Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all can produce products that customers want.
How the web disintermediated the old world
“Your margin is my opportunity,” this quote apparently attributed to Jeff Bezos, explains well the process of disintermediation that has been going on with the advent of the web.
One of the core premises of the web was the concept of decentralization and, as a result, intermediation.
Amazon has been disintermediating a whole supply chain for e-commerce, and now it’s looking into last-mile delivery to cut out from the supply chain of traditional large carriers (DHL, UPS, FedEx) to realize its dream of customer obsession.
Netflix has been, for over a decade, disintermediating the entertainment industry.
Google and Facebook unlocked branding and marketing at first.
In the previous era, if you wanted to get brand exposure, you had to go through a classical ad agency or a set of intermediaries that kept tight control over the industry and their marketing budgets.
As Google first Facebook later came up with a massive, mostly automated digital advertising machine, they first targeted a different segment of the ad industry (not that interesting to those who were used to the old way of advertising).
Indeed, Google itself proselytized a set of new marketers who learned to believe in the only god of performance-based marketing. No more branding or marketing is done without data, measuring, and clear ROI.
The engineering approach of Google first and Facebook later made the whole deal look promising to those companies (especially startups) who didn’t have the budgets to invest in TV advertising.
Those digital marketers started to look for what we might define as last-mile advertising, where it gets easy to track the click and therefore measure the impact of marketing.
With that simple yet powerful promise, Google and Facebook created a digital advertising industry that initially grabbed those who were all about performance and therefore didn’t need an ad agency.
And later on, digital advertising would transition and become much more complete. As those companies evolved, both brand and performance advertising on Google and Facebook were covered up, and this process of disintermediation brought the end of the traditional ad agency.
Yet, all in all, as those companies turned into tech giants, it started – I argue – a process of reintermediation. Before going there, let’s also look at the process of intermediation that happened after the consolidation of a new era, turning mature.
Disintermediation examples
Below we will list just a few of the many examples of how companies are removing intermediaries from a transaction.
Apple’s iPhone has been the product that has completely rehauled the mobile carrier industry by building a massive distribution via its stores and the subsidization of the iPhone from these mobile carriers.
Indeed, while today most of sales still come from the indirect channels, thanks to the incredible network of stores across the world, Apple has managed to build its own distribution pipeline.
In 2022, most of Apple’s sales (62%) came from indirect channels (comprising third-party cellular networks, wholesalers/retailers, and resellers). These channels are critical for sales amplification, scale, and subsidies (to enable the iPhone to be purchased by many people). In comparison, the direct channel represented 38% of the total revenues. Stores are critical for customer experience, enabling the service business, and branding at scale.
This gives it much more leverage toward indirect distribution.
Eventually, also Tesla would follow this playbook.
Dell
No article on disintermediation would be complete without mentioning the American multinational electronics company Dell.
The company, which was founded in 1984, started as a direct seller with a mail-order system that eventually shifted online.
While its competitors were selling pre-configured computers in retail stores, Dell used cost savings from cutting out the middleman to offer deeply discounted and highly customizable machines.
Tesla is vertically integrated. Therefore, the company runs and operates the Tesla’s plants where cars are manufactured and the Gigafactory which produces the battery packs and stationary storage systems for its electric vehicles, which are sold via direct channels like the Tesla online store and the Tesla physical stores.
Unlike other vehicle manufacturers that tend to sell via authorized dealers, Tesla employs a direct sales approach with a global network of company-owned showrooms in major cities.
The company claims disintermediation increases product development speed and creates a superior buying experience for the customer.
Interested customers can visit a showroom in person and chat with sales and service staff who are employed by Tesla and have no conflict of interest.
Alternatively, those wishing to purchase a Tesla vehicle can customize and order it online.
The company also handles its own servicing.
Many showrooms double as service centers, with these supplemented by a fleet of mobile technicians who can perform routine maintenance at a customer’s residence.
Tesla is also following the same playbook when it comes to offering insurance premiums through its real-time insurance.
A real-time insurance business model enables Tesla to build its own insurance arm, by dynamically adjusting the premiums, based on real-time driving behavior. Reduced insurance premiums hooked with the leasing arm, enable Tesla to scale its demand side of the business.
