This is an MIT Sloan Management Review article. When companies first plunged into e-commerce, they thought success meant cutting out middlemen. That approach didn't work, in part because e-businesses misunderstood the role of intermediaries. Middlemen are not costly, necessary evils. They solve problems for customers and, in so doing, enable sales and create value for producers. INSEAD's Philip Anderson and Erin Anderson show how intermediaries are helping smart companies realize the promise of the Web. They explain intermediaries' nine ways of adding value, suggesting that three will change, three will survive in a new form, and three (reducing uncertainty about quality, preserving customer anonymity, and tailoring offerings to customer needs) present growth opportunities. Middlemen can co-opt the Internet by offering services that would be too difficult for individual producers to provide. However, the authors caution, intermediaries must be open to new ways of doing business with suppliers and vice versa. The Web transforms but does not eliminate the advantages of the middleman's central lookout position. But what was once thought of as a straight distribution channel from supplier through middleman to customer is now more accurately described as a service hub. The player that takes the customer order--possibly a Web site--occupies the center and interacts with many partners. The authors specify appropriate, fair incentives (for example, Ethan Allen's quasi-independent furniture stores that customers browse before buying directly from the manufacturer's Web site automatically receive a 10% tip). And they describe service-hub management that will generate enough trust to permit producers to get closer to customers--indirectly.

A corporation's success today lies more in its intellectual and systems capabilities than in its physical assets. Managing human intellect--and converting it into useful products and services--is fast becoming the critical executive skill of the age. It is therefore surprising that so little attention has been given to that endeavor. Few managers have systematic answers to even these basic questions: What is professional intellect? How can we develop it? How can we leverage it? According to James Brian Quinn and his coauthors, an organization's professional intellect operates on four levels: cognitive knowledge, advanced skills, systems understanding, and self-motivated creativity. They argue that organizations that nurture self-motivated creativity are more likely to thrive in the face of today's rapid changes.