Seek Efficiencies to Serve Customers
Biutou Doumbia lives in a tiny village in the West African country of Mali. Biutou (sounds like Bee-oo-too) and her family live in poverty, very close to the line between survival and, well, you know.
Oh, one more thing: Biutou is a small business owner. She makes and sells peanut butter.
In Mali, as Roger Thurow reports in a Wall Street Journal article, peanut butter is made the same way African women have made other staples for millennia: by grinding the seeds on a rock with a large wooden pestle.
You might say that Biutou's operation is vertically integrated: She grows the peanuts, and then manufactures, sells, and distributes her product.
Over two centuries ago, in The Wealth Of Nations, Adam Smith explained how markets are made by the division of labor. And free markets created capitalism, which Ayn Rand called, "the only system geared to the life of a rational being."
Biutou doesn't know Smith or Rand from a warthog - she's illiterate.
But she is one of Rand's rational beings. And as such, she recognized the efficiencies offered by the division of labor when a diesel-powered grinder/blender became available. Now for 25¢ and a 10-minute wait, the sack of peanuts Biutou carries to the central grinding location, turn into better peanut butter than she could make pounding all day with a pestle
So Biutou now practices intermediation - a fancy modern-day word for division of labor - which is the process of employing contactors to create efficiencies. It's a valid business strategy, as is its opposite - you guessed it - disintermediation, the process of removing vendor layers, usually to get closer to customers.
These two strategies are as different as chocolate and vanilla, but like ice cream, choosing one doesn't mean the other is wrong, just different.
Biutou had practiced disintermediation because she didn't have a choice. You have many choices, but are you choosing wisely?
One of the things every 21st century small business must do is focus on core competencies: what you do that makes your business valuable to customers. Everything else, theoretically, can be performed by a specialist in your non-core activity.
Take a look at your own operation to see if - like Biutou - you can find efficiencies and recover time through intermediation. Ask yourself and your staff this six-word question: Must this task be done in-house?
The answer will be found in the answers to other questions like these three:
- How much control do we lose, and can we live with it?
- What impact will our decision have on customers?
- How much of not using intermediation is about ego?
Remember, any decision to employ intermediation - or not - should be driven by the desire to seek efficiencies and improve customer service.
Write this on a rock... Take a lesson from Biutou: Use intermediation, but only when it's good for you and your customers.
Jim Blasingame
Small Business Expert and host of The Small Business Advocate Show
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