Strategic Choices #7: Disintermediate Channel Network

Should the Company Fully or Partially Disintermediate Distribution Channels or Service Networks?

The article, How Smart, Connected Products Are Transforming Competition, published in the November 2014 issue of Harvard Business Review (HBR), identifies the ten strategic choices manufacturers must make to capitalize on the IoT.

Co-Author and PTC CEO Jim Heppelmann explains whether companies should fully or partially disintermediate distribution channels or service networks, and provides a recommendation to get started.

Video Transcript

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. 


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. To learn more, I encourage you to download the HBR article.