Saturday, November 2, 2019

"There are two ways to make money in business: bundling and unbundling"

An elegant little idea that in the end gets us to a rather repulsive place.
From Real Life Magazine:

Bundling and Unbundling
No goods or services are stand-alone
In a famous 1995 pronouncement that has since become a Silicon Valley trope, Jim Barksdale, the CEO of Netscape at the time, declared that there are two ways to make money in business: bundling and unbundling. That is, many ventures seek profit by repackaging existing goods and services as revenue streams they can control, with technology frequently serving as the mechanism. The tech industry’s mythology about itself as a “disruptor” of the status quo revolves around this concept: Inefficient bundles (newspapers, cable TV, shopping malls) are disaggregated by companies that serve consumers better by letting them choose the features they want as stand-alone products, unencumbered of their former baggage. Why pay for a package of thousands of unwatched cable television channels, when you can pay for only the ones you watch? Who wants to subsidize journalism when all you care about is sports scores?

Media has been the most obvious target of digital unbundling because of the internet’s ability to subsume other forms and modularize their content. But almost anything can be understood as a bundle of some kind — a messy entanglement of variously useful functions embedded in a set of objects, places, institutions, and jobs that is rarely optimized for serving a single purpose. And accordingly, we hear promises to unbundle more and more entities. Transportation systems are being unbundled by various ridesharing and other mobility-as-a-service startups, causing driving, parking, navigation, and vehicle maintenance to decouple from their traditional locus in the privately owned automobile. Higher education, which has historically embedded classroom learning in an expensive bundle that often includes residence on campus and extracurricular activities, is undergoing a similar change via tools for remote learning.

Unbundling has gained traction as a rationale because of its potential, in certain cases, to extract what is useful or valuable for consumers from the once necessary infrastructure that delivered it. But the tech industry, in its continuing eagerness to unlock new revenue sources by unbundling more of the world, has been driven to look beyond the low-hanging fruit. Restaurants are as pleasant and functional as they have ever been, for the most part. Yet from these unbundlers’ perspective, restaurants are inefficient bottlenecks that limit the throughput of food. The solution to this “problem”? For one, replace restaurants with something more like food fulfillment centers — assembly-line-driven fast-casual chains and food halls. These suggest a technologized approach to food provision, but the startups working to streamline this process can go much further, disaggregating meal preparation, service, and the food’s ultimate consumption altogether with delivery apps and “ghost kitchens.”...MORE
Related, Harvard Business Review, July 2014:

How to Succeed in Business by Bundling - and Unbundling