Uber is a is two-sided marketplace, a platform business model that connects drivers and riders, with an interface that has elements of gamification, that makes it easy for two sides to connect and transact. Uber makes money by collecting fees from the platform’s gross bookings.
The example of Uber disintermediation is perhaps the most controversial on this list.
The company was a major disrupter of the taxicab industry, enabling passengers to connect with drivers directly via an app.
While Uber has no doubt harmed the viability of taxis, it is nevertheless a representation of how removing the middleman can transform industries where regulation, lobbyists, and bureaucracy have created significant barriers to progress.
One of the earlier examples of modern disintermediation comes from the travel site Expedia.
Once upon a time, consumers wishing to go on vacation would employ the services of a travel agent who would organize airline tickets, hotels, rental cars, and so forth.
Today, Expedia and many similar sites allow consumers to purchase airline tickets from the airline and accommodation from the hotel chain.
This has caused many travel agency businesses to shut down or move into related industries such as insurance.
Glossier
Glossier is a beauty brand that favors customer centricity over so-called “stale retail”.
Instead, its skincare and makeup range is sold online and in a selection of retail stores across the United States which the company owns.
According to COO Henry Davis, Glossier is an innovative example of disintermediation because it controls the bottom section of its sales funnel and does not rely on third parties to make sales on its behalf.
The company is also looking at ways to disintermediate social media, noting that the brands of the future will need to take ownership of business-customer interactions away from companies such as YouTube and Instagram.
Kickstarter
Platforms like Kickstarter have democratized the process of acquiring capital to fund business ventures and other causes. Entrepreneurs and creators can now use Kickstarter’s platform to raise money directly from users and in the process, bypass banks, venture capitalists, and other more traditional investors.
The benefits of disintermediation in this context extend beyond easier access to capital. In a study from the University of British Columbia in 2016, researchers posited that the new form of early-stage financing improved the quality of entrepreneurial decisions because the individual received crucial early feedback on their idea.
Airbnb
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees.
One of the core principles of Airbnb’s business model is disintermediation. The company does not own accommodation itself and instead connects those who own property with those who are looking for somewhere to stay.
In providing a marketplace to connect supply with demand, Airbnb has reduced the need for various intermediaries that once dominated the hotel industry. These include hotel chains, travel agents, and booking sites.
The result is that Airbnb provides a more personalized and authentic accommodation experience for travelers. Many Airbnb stays are also in locations a hotel or travel agent could never facilitate, such as in a retired aircraft or secluded rainforest treehouse.
Etsy
Etsy is a two-sided marketplace for unique and creative goods. As a marketplace, it makes money via transaction fees on the items sold on the platform. Etsy’s key partner comprises sellers providing unique listings and a wide organic reach across several marketing channels. Etsy generated over $2.3 billion in revenues in 2021, it counts 88.3 million active buyers, and 5.3 million active sellers as of 2022.
Etsy is an online marketplace that connects buyers with various artists, craftspeople, designers, and entrepreneurs. In the past, many of these sellers would have been required to deal with merchant account providers to be able to accept online payments.
However, in Etsy’s marketplace, sellers instead use the company’s Etsy Payments service and avoid the hassle, cost, and complexity of dealing with merchant account providers themselves.
Sellers can also have their sales revenue deposited into an account in a currency of their choice and can also choose the payment schedule.
Wise
Wise is one of the numerous fintech companies to take advantage of the digital revolution, evolving customer expectations, proliferation of new channels, and ever-changing regulatory landscape of the finance industry.
The company’s global money transfer service enables individuals and businesses to send and receive money across borders with favorable exchange rates and low fees. In the process, TransferWise has obviated the need for banks and traditional services like Western Union.
Netflix is a subscription-based business model making money with three simple plans: basic, standard, and premium, giving access to stream series, movies, and shows. Leveraging on a streaming platform, Netflix generated over $29.6 billion in 2021, with an operating income of over $6 billion and a net income of over $5 billion. Starting in 2013, Netflix started to develop its own content under the Netflix Originals brand, which today represents the most important strategic asset for the company that, in 2022, counted almost 223 million paying members worldwide.
Netflix’s decision to disrupt the video rental industry with a new business model is also an example of disintermediation. Initially offering a postal DVD rental service, the company did not hit a home run on its first attempt.
