IoT Choices: When to Disintermediate a Channel or Service Partner




The Harvard Business Review article, How Smart, Connected Products Are Transforming Competition, identifies ten strategic choices manufacturers must make to capitalize on the Internet of Things.

In this seventh installment of a series of video interviews, the article’s co-author Jim Heppelmann looks at disintermediation tradeoffs.

Should the company fully or partially disintermediate distribution channels or service networks?

You might be wondering whether your company should fully or partially disintermediate some of your distribution channels or service networks. Obviously, those distribution channels or service networks capture significant value, and they create distance between the customer and your brand.

Smart, connected products enable disintermediation by eliminating, in many cases, the need for physical proximity to your customer and your product. You can now maintain a direct, deep, and ongoing customer relationship by using your product as a sensor for the relationship with your customer. Perhaps you can diagnose failures and make repairs remotely, which can reduce the need for physical presence from your service partners.

Now obviously, disintermediation has some tradeoffs. Some level of physical proximity to the customers may still be required, and of course, your customers may have strong relationships with your resellers and distribution channel.

Recommendation

So, our recommendation is to identify partner activities that can perhaps be replaced by the digital connection you have with your customer through your smart, connected products. Then, evaluate how the value generated by going direct can be captured and managed. And finally, evaluate your firm’s true ability and capabilities to develop and maintain this direct relationship with your customer in an effective manner. 

Learn More:

In their upcoming October 2015 Harvard Business Review article, How Smart, Connected Products Are Transforming Companies, co-authors PTC CEO, Jim Heppelmann, and Harvard Business School Professor, Michael Porter, will focus on the impact of smart, connected products on companies’ operations and organizational structure. Reserve your copy››