Find Your Place in the Middle
The tech world isn't just about disruption these days. In recent years, startups have embraced the idea that being the middleman—an intermediary between two sides of a transaction—isn't a bad thing at all. Associations would be smart to borrow some pointers.
It’s early 2016. It may be a new year, and a new start, but you’re probably still shaking off a lot of the usual junk that hits around the holidays.
Your waist size is slightly bigger than usual. Your home might be in a state of disarray from a recent party or because you forgot to clean it before you made your way out of town. And your inbox is looking pretty insane at the moment, with reminders and messages that still need sorting through.
It’s enough to make you wince. The retail industry feels your pain, kinda. They’ve spent the last couple of months trying to get you to buy gifts, and now they have to clear the debris and get ready for a slower winter season. New holidays are on the horizon and they have to keep looking forward.
But there’s a problem: People who weren’t so impressed by the gifts they got from their loved ones would like to return said gifts without too much of a problem. Retailers are OK with this; it comes with the territory, but it doesn’t mean they want to deal with all those crock pots and ill-fitting sweaters if they can’t sell them.
Enter the middleman. Late last year (or last week, depending on your embrace of temporal terms), the Maryland startup Optoro was the subject of an array of stories regarding its business model. The company, long story short, takes on the returns that people didn’t want, manages the inventory, finds the right place for the items to go on the supply chain, and optimizes an annoying task through cloud-based software. It’s a master of reverse logistics.
Middlemen get a bad rap—just another step, another stripe of red tape to wade through—but companies like Optoro show the potential of a middleman in optimizing what could be a painful task.
Optoro is far from the only middleman in the retail space. Some, like Square, manage payments and credit cards. Others, like Belly, manage rewards programs. And others still manage tasks as diverse as employee drug testing to payroll distribution. The connecting tissue of these diverse tasks is that they’re often secondary to the main goal of the retailer, meaning they’re not within its area of expertise.
Embracing the Middle
The growth of companies like Optoro reflects something of a sea change in the scope of startups. For years, startups were seen as, by default, disruptive and damaging to an old way of doing things. Firms like Amazon and Craigslist made their bread and butter by cutting out as many middlemen as possible, using technology to greatly simplify the process of making a transaction.
But in the past few years something surprising has happened: The disruptors themselves have become more like middlemen, offering services that made things that would’ve been a challenge on their own much easier.
Case in point: When I moved to Washington, DC, in 2009, I remember one time when I needed to get to the airport early in the morning; I had to call the cab company and waited nearly an hour for a vehicle to show up at my apartment. These days, Uber would have made this transaction a 10-minute affair, with no phone call required. The difference here is that the cab company tends to own all of the vehicles that it dispatches, while Uber works as something of an intermediary between nearby drivers (who work as free agents, essentially) and passengers. By working as a go-between, Uber can focus on efficiency between the two sides of the transaction.
The grocery-shopping service Instacart doesn’t work for the grocery stores—it works as an intermediary of sorts. It’s a middleman in every sense of the term, but it makes life easier for its users. Unlike a service like Grubhub, it doesn’t merely handle the transaction—rather, it also manages the delivery drivers, effectively taking on the biggest pain point of the transaction.
There are even services these days, like Magic and Hello Alfred, that exist essentially to become a middleman between services like Amazon and Instacart and your own time management. In a recent article for TechCrunch, venture capitalist Ezra Galston suggested that the reason for the move toward middlemen is an attempt to compete on service rather than price.
“Amazon’s operating margins—already tight at 1.3 percent—don’t allow for much room to train and mobilize a large human concierge force,” Galston wrote last month. “Which means that building a human-focused, relationship-driven personalization platform actually provides for a tangible differentiator against Amazon.”
Association as Middleman
Associations are well-suited to be in the middle of things. They represent their respective industries, as well as their members’ needs. It’s the kind of situation a middleman is made for. Associations are well-placed to leverage this kind of business model—and the fact that they quite often already have a built-in, well-targeted audience means they have the hard part already figured out.
The secret is finding services and resources that will improve your members’ interactions within an industry, and making those tools “sticky,” so that they’ll keep coming back. A concierge-style service, as has become the trend in the tech industry, is a great example of a middleman-style approach, but it’s far from the only one.
Is there a common frustration within your space that could use a little less complication? Say, a regulatory form that your members would benefit from having a simpler method to complete, or a complicated process for getting health insurance?
This is where a middleman comes in handy. When you can take something complicated or annoying and offer an alternate path, that’s when you’ve created something of value, rather than just another intermediary.
If your association does something so useful that it can’t be ignored, it’ll help ensure your members won’t ignore you.