Bundle, Unbundle, Repeat


Unbundling is a powerful trend. You see it affecting every sector from personal finance to ecommerce to travel. Every industry is susceptible to unbundling, and the innovation economy is pushing many of them in this direction today.

Once upon a time, the financial industry consisted of brick and mortar banks that provided everything from consumer checking accounts to business credit cards to mortgages. More recently, companies have arisen who focus exclusively on one area and are thus able to provide better service, cheaper. Examples include Quicken for accounting, TurboTax for taxes, Simple for basic checking accounts, Mint for personal financial planning and Haven for life insurance.

Prior to the internet, newspapers were where you went for everything from weather to personal ads to (oh yeah) news. Now we have Weather.com, Craigslist and thousands of niche news sites.

Why Unbundling? Why Now?

Unbundling as a trend resonates particularly well with Millennials, who have huge buying power. Just look at Uber or Sidecar, unbundling the transportation and delivery industries to make life easier. Twenty- and 30-somethings love it. Who can blame them?

Huge industries like publishing are also feeling the upset. Whereas mega players like Harper Collins and Houghton Mifflin once dominated the space, now 50 percent of all books are bought online, with stores like Amazon dominating the market. This means interesting things for the industry as a whole. Random House, which barely has an online presence, is now going head-to-head with self-publishing platforms like Pronoun (one of our portfolio companies). Welcome to the democratization of publishing, brought to you by unbundling.

Even Google, banner company of the Internet Age, is doing a little unbundling of its own by forming a parent company, Alphabet, and splitting its many divisions into discrete enterprises. Unbundling is an ongoing real-time process, not just one that affects stodgy companies that have been slow to evolve.

Now you might point out that, while all this unbundling is taking place, there’s also a lot of bundling happening too. After all, doesn’t Amazon’s marketplace represent a coagulation in ecommerce? Even small companies like Harry’s that start out focusing on one product—men’s razors—and doing it really, really well, eventually realize it’s a good idea to expand. Let’s make women’s razors. Shaving cream. Why not strike while the iron’s hot?

I’m not the first to observe this trend. Harvard Business Review and Techcrunch have both written about it in the last year. But not everyone is getting it yet. I still find plenty of people who see unbundling as the one and only vector here.

The Pendulum Swings

Not true: bundling and unbundling is a cyclical process, both at individual companies and within the market at large. It’s not our job to believe only in the companies that are boarding the unbundling train. We have to pay attention to the nuances and recognize when a certain market is swinging in one direction or the other (or both at once), why and how. That’s the way to make smart business decisions in this climate—whether you’re starting up a new company or investing in one.

What’s really interesting about this cyclical trend, though, is the way the internet has sped up the cycles. Today, distribution is more accessible than ever before, even to those without mountains and mountains of capital to start with. Now anyone with an internet connection can sell just about anything. Anything can be outsourced or manufactured. It’s a brave new world we’re living in.

What are you (un)bundling?