# 188: Cutting out the Middle Men

Platform Business Model explained…in under 100 words | Deloitte Switzerland

Story behind the Passage

As you know, I can be quite passionate about things. The thing I am most passionate about is injustice. Of course, injustice is everywhere and we cannot all turn into Mother Teresas to fight it. Still, people with my personality traits and my “brain disorder” tend to get very upset about injustice. The injustice that I want to address today is the fact that the digital world disrupting businesses, i.e., destroying them, that really have no means of countering the attack. I am talking about small businesses in this case, really small ones, like women freelancers. As you also know, however, I never leave it at the “bashing” and mourning part, I want to suggest solutions that empower individuals. This is the reason why I am choosing a passage on platform businesses today.

When I talk about small businesses, I especially mean trainers, language teachers, and coaches (of course, there are many more, especially in arts and culture). In contrast to those who have been running their own businesses completely independently for many years, there are also many who have depended largely on “middle men.” What I mean by that is usually not really one person as the middle man, I mean institutions. So, sometimes, these can be agencies, like companies that offer trainings for corporates and they work together with a network of trainers. Or we are talking about public institutions. Here, I am thinking about the chambers of commerce and about the adult education centers (“Volkshochschulen” in Germany). These are nothing but platforms that derive their value from the fact that they have funding which their freelancers do not have access to, they have a reputation and they have marketing channels.

Guess what — you do not need these anymore!

Nowadays, because of digital platforms — think of Ebay — anyone can sell stuff, e.g., trainings and coachings, online. You do not need any middle men anymore. You can reach your clients directly, sometimes even for no or very little charge. This is why I am saying I am approaching the issue from a constructive angle. Even though platforms are the reason for much disaster and business bancruptcy, they also offer great perspectives for those who know how to use them — to cut the middle men.

Unfortunately, not everyone sees this opportunity and has the ability and courage to do this.

My Learnings

“The role of the platform business is to provide a governance structure and a set of standards and protocols that facilitate interactions at scale so that network effects can be unleashed.” The benefit of an infrasctructure is governance, there you go. This is what I am describing above. If you offer your language classes via the adult education center in your city, you do not need to worry about getting students on board or posting your course on the website. All this is being taken care of. That is easy, right? The downside is that you get a ridiculously small honorarium for quite some work that you invest. Still, in pre-Covid times, this might have been sufficient for you. Even though platforms that connect students and teachers have existed for many years now, the “old-fashioned” teachers would not have joined them. They had their middle men that served them well.

Now, everything is changing more rapidly. Teaching and coaching takes place online and those who were quick to join the digital crowd were also able to do so when their “middle men” decided to move their offers online. The problem is, and this is where I am getting to the pain that is really frustrating, not every teacher was able to do that this quickly. Yes, we have “silver servers” but there are many people who for different reasons were not able or willing to simply move everything online. This is where it happened: They got lost. Or rather: They got kicked out — even tacitly. Their courses were removed from the curriculum and replaced by new “personnel.”

You might say, bad luck, they should get digital skills quickly and then make sure they can still make their middle men happy. Those who did not do this, really started panicking. And I mean, not only panicking, they really stated getting mobbed. But here comes the thing: platform businesses are their heros, not their enemies. The keyword above is “network effects.” This is exactly what I told a friend of mine when she was really upset about the fact that her middle men had dumped her (we are talking about a central civic insitutition in town). I said: “No, think about it the other way around. YOU have the power because you do not need them anymore. You can sell your courses online without them and charge 10times the prices they are paying you.” They should be afraid, not you.

The problem is: that is not that easy.

You cannot simply “make” someone offer his/her courses on a platform online if this person has been working with middle men for almost his/her entire career. To be bloody honest, I myself am not even part of any platform because I sell my stuff directly. What you are missing out on in this case is the most important thing the digital world offers you: network effects, as is stated above. Network effects are the currency. No network, no scaling. This is a huge chance and the reason why I am putting so much emphasis on the topic.

Please, dear (women) business owners, use the power of these networks that are based on platform businesses.

I know it sounds weird and might be hard but it is all about giving it a try. If you do not get any clients via these channels — fine. But it is a chance. You simply cannot know beforehand which new opportunities might emerge from this. Networks have so much power — also in a very positive way in this case. And please, do not think about “reputation.” What kind of reputation do the middle men have nowadays? Do they really deserve the image they might still have in the public — the chambers of commerce, the “prestigious” agencies, etc.? Do they really bring cash to your pocket? I hate to say it but some public institutions are treating their personnel like shit and they pay you shitty low salaries. Are they really worth sticking to? And, just to be celar, they are in decline — their businesses are being disrupted by more powerful digital networks. You as an individual with all your expertise are free — you can join any platform. They have to worry about how to transform their entire machinery to survive. You have it in your hand. And your decade-long expertise cannot simply be copied by some youngster who knows how to fill in a form online and turn on an expensive camera. Hence:

Cut out the middle men.

Reflection Questions

1) Are you doing anything (in business or your private life) that involves a middle man that is actually superfluous nowadays? Why?

2) In which areas of your life does the digital transformation really affect you?

3) Do you think that the digital age also offers new opportunities for people who are not among the most “tech-oriented”?

Founder & CEO of Companypoets