Netflix’s ambitions to disrupt the industry for a second time were also initially halted by a lack of sufficient broadband speed in consumers’ homes.
Nevertheless, the company offered a point of difference to incumbent Blockbuster and its exorbitant fees, lackluster service, and lack of convenience.
Netflix ultimately pivoted toward producing content itself to not only remove DVD rental companies from the equation but also other intermediaries such as production companies and TV networks.
Reintermediation
Reintermediation consists in the process of introducing again an intermediary that had previously been cut out from the supply chain. Or perhaps by creating a new intermediary that once didn’t exist. Usually, as a market is redefined, old players get cut out, and new players within the supply chain are born as a result.
As companies like Google and Facebook disintermediated the advertising industry. At the same time, the market has been adjusting to the new industry created by those players.
As marketing itself got redefined through the lenses of data and measurement, once ad agencies turned into digital marketing agencies.
Today the whole industry of consultancy companies born as a result of the SEO/SEM and SMO/SMM industries has seen the rise of digital agencies managing budgets for clients.
So, after all, after the first stage of actual disintermediation. The market adjusted, and the dream of disintermediation transformed into something else.
Another case of disintermediation
Another interesting case is how, thanks to the rise of Google, more and more vertical search engines started to spring up over the years.
Where Google could not offer a great search experience, users and qualified traffic would be sent there.
Whole new industries were born thanks to that. OTAs or online travel agencies were born, or at least further disintermediated travel agencies and locked-in demand in the travel sector, thanks to the massive amounts of traffic Google sent them:
Those digital players became the new intermediaries. They, together with Google, helped disintermediate an entire industry from fragmented players. Yet they became the primary intermediaries.
Disintermediating the disintermediators
Yet as Google turned in what we can call “the everything search engine” or the tool able to cover many verticals that before could not be covered.
Google started to roll out products like Google Travel (Trips), and Google Flights that have the potential to offer an end-to-end experience within its own platform, thus disintermediating the digital disintermediators.
Enter the gatekeeper’s hypothesis
In a world driven by tech giants that locked-in the digital distribution pipelines to reach billions of people across the globe, the gatekeeper hypothesis states that small businesses will need to pass through those nodes to reach key customers. Thus, those gatekeepers become the enablers (or perhaps deterrent) for small businesses across the globe.
Those once startups turned gatekeepers.
The old markets that crashed under the pressure of new industries also matured. That might have created a process of dominance, where winner-take-all effects took over.
And markets, once fragmented by many intermediaries, turned into new markets primarily dominated by a few central players, setting the rules of the game.
According to what I called the “Gatekeeping Hypothesis,” we sort of went back to an era of blocked distribution by a few key players, with some critical differences.
First, this time algorithms defined the rules to follow, even though at central levels, a few key people (usual engineers following the executives’ instructions made those rules in the first place).
Second, this era is primarily customer-centered.
Where in the past, it was all about keeping tight control on the supply chain and distribution so that, over time, consumers would get used to whatever got sold to them (standardized mass-marketing helped indeed).
To an era where those tech giants are stubborn and obsessed with customer experience.
When Google sets the rules for websites to follow, it does that by keeping as North Start, the user experience (of course defined a la Google), and those who do not conform to that are out from the walled garden.
Third, consolidation and asymmetry took over. Where many more intermediaries might have controlled fragmented industries. The new players learned that domination is what matters and they set for it.
In addition, most processes are now asymmetric.
When the user gives data to Facebook, the value it gets back is much lower compared to what Facebook can and will do with that data. Both in terms of usage and monetization.
In short, Facebook will be way better by getting the data of the user, as this will add up to its network effects. Compared to what the user gets back (some form of entertainment).
Therefore, winner-take-all effects created a few super-large players that became the main intermediaries.
Super platforms and super gatekeepers
Let’s add to that, those gatekeepers have been stretching their tentacles to cover more and more parts of the user experience, thus generating potential for the rise of super gatekeepers.
Blockchain and the renewed dream of decentralization at scale
There isn’t a single way for the web to evolve. And renewed dreams of scaled decentralization took place with the Blockchain and its potential commercial applications. Whether this will be a permanent effect, we can’t be sure.
However, for one thing, Blockchain might get us to the rise of a new form of organization, something that goes beyond the classic corporation and take the form of a super, decentralized company, made of many companies combined, and all joining a shared protocol.
