Bundling, Unbundling, and Startups

“There are two ways to make money in business: You can unbundle, or you can bundle.” -Jim Barksdale

 

I have just published a long article on bundling and unbundling. It is interesting to think about technological evolution (PC, internet, mobile, blockchain) in this framework. For entrepreneurs, however, it is also a way to generate and pursue business ideas. 

 

When something is bundled (or unbundled), ask why it is the case and understand if technological forces are disrupting it. For example, Microsoft used to bundle (and pre-install) everything on a PC (operating system, office suite, etc). Why? Because 1) the mechanism of software delivery is inefficient with floppy disk and CD, and 2) the limited computing power of PC discourage alternative applications to perform the same function. If you understand that, you can see how the downfall of Microsoft is inevitable (Still, it is pretty amazing that the Microsoft domination lasted as long as it did and it finally took mobile revolution to finish it off). When the internet makes software deployment more efficient and PC becomes more powerful, the cloud-based software chipped away Microsoft dominance. 

 

There will come a time when a field is hot. It is easy for entrepreneurs to pursue these hot fields, but it takes a rational mind to understand why this is the case and pick them selectively. Now since we are at it, let me list several and discuss the merits:

 

Taxi app (Uber, Lyft): It bundles initial call, dispatching, ride and review into one app. The reason is that a mobile phone is location aware for consumer and it powerful enough to replace the old dispatching system. 

 

Messaging app (WhatsApp, WeChat): It unbundles SMS from mobile phone. The reason is that SMS is expensive and lacks additional feature. The new messaging app routes everything through a cheap pipe (wifi/data) and added additional features (picture, walkie-talkie, sticker).

 

Meal in a box (Sprig, Blue Apron): It bundles grocery purchase and recipe search together. The underlying technology reason is weaker than Taxi app. In fact, I do not see any technological reason on why it happens now but not 10 years ago. 

 

Daily deal (Groupon, LivingSocial): It bundles coupon creation, coupon curation and coupon distribution together. It actually has a strong value proposition, but it fails to capture the redemption loop in its desktop days. It is totally reasonable to see a new iteration in this space that bundles mobile in an more effective way. 

 

Tenant verification (Tenantify): Forgive me to lump my startup into the mix. Its category is not as worthy, but it illustrates the same point. Tenantify unbundles employment and income verification from the traditional methods, because the new bank API allows us to do this piece more efficient and effectively than previously possible. 

 

It is totally expected if you conduct the similar analysis but reach different conclusions, as we might hold different assumptions. However, this does not diminish the value of such analysis. As an entrepreneur, you will be better served to ride on disruptive technology wave to bundle/unbundle a space ripe for disruption!