The digital age has been about taking products and institutions apart ie., unbundling them. Music CDs ave been unbundled as Mp3 and sold individually. Newspapers have been unbundled by blogs and ad sites. University education is being unbundled by online learning.
However, this is not a one-way process. New bundles appear as old integrated units are getting unbundled. This is because businesses can earn revenue either by bundling or unbundling. This basically means that people are adding or subtracting businesses in order to grow. This aspect of the business is being discussed with Marc Andressen and Jim Barksdale. They started working together and created Mosaic and then NETSCAPE. It is common to add companies, business and divest it when you think that they will fetch better value alone than together.
It is easier to do in the digital age. It is easier to bundle and unbundle products. Music was one o things that had a clear set of bundles and it was extremely profitable for companies and artists.
It should be understood that bundles emerge because of the underlying technology available at that moment. Hence the newspaper bundle emerged with putting together news, sports, stock quotes advertisements and classifieds once in a day due to the printing plant. This is followed by the distribution using trucks, newsstand, delivery boy. This was the first to get unbundled by eliminating the distribution and offering the news on the internet.
So also for the music industry, it was quite logical to add 15 songs together on a compact disc or LP and manufacture it. When you have the ability to download or stream the same music, it makes no sense o bundle them together and sell them as LP or CD. Once this has been done then it makes sense to bundle them as streaming services like Spotify, pandora.
It is also true that while the consumers are free to choose what they want which has been enabled by unbundling, at the basic level consumers need a set of bundles. Bundles of any time start coming together as the technology has made this very easy until they tip over under their own weight.
It should be kept in mind that bundling and bundling products affect the business. In the music industry, it is getting reorganised and split into distinct groups. You have companies that have started entirely online, companies focussed on merchandise sales, on artist tours and live shows. The old businesses dependent on P and Cds are struggling to adapt to this new world with multiple competitors who have benefitted from the unbundling.
A similar pattern is playing out in the TV cable industry. The OTT system delivers a whole program, play, web series, and these unbundle offerings are doing well and goes directly over the internet and do not have the burden of bundling.
As a startup you start offering individual unbundled products, start adding products, offerings and naturally migrate to bundling things again. This creates a vulnerability that you didn't have when you were a startup and you get taken down and the whole cycle repeats itself.
Most companies when they are bundling treat this as adding advantages to products. If they can add it to the core and be efficient about it and this efficiency is one of the advantages of bundling. there are quite a few synergies to bundling as you do not have to redo the products when you put them together.
The unbundling happens when there is a change in the underlying technology. The internet, mobile technology, social networks, the bitcoin are the recent examples. With the change of the basic framework, one needs to rethink the entire strategy, product and visualise what is essential and what is not.
AOL which bundles everything from dialup to all the information got unbundled by yahoo which unbundled content from access. Yahoo had an important feature search which got unbundled by Google. Google search was good in search and Facebook gave people a much better way to search for people. The technology industry is a family tree of a series of unbundling starting from IBM. Microsoft is unbundling itself significantly. Apple which has bundled many components and tightly integrated them is getting unbundled by android.
This process keeps playing out as new entrants find new ways of unbundling products/ services.
How to Succeed in Business by Bundling – and Unbundling
by Justin Fox HBR2014/06
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