Key takeaways
Disintermediation is the process of cutting out intermediaries from the supply chain. The web has been a critical driver of this process, by disintermediating old industries to create whole new market opportunities for all.
The wave of disintermediation is still going on (see Amazon last-mile). At the same time as those companies created new markets that are becoming more mature, a process of reintermediation (where new intermediaries are born as a result).
As former startups, turned tech giants, those became gatekeepers and winner-take-all/intermediaries at large scale.
The Blockchain brings back the dreams of disintermediation and decentralization at large scale. Whether this will happen, be permanent we don’t know yet, and can’t be sure either.
Other business phenomena of the web 2.0 era
Let’s also look at a few other phenomena enabled by the web.
Business Platforms
In the digital era, business platforms have become the key foundation for massive entrepreneurial ecosystems to form, and, therefore the development of products used by a large consumer base.
The advent of business platforms has taught us that to scale up a product at a mass-consumption level; it’s not enough anymore to have the physical side (hardware).
Instead, the non-physical, comprising the software and all the other applications built on top of it, becomes critical.
In short, while hardware and software are critical to building a solid foundation, they are usually highly centralized.
Instead, there is another part where companies act more like governments, setting the policies and rules for the platform.
The products made as a result of these platforms enhance the core products offered by the organization (your iPad would be worth much less without apps).
Customer-Centrism and Customer Obsession
Customer obsession goes beyond quantitative and qualitative data about customers, and it moves around customers’ feedback to gather valuable insights. Those insights start by the entrepreneur’s wandering process, driven by hunch, gut, intuition, curiosity, and a builder mindset. The product discovery moves around a building, reworking, experimenting, and iterating loop.
In this era, customers got at the center of the business stage.
They became the focus for the development of products in the first place. Indeed, at an entrepreneurial level today, you first validate the market, understand if people want something, then go on and build it.
At the same time, as Amazon taught us, customer obsession also takes the form of random discovery, where the company is audacious enough to push products that customers don’t even know they want, yet, also win.
Decoupling
According to the book, Unlocking The Value Chain, Harvard professor Thales Teixeira identified three waves of disruption (unbundling, disintermediation, and decoupling). Decoupling is the third wave (2006-still ongoing) where companies break apart the customer value chain to deliver part of the value, without bearing the costs to sustain the whole value chain.
The decoupler learned how to look at the whole customer value chain, only to focus on one core aspect of it to enable a whole new experience, based on convenience, in terms of money, time and effort.
The new experience designed by the decoupler breaks apart the customer value chain, thus identifying and offering only the most valuable part.
Digital Platforms
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
The Amazon Flywheel or Amazon Virtuous Cycle is a strategy that leverages on customer experience to drive traffic to the platform and third-party sellers. That improves the selections of goods, and Amazon further improves its cost structure so it can decrease prices which spins the flywheel.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
Network effects instead become critical to enable the platform to scale and, as it does, become more valuable. In short, where in the past we talked about economies of scale, in this era, we talked about network effects.
Negative Network Effects
In a negative network effect as the network grows in usage or scale, the value of the platform might shrink. In platform business models network effects help the platform become more valuable for the next user joining. In negative network effects (congestion or pollution) reduce the value of the platform for the next user joining.
In the physical world, where this phenomenon is known more as diseconomies of scale.
In the digital business world, when the network becomes too busy (overcapacity), or it scales too much, negative network effects can pick up. Thus, redounding the value of the overall network.
Unbundling
Unbundling is a business process where a series of products or blocks inside a value chain are broken down to provide better value by removing the parts of the value chain that are less valuable to consumers and keep those that, in a period of time, consumers value the most.
Many of the companies that entered those new spaces, and dominated them, started out as an unbundler.
They took an existing “pre-packaged experience” from the previous era, and they only offered the most valuable part.
In short, they surfed the giants of the previous era.
And as they did, they gained massive growth.
As new companies come into the market and supplant incumbents with an unbundling process, they tend to consolidate their distribution, thus bundling things up to offer an end-to-end experience and gain as much control possible over the customer journey.
When this process is mature, other companies with a different mindset, willing to take the best of that experience and unbundle it, might gain traction at the expense of the incumbent.
