Down-Economy and Innovation: Disintermediation and SanDisk

It's time to change your business model.  No matter what business you're in or how successful it is, it's time to change the model.

Some of the changes may be small.  In fact, invisible to the customer.  But if it ups your profits, you're doing the right thing.

Some of the changes will be big.  Organization changing.  Former strategy-busting.

That's what SanDisk did when it changed its business model away from selling into the retail market toward selling directly to device makers.  They took out the middle man and, as a result, are now able to control their pricing and production as never before.

It was the economy that did it.  The company realized it couldn't keep going with the vagaries of retail and remain successful.  Or viable.  Or avoid takeover.

And it's worked.  Their costs are down, productivity up and their share price skyrocketing.

The strategy they chose isn't new.  It's called "disintermediation" and what it means is that you're addressing the middle man - whether taking him out or becoming a new, value-added version of one.

In SanDisk's case, they took out the middle man and went for what my friend and Silicon Valley serial entrepreneur, Brian Ebert, refers to as "going for the big feeders."

The mistake that most companies make, however, is that they don't challenge their business model regularly and, as a result, only start looking for disintermediation opportunities when things are bad.  Usually really, really bad.

The smart kids know that they should be looking for innovation opportunities at all times - and that innovation doesn't only occur in new technologies.  Innovation is also all about how you do business.

So be smart and be fast - and find where those opportunities lie.  Because the given is, if you don't, someone else will...or has already.
___________
To learn how to bring a Disintermediation Strategy - and others - into your organization, check out my Executive Field Guide, "Becoming a Best of Breed Organization."  It will give you the information you need.  Now.