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The Big Deal Is: The Death of the Age of the Middleman!
by Saeed Mohasseb

 
   
 
   

The big deal about the Internet is not the convenience of buying things from home and then waiting for them to be delivered to our door.  The big deal about the Internet is not even the romanticized opportunity of finding a soul mate in a chat room.  The big deal is, however, the fundamental impact the Internet will have on the nature of economic transactions and commerce. 

A few days ago, for the first time, I sat in front of the computer and used the Internet to buy something.  I needed to plan a trip, and as usual, I started with my travel agent.  However, it was late, the office was closed and she had gone home for the day.  I took the next step and attempted to call the airlines to explore my options and possibly purchase a ticket.  A long wait and a lot of bad music motivated me to jump on the net and try this Internet transaction business.  In seven minutes I had examined my alternatives, found the best deal and purchased my ticket.  I even earned double mileage on account of my purchase!  In another eight minutes my entire itinerary was gracefully sliding out of the fax machine.  I was hooked, and my travel agent was officially out of a job.

Since the time “money” was created as a medium or unit of transaction, there has never been such a fundamental restructuring of the way in which economic exchange takes place.  In the good old days of bartering, we would make a direct, fair trade and both be happy.  I might desire to trade my chickens for your wheat, we would then strike a deal, and our transaction would be complete.  As the village got bigger, the type of merchandise available to us would increase, and our needs might begin to exceed our ability to find bartering partners in our own village -- and then in the immediate surrounding community.  Therefore, we create the “middleman” and “money” and together they provide a workable structure for effective, widespread commerce.

For years, with this type of system in place, we trust middlemen to find the best economic relationship for us.  In return, we compensated them for their efforts and for their ability to find the merchandise we were looking for at an acceptable price and adequate terms.  The middlemen solved the problem of the great multiplicity of goods and choice and addressed the difficulties of distance and the challenges of achieving transactional fairness.

Now we have come to the “big deal”.  The Internet has provided us, once again, with the ability to participate in direct commerce with our fellow villagers.  Virtual communities on the Internet now provide us with the ability to instantly contact a large volume of services across the globe.  Using electronic credit and debit cards has made it possible to complete instantaneous transactions.  Instead of relying on the “middleman”, we can use our own resources to evaluate our choices and find an appropriate trading partner in seconds.  The “small” community that allowed us to deal with people directly is here once again.  However, this time it is a virtual community, where trade takes place almost immediately, and without any geographical limitations.  Now, You have “A” and I need “A”, so we meet in the virtual village and complete a transaction on a one to one basis -- with no middleman. 

This extraordinary phenomenon is restructuring the fundamental premise of commerce.  The accepted formula for transfer of goods through multiple layers of middlemen (brokers, agents, distributors, VARs, etc.) is no longer offering the benefits it was once intended to deliver.  The Internet is forcefully breaking the traditional value chains of delivery of goods and services.  Shortly, the price wars will be intensified and the middle players will have to face significant financial challenges as margins shrink rapidly.  The very probable and painful side effect on our “middleman” systems will be evident, and the economy, on a global basis, will have to absorb the difficulties caused by instabilities resulting from the elimination of an entire layer of employment.

Additionally, the expansion of the virtual space for commerce will directly and inversely impact the need for real space for occupancy. One major developer in California projects a 5% reduction in commercial real estate needs within the next three years.  As the role of the middleman diminishes the need to house the middleman in an office also diminishes.  In addition, the storage and warehouse space requirements will be reduced drastically as the manufacturer/customer relationship becomes direct and middleman free.

The key operative word is change across the board. This change will not be a simple adjustment, but a fundamental alignment - an alignment that will influence multiple industries simultaneously and drastically.  One estimate suggests that an Internet year is 18 days.  As the new backbone of commerce the speed of Internet evolution clearly influences the dimensions and the velocity of change in other industries.

This new dynamic framework for business offers a new set of challenges.  It also offers an unprecedented menu of opportunities.  The domino effect of change has just begun.  The time to develop your E-strategy is now.  This advice is not only for large corporations, it is not only for small organizations, but for every business individual.  Particularly to the potentially most endangered business species, The Middleman!

Folks, find a niche promptly.  Get wise now, and reevaluate your position in the value chain of goods and services delivery.  In the age of the Internet, the value of a proposition must be proven every time and the matter by which this is done will be digital.  If the machine can replace our travel agents, our brokers and the local bookstore, it is highly probable that it can replace you and me.

In short, the big deal is redefined value propositions, restructured service delivery models, and re-energized village based commerce.  The big deal is fluid industry definitions, In-flux employment terms and short lived and illusionary perceptions of corporate stabilization.


     
   
     
   

The Author

 

Mr. Mohasseb is the CEO, chairman of the Board and the visionary of Competitive Knowledge, Inc.  Former CEO of a national management consulting organization, he is a published strategist, an expert in business performance, and a veteran management consultant with many of the fortune 500 as his clients and having served as a principal in turn-around acquisition situations. 

Saeed Mohasseb, Chief Executive Officer
Competitive Knowledge, Inc. 7139 Woodley Avenue, Van Nuys, CA 91406
Tel: (818) 909-6709 E-mail: Togable@competitive-knowledge.com .

     
   
     
   
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Copyright 2000 by Saeed Mohasseb. All rights reserved.

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