Value Innovation
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Innovators in the digital age have been able to innovate by breaking down the wall between cost and value.
In business, vertical integration means a whole supply chain of the company is controlled and owned by the organization. Thus, making it possible to control each step through consumers. in the digital world, vertical integration happens when a company can control the primary access points to acquire data from consumers.
Over time, small players that have gained more and more market shares in their industry also expanded in adjacent markets.
Thus, controlling more parts of the journey for potential customers.
For instance, where Google has been able, for decades, to only find relevant information for users, it then sent them to whatever site was available on the web.
Google integrated more and more products into its search engine to enhance the user journey and create an end-to-end experience, and at the same time, by integrating its supply chain, to gain control over the whole process.
A phenomenon known for decades to the physical world has also become widely applied to the digital world.
The supply chain is the set of steps between the sourcing, manufacturing, distribution of a product up to the steps it takes to reach the final customer. It’s the set of step it takes to bring a product from raw material (for physical products) to final customers and how companies manage those processes.
A classic supply chain moves from upstream to downstream, where the raw material is transformed into products, moved through logistics and distribution to final customers. A data supply chain moves in the opposite direction. The raw data is “sourced” from the customer/user. As it moves downstream, it gets processed and refined by proprietary algorithms and stored in data centers.
Distribution represents the set of tactics, deals, and strategies that enable a company to make a product and service easily reachable and reached by its potential customers. It also serves as the bridge between product and marketing to create a controlled journey of how potential customers perceive a product before buying it.
A distribution channel is the set of steps it takes for a product to get in the hands of the key customer or consumer. Distribution channels can be direct or indirect. Distribution can also be physical or digital, depending on the kind of business and industry.
In business, vertical integration means a whole supply chain of the company is controlled and owned by the organization. Thus, making it possible to control each step through customers. in the digital world, vertical integration happens when a company can control the primary access points to acquire data from consumers.
Horizontal integration refers to the process of increasing market shares or expanding by integrating at the same level of the supply chain, and within the same industry. Vertical integration happens when a company takes control of more parts of the supply chain, thus covering more parts of it.
By definition, a horizontal market is a wider market, serving various customer types, needs and bringing to market various product lines. Or a product that indeed can serve various buyers across different verticals. Take the case of Google, as a search engine that can serve various verticals and industries (education, publishing, e-commerce, travel, and much more).
A vertical or vertical market usually refers to a business that services a specific niche or group of people in a market. In short, a vertical market is smaller by definition, and it serves a group of customers/products that can be identified as part of the same group. A search engine like Google is a horizontal player, while a travel engine like Airbnb is a vertical player.
When entering the market, as a startup you can use different approaches. Some of them can be based on the product, distribution, or value. A product approach takes existing alternatives and it offers only the most valuable part of that product. A distribution approach cuts out intermediaries from the market. A value approach offers only the most valuable part of the experience.
Backward chaining, also called backward integration, describes a process where a company expands to fulfill roles previously held by other businesses further up the supply chain. It is a form of vertical integration where a company owns or controls its suppliers, distributors, or retail locations.
A market type is a way a given group of consumers and producers interact, based on the context determined by the readiness of consumers to understand the product, the complexity of the product; how big is the existing market and how much it can potentially expand in the future.
Psychosizing is a form of market analysis where the size of the market is guessed based on the targeted segments’ psychographics. In that respect, according to psychosizing analysis, we have five types of markets: microniches, niches, markets, vertical markets, and horizontal markets. Each will be shaped by the characteristics of the underlying main customer type.
According to the book, Unlocking The Value Chain, Harvard professor Thales Teixeira identified three waves of disruption (unbundling, disintermediation, and decoupling). Decoupling is the third wave (2006-still ongoing) where companies break apart the customer value chain to deliver part of the value, without bearing the costs to sustain the whole value chain.
Disintermediation is the process in which intermediaries are removed from the supply chain, so that the middlemen who get cut out, make the market overall more accessible and transparent to the final customers. Therefore, in theory, the supply chain gets more efficient and, all in all, can produce products that customers want.
Reintermediation consists in the process of introducing again an intermediary that had previously been cut out from the supply chain. Or perhaps by creating a new intermediary that once didn’t exist. Usually, as a market is redefined, old players get cut out, and new players within the supply chain are born as a result.
