In Focus   Weekly exploration of industry trends and developments.


The “Meta-Trend” of (Un)Bundling: It happened tomorrow!


“Gentlemen, there’s only two ways I know of to make money: bundling and unbundling,” remarked Jim Barksdale, the CEO of Netscape, at the end of his pitch to a group of investment bankers at the Savoy Hotel in London, right before his company went public in 1995. Little did he realize at the time that, what he said in passing, clearly and concisely articulated a ‘meta-trend’ of value-creation in the economy. Bundling and unbundling speak of ways of creating new combinations of solution offerings as well as reformulations of the organizational structure, so as to capture value in the economy. The increasingly well documented quirks of human behavior and decision-making provide ample room for maneuvering through such changes.

At a conceptual level, (un)bundling is a necessary consequence of new products/services that are forever being created in the economy and the myriad ways in which organizations are re-arranging in newer permutations. Surveying the corpus of business history that already exists, it wouldn’t be outlandish to propose that bundling/unbundling have been around for as long as organized economic systems. The nature of growth and advancement in the economy is both, fractured and fractional. This is to say that progression of economic activity happens through both, evolution and revolution. While incremental changes continue in their gradual attempts to crystallize the dynamic shape of an organization, disruptive events continue to push the envelope of value creation within the economy. Basically, all the enterprise and bustle in any economic system thrives on the chaotic nature of economic progress and, much more broadly, the entropic nature of human advancement. Therefore, (un)bundling adds a layer of value by repackaging the dispersed, fragmentary, and frictional advances in the economy. It does so by harmonizing the form of such pockets where advances happen and the niches that are created. It moves structures within the economy toward an equilibrium and launches economies of efficiency.

The nature of these market-niches is essentially relative and time-bound. This creates moving targets for economic agents to specialize or bringing about a ‘division of labor’ that, in turn advances efficiency and create pockets of value in the economy. So, an organization specializing over something today would not be a specialist forever. This perspective should be viewed in the context of a deeper and more fundamental exposition on the subject, which would allow for a beneficial understanding of the gears and levers behind such large-scale economic movements. It would be useful to consider this as a basis, not only for (un)bundling, but as that of other such meta-trends and shifts in any economic system.

The idea of ‘meta-trends’ can perhaps be better understood with the metaphor of a cloud. It is our understanding that there exist clouds of meta-trends in the economy. Like clouds, these meta-trends dissipate and re-condense from time to time. At other times, they move and join other meta-trends, adding their influence and causing a precipitation of macro-level changes.


The phenomenon of bundling and unbundling are economy-wide movements that are largely immune to industrial and functional boundaries. As evidenced by experience, they share a symbiotic relationship with each other, with bundling following at the heels of unbundling of any shape or form and vice versa. Moreover, these are cyclical events, which can be clearly seen as being periodically triggered by a variety of forces within and external to an organization. The effect of these forces serves a complementary function to the next iteration of their activation. In recent memory, this can perhaps be best seen in the platform providers, which have themselves resulted from the unbundling and subsequent horizontal integration of the functions of digital organizations and now are providing the infrastructure for the unbundling, as an example, of the financial industry by fintech startups.

The classical literature on the unbundling of organizations bases this disaggregation on imbalances in the interaction costs within and outside the organization. It suggests that any given organization is comprised of three core “businesses” — product innovation, infrastructure and customer relationship management — the divergent economies of which lead to an inherent conflict over resource allocation, thereby causing an unbundling of these functions in a traditional corporation if the interaction cost of undertaking an activity inside the corporation is higher than outside of it. This approach is based on organizational processes and identifies a mechanism as well as fault-lines within the organization. The existing literature on bundling, while disproportionately focused on monopolies and price differentiation as the motivating force, does acknowledge the strong pull of the economies of scale and scope, which provide for efficiency increases and cost savings in tying products/services and weaving together organizations. As to where bundling happens, it points to an examination of the extent of complementarity and independence of products/services and, by the same token, the synergies between actors and agencies.


The discussion above entails that bundling and unbundling are triggered by forces that can either be readily measured or the onset of which can be reasonably predicted, despite any differences over the measures used. This is a highly contagious trend on account of its replicability, whereby it can be packaged into models and frameworks that may be amply extended over multiple businesses, across industrial boundaries. As examples of such models one might consider vertical integration, core-competence based specialization, outsourcing, converting process manufacturing into discrete manufacturing, anti-competition regulation, et cetera. However, any large-scale adoption of bundling/unbundling would be based, either on the perceived success of such initiatives by others (in case it is triggered as a one-off event) or by the onset of other meta-trends, such as shifts in aggregate market demand, technological advances that create new businesses opportunities, et cetra. One-off events marking consolidation or divestiture may even be triggered by market forces, such as gains on the market-cap through changes in market valuation. Therefore, given that this is a trend which has been repeatedly observed throughout the economy, it should be predictable. One way of anticipating the onset of these trends would be by creating indices based on well-founded and widely-accepted metrics including, but not limited to, those discussed above.

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