It was hugely popular in 90’s and 00’s strategy circles to talk about disintermediation, focus on core, do what you do well and what-not.
Well, all of that was only partially true and people & consultants who pushed that as a cure were stunningly wrong as usual.
It’s always been the case that economies of scale are important to managing costs. For a long time, companies vertically integrated when appropriate because they felt they could lower their costs or improve their products by controlling their dependencies. The strategy consultants came in and said, no matter what a big or small company can do, if you do not focus on the core you are wasting money and management attention.
Strangely enough, consultants felt that this concept applied at any scale. Of course, small companies with limited means need to rely on others. But even small or large companies can vertically integrate. The criteria for “what is core” and “outsource everything” was fairly helter-skelter. At times, the outsourcing and disintermediation process was linked to the customer experience at other times money at other times, it was based on what you thought your business was (which was sometimes hard to define or constantly changing).
Amazon will be, shortly, a larger package delivery operation than UPS or FedEx. Amazon vertically integrated. Their core is not package delivery, but they are building one of the largest consumer delivery capabilities in the US. They are doing this to save money and enhance the customer experience with 1-day or same-day delivery.
Disintermediation? With so much capital floating around, companies can invest and do it themselves. There are limits to this approach of course and in knowledge-based areas it may be better to rely on others. But even in the knowledge-based area that’s also less true as, for example, FANG companies buy others with innovative technology versus “consuming” it as a customer. FANG is also “vertically integrating.” While google fiber was not a huge success, it is more evidence that even in knowledge-based companies, vertically integration is alive and well.
In general, do we think disintermediation really happened or that there is more disintermediation than before?