As startups gain control of new markets. They expand in adjacent areas in disparate and different industries by coupling the new activities to benefits customers. Thus, even though the adjunct activities might see far from the core business model, they are tied to the way customers experience the whole business model.
The bullwhip effect describes the increasing fluctuations in inventory in response to changing consumer demand as one moves up the supply chain. Observing, analyzing, and understanding how the bullwhip effect influences the whole supply chain can unlock important insights into various parts of it.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Consumer-to-manufacturer (C2M) is a model connecting manufacturers with consumers. The model removes logistics, inventory, sales, distribution, and other intermediaries enabling consumers to buy higher quality products at lower prices. C2M is useful in any scenario where the manufacturer can react to proven, consolidated, consumer-driven niche demand.
Transloading is the process of moving freight from one form of transportation to another as a shipment moves down the supply chain. Transloading facilities are staged areas where freight is swapped from one mode of transportation to another. This may be indoors or outdoors, depending on the transportation modes involved. Deconsolidation and reconsolidation are two key concepts in transloading, where larger freight units are broken down into smaller pieces and vice versa. These processes attract fees that a company pays to maintain the smooth operation of its supply chain and avoid per diem fees.
Break bulk is a form of shipping where cargo is bundled into bales, boxes, drums, or crates that must be loaded individually. Common break bulk items include wool, steel, cement, construction equipment, vehicles, and any other item that is oversized. While container shipping became more popular in the 1960s, break bulk shipping remains and offers several benefits. It tends to be more affordable since bulky items do not need to be disassembled. What’s more, break bulk carriers can call in at more ports than container ships.
Cross-docking is a procedure where goods are transferred from inbound to outbound transport without a company handling or storing those goods. Cross-docking methods include continuous, consolidation, and de-consolidation. There are also two types of cross-docking according to whether the customer is known or unknown before goods are distributed. Cross-docking has obvious benefits for virtually any industry, but it is especially useful in food and beverage, retail and eCommerce, and chemicals.
The Toyota Production System (TPS) is an early form of lean manufacturing created by auto-manufacturer Toyota. Created by the Toyota Motor Corporation in the 1940s and 50s, the Toyota Production System seeks to manufacture vehicles ordered by customers most quickly and efficiently possible.
Six Sigma is a data-driven approach and methodology for eliminating errors or defects in a product, service, or process. Six Sigma was developed by Motorola as a management approach based on quality fundamentals in the early 1980s. A decade later, it was popularized by General Electric who estimated that the methodology saved them $12 billion in the first five years of operation.
Scientific Management Theory was created by Frederick Winslow Taylor in 1911 as a means of encouraging industrial companies to switch to mass production. With a background in mechanical engineering, he applied engineering principles to workplace productivity on the factory floor. Scientific Management Theory seeks to find the most efficient way of performing a job in the workplace.
Poka-yoke is a Japanese quality control technique developed by former Toyota engineer Shigeo Shingo. Translated as “mistake-proofing”, poka-yoke aims to prevent defects in the manufacturing process that are the result of human error. Poka-yoke is a lean manufacturing technique that ensures that the right conditions exist before a step in the process is executed. This makes it a preventative form of quality control since errors are detected and then rectified before they occur.
A Gemba Walk is a fundamental component of lean management. It describes the personal observation of work to learn more about it. Gemba is a Japanese word that loosely translates as “the real place”, or in business, “the place where value is created”. The Gemba Walk as a concept was created by Taiichi Ohno, the father of the Toyota Production System of lean manufacturing. Ohno wanted to encourage management executives to leave their offices and see where the real work happened. This, he hoped, would build relationships between employees with vastly different skillsets and build trust.
Jidoka was first used in 1896 by Sakichi Toyoda, who invented a textile loom that would stop automatically when it encountered a defective thread. Jidoka is a Japanese term used in lean manufacturing. The term describes a scenario where machines cease operating without human intervention when a problem or defect is discovered.
The andon system alerts managerial, maintenance, or other staff of a production process problem. The alert itself can be activated manually with a button or pull cord, but it can also be activated automatically by production equipment. Most Andon boards utilize three colored lights similar to a traffic signal: green (no errors), yellow or amber (problem identified, or quality check needed), and red (production stopped due to unidentified issue).
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
