When Netscape ex-CEO’s remark shocked the start-up world

This was a statement made at the last minute question asked of him while he was in a hurry to catch a plane. Its a simple statement which explains the current situation in the technology service market.

In business, there are two ways to make money. You can bundle, or you can unbundle.

By Jim Barksdale, Former CEO and President

Pixabay - Bundle of BooksBundling and unbundling can be explained through a very simple example. A decade ago, in India we used to buy music cassettes for movies. We liked 1 or maybe 2 songs in total but because we did not have the option of buying mp3’s, we ended up buying the whole album. We ended up spending more and buying more because of the lack of options in the market. We would see DJ’s getting songs they want to play, recorded on a separate audio cassette into mixtapes. This is an example of bundling and when mp3’s came in, it can be viewed as an example of unbundling. Through unbundling, we had the freedom to buy exactly the tracks we wanted to enjoy and own.

A similar situation can be seen in the newspaper market. Before the internet age, the newspaper was delivered with all kinds of news in it. The whole family took the pages relevant to their interests and the rest was used as raddi (recycled). The internet came and with it, various websites which were focused on particular genre’s of news such as Sports, Bollywood, Politics etc. Effectively, all these different websites which picked out their audiences, unbundled the news business. The user has the option of reading exactly what they want to read.

Pixabay - Swiss KnifeWe have seen a similar situation in Advertising, Enterprise Software and even daily tools that we use. We have moved from a single app which was the browser to multiple browsers who have unbundled the internet space. And due breakneck speed of technology and the internet, this phenomena has speeded up considerably.

The most recent example is Financial Technology which is unbundling banking. There are mobile wallets which have unbundled small to medium sized payments service and remittance part of the business. We have financial planning taken over by independent and much smaller organisations. We have kickstarter and Indiegogo which will help you crowdfund your idea instead of applying for a business loan. The importance of traditional banking has been dipping for some time now.

However the opposite trend is picking up as well. When a startup has established itself, they have the option to expand their set of services. These could be complimentary services to their main business and slowly as success is achieved, more services are added to the fold. This is bundling.

Samsung is a huge example of this. They started out as a grocery shop and now are involved in defence, medical research. Shipping and construction among many others. This becomes a viable option for many business when they have reached a saturation point in their core business. Also, it is a hedging tactic as well where the business is diversifying to reduce chances of it being shut down because of new players. Changing Govt policy etc.

We have seen a few more examples in the e-commerce domain in India with Flipkart’s acquistion of Myntra where Flipkart which was more focused on electronics, bought into the fashion domain. Freecharge, a payments platform go bought over by Snapdeal which entered the payments industry. When it comes to established players, they have the customer base but to increase revenues and maintain high growth rates, they need to add services.

Bundling and bundling does make it easy for us to classify most businesses in the market. It also helps us make sense of the ever dynamic market conditions and business developments. It also helps us figure out the industries which are ripe for disruption. With a lot of Venture Capital companies trying investing in start-ups which are dealing in all kinds of specialised services, I can’t wait to see the next industry which is shaken up and unbundled.

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