Michael Mainelli, The Z/Yen Group
[A version of this article originally appeared as "Reclaim the Middle Ground", Opinion, The Facilities Business, The Builder Group plc (November 2000) pages 15-16.]
The Head of Facilities Management (FM) for a large multi-national, remarked to me that "if we could get the right suppliers to do the right job, we would be redundant" and "our goal is to eliminate our own jobs". Having tried to eliminate large numbers of useless, make-work jobs over the years, you might think I would applaud. Actually, I found it depressing. This FM department hadn't realised the immense value they could add by being effective. They might as well have imagined a utopia where work is unnecessary - when would there ever be a supplier who didn't need management? Why would they seek dis-intermediation?
Dis-intermediation? What, yet more jargon? Dis-intermediation is no esoteric threat; it is when your customer deals directly with your supplier, eliminating the need for you. For years, industries such as financial services have feared dis-intermediation - cutting out the middlepeople (sic). Direct telephone insurance eliminates brokers; direct access to capital markets eliminates an investment bank placement role; direct access to foreign exchange markets eliminates a corporate bank role; etc. Dis-intermediation is affecting many businesses, not just FM, and there are lessons FM can learn from other industries on how to cope and win. Re-intermediation is how middlepeople compete and re-insert themselves.
FM is a difficult service area to define. Is information technology or fleet service part of FM? Sometimes, sometimes not. Does FM include major works or refurbishment? Sometimes, sometimes not. Is FM responsible for security or health and safety? Sometimes, sometimes not. Nevertheless, under any definition, FM functions have a vast range of suppliers. These suppliers seek all manner of ways to get directly to customers and by-pass corporate entities established to control their supply of goods or services. Reprographics suppliers attempt to sell design services. Stationery suppliers seek special budgets beyond the FM budget. It's in their nature to try and extend their business within your organisation. Sometimes it's in FM interests to ignore extension; sometimes to deal with it. However, with the radical changes that internet technology is making to customer relationships, it is time for a fundamental rethink on how to re-intermediate and how re-intermediation adds value.
Before we look at FM in detail, let's see how another industry, professional computer sales, has dealt with dis-intermediation and re-intermediation. One of our clients sold off-the-shelf computers to large organisations, so called 'professional' buyers. The rapid rise of the internet, particularly in computer services, meant that key suppliers such as the PC and laptop providers started selling directly to the professional buyers, by-passing our client. Sales initially went very well for the large suppliers and things looked bleak for our client - our client was being dis-intermediated. Things were even bleaker than you think when you realise that all this occurred a few years ago at an early stage of commercial internet take-up. Our client was hit early, and hard.
Our client's response was to change their business model. Our client built a 'hortal', a horizontal portal which made it easy for professional buyers to compare products from key suppliers. After a short period of time our client had successfully re-intermediated themselves by proving the importance of their role as middlepeople. Using detailed information from actual traffic they were able to show the suppliers how much market knowledge they were missing. Were suppliers working on improving disc drive seek time? Yes, but meanwhile customers were comparing suppliers on mean time to failure and rarely contrasted disc drive seek times. Our client was able to demonstrate that a direct sale to a professional buyer left the supplier with just a sale, not crucial information for the future. Leveraging off their independence and their resurgent power over suppliers, they were able to become the trusted third party for their customers winning back an increased market share online.
A few years ago commentators believed that the internet would kill middlepeople. If anything, middlepeople have resurged with even more power, albeit in somewhat different roles. In financial services, people go to independent sites to find the current best deal and then buy today's specific best product. For example, bestmortgage.com (I made it up, but then found it's real) or charcolonline.co.uk help people find a mortgage and the venerable, established institution has to take the business at competitive margins. Middlepeople have found ways to add value by providing information and authority - both to their customers and to their suppliers.
Being a middleperson is often seen to be a non-role, or even a role which subtracts value, yet middlepeople have existed since the start of business. Even the oldest profession (your choice) gave rise almost immediately to middlepeople who helped clients find what they wanted. But middlepeople are crucial. Without them the right buyers don't meet the right suppliers in the right way to get the right products and services. FM is a crucial middlepeople role in organisations. FM needs to recognise its middle-role, learn from comparisons, build on it, measure it and take pride from it.
It's easy to talk in the abstract - FM needs to re-intermediate, find ways to add value, prove they've added value and seek more. Let's look at some concrete examples, some complete, some underway:
on-line, up-to-date schedules of repairs and planned repairs so users can see for themselves that the light in the lavatory is going to be fixed;
plans for building improvements and moves, including schedules of forthcoming free space;
using two suppliers for competitive areas rather than one, such as taxis. Suppliers are rated by users and users are given a choice while the suppliers are fed information on their performance;
assembling useful information for travellers - given the taxi booking use an internet mapping facility to email back the booking confirmation with a local map. For travellers to another office (captured in the online booking hortal), send them office maps, local emergency numbers and pre-register them at the remote reception to make them feel wanted;
review every imagery project for reusable material and post on the extranet - a corporate corbis.com or gettyimages;
display print schedules and print runs in reprographics to warn fulfillment, identify large postings and help ensure people who may wish to add to orders have a chance - imagine an unplanned second print for your annual report;
measure satisfaction often, regularly and randomly. Don't rely on complaints or email - try quick response questionnaires, heavy users, non-users, rate the supplier(s) or competitions for the best suggestion;
provide statistics and usage on things you never imagined people would care about - how many incoming/outgoing telephone calls they've had, how many meeting booked/unbooked, visitors received at reception, temporary staff employed per period, taxis used, repairs ordered/fulfilled, etc. Provide bookings and statistics centrally, by department, by person. Make comparisons easy.
If you do the above, or more, how will you know when you have successfully re-intermediated? At a business level, you should be able to provide qualitative measures of satisfaction and improvement. You should be able to demonstrate how you have used your control of access to the customer at the desk to improve services and costs from suppliers. You should be able to show internal costs moving to a controlled, competitive market of suppliers. You won't be able to move everything into some e-procurement wonderland, but you will be surprised at how often two suppliers will happily compete more cheaply for less than half of your business than your prejudice for "economy of scale purchasing" predicts.
A good test of successful re-intermediation, which few have passed, is a market share for your hortal which exceeds 50%? You can measure this by seeing how many people have FM as their homepage on the intranet. This is not an unfair test. The competition is the corporate homepage (infrequently updated and full of 'push' news) or a departmental homepage (even less frequently updated) or your vibrant internal website full of important news about the environment in which your customers live. No contest - if you have regained the middle ground.