionally earned their keep by providing information or funnelling goods from producers to consumers are being bypassed.
Uber is a revealing illustration of this process. Anybody can register with Uber to hail a driver to go from point A to point B in a city. There are now over 200 cities throughout the world with Uber service. Users get to rate drivers out of 5 (a driver with an average score below 4.5 gets eliminated from the service) and they can use their smart phones to order a car using online payments and the built-in GPS receiver and map. Fares also vary according to demand, which means that you can get a car at any time if you’re prepared to pay a higher rate. And there’s nothing wrong with that. That’s how supply and demand is supposed to work, by finding the right price at the right time.
Taxi drivers and dispatchers in most cities where Uber is present are furious and are fighting a rear-guard battle against the company and the “unlicensed” cars. Weapons include intimidation of Uber registered drivers, vandalism of Uber cars, and municipal regulations. But none of that is stopping customers from using the service. What we’re seeing, therefore, is the demise of one particular type of intermediary, the taxi dispatcher. Increasingly, if you want to drive a taxi Uber will be the way to go. Uber has also created other services, such as package delivery. Could this also have an impact on Fedex and other parcel services?
A few weeks ago Netflix was called before the Canadian Radio-Television and Telecommunications Commission (CRTC). The company has refused to hand over its extensive data on its Canadian clients to the commission. Up to recent years, Canadians have been restricted to broadcast and cable content that has been approved by the CRTC. The objective has traditionally been to protect Canadian producers of content, and by extension, culture. But now with Internet access, Canadians (like people anywhere the Internet isn’t censored) can watch or consume whatever they want, regardless of where it’s from. Even if there are restrictions on streaming, say, videos outside its producer’s home country, there are ways around that. You can set up a virtual private network (VPN) and access it as if you were in that country.
The result is that nationally protected content producers and distributors are competing directly against foreign producers whether they like it or not. As with taxis, customers are either buying directly from suppliers or going through a different type of intermediary. The latter are still intermediaries, but instead of hundreds or thousands, there are now a few companies acting mainly as information warehouses. Customers get the information they need when they need it and can deal directly with sellers. The new type of intermediary is either just an ordering service or an information repository.
There are numerous other examples. Google has put a serious dent in advertising intermediaries, itself becoming the marketplace where advertisers words and pictures, and buyers’ eyes, meet. Search engines and the Internet in general have eliminated Yellow Pages as a viable business. Craigslist and similar web services have undermined local classified and help wanted ads. What’s more, like Uber and Netflix, it’s all done remotely with a lot fewer employees and a lot better accessibility and flexibility for users.
You’ve got to wonder what the impact of physiological and health data generated by smart watches and other devices is going to be on the healthcare industry. If I were in life or health insurance, any kind of health care, or even funeral services, I’d be looking at what the potential impacts could be.
It’s always prudent to look for how your business can be undermined or overtaken by new entrants and competitors who come out of nowhere with substitute products and services. However, if you’re in any kind of business where you’re mainly an intermediary, it would be high time to look at your strategy and business model to see how vulnerable it is to getting bypassed by future “Ubers” and “Netflixes.”
The best defence is offence, so it makes sense to find ways to launch a spoiling attack and see how you can outmanoeuvre new entrants by creating substitutes that undermine your own positions.
Richard Martin is a Master Strategist and Leadership Catalyst. Richard brings his military and business leadership and management experience to bear for executives and organizations seeking to radically improve performance, grow, and thrive in the face of rapid change, harsh competition, and increasing uncertainty.
© 2014 Richard Martin. Reproduction and quotes are permitted with proper attribution.