Below is a draft of a post I'm writing about "unbundling". I've had unbundling on my mind for weeks now, and have stopped and started a post on this topic because I just can't resolve some ideas. All comments, feedback, criticisms are very welcome.
I set out to write a blog post about what I thought was the existing "theory" of unbundling. Unbundling is best expressed by Andy Weissman in the context of "fragmentation". Weissman asks:
What if the power of connected networks such as the Internet is that they unbundle all that came before them? They disintermediate incumbent industries but also do the same to any new attempts at re-aggregation?
The simplest way to illustrate unbundling is to look at the grid of app icons on your phone. The things we now call apps were once bundled as part of a greater platform. As Fred Wilson put it, "The phone is the equivalent of the web application and the mobile apps you have on your home screen(s) are the features."
The post I was writing broke down when I realized that, to this point, unbundling has mostly been identified as a phenomenon, not a theory. In other words, unbundling is something that we can clearly observe but not necessarily explain. Moreover, it's unsettling that expositions about unbundling are generally tied to the internet specifically, whereas I suspect that if this is true of the internet, it should true of all non-internet technologies as well.
So now I'm asking (aloud): Is there a general theory which explains this phenomenon? Just as importantly, could this theory explain why some things which appear to be ripe for unbundling may not necessarily be unbundled in the future?
Here's my first attempt at formulating the theory: Unbundling can be explained in the framework of the disintermediation of things from their mechanism of delivery. It is typically technology which creates a new form of delivery (e.g., broadband, wireless mobile services), but it need not be so.
Here are three examples of unbundling which I believe are explained by this formulation of theory.
Cable television delivers value in the form of entertainment (everything from news to frivolous sitcoms is a form of entertainment). Cable television thrived as a business in large part because it was a closed system: If you wanted access to the market of television programming from your home, you had to use their pipes (i.e., their delivery mechanism). Everything else about cable television - remote controls, programming guides, DVR, are accessories.
Now that an alternative to those pipes exists in the form of the internet, the cable pipes remain irreplaceable (you can't access cable television without them), but they become unnecessary. As are the accessories. It's no coincidence that we are gradually witnessing the obsolescence of cable television.
AOL is nearly synonymous with the term "internet portal". It delivered both entertainment (e.g., news, articles, music) and services (e.g., chat, email). As time has shown, portals are very reducible. Portals have long been unbundled.
During its heyday, AOL's one market driver wasn't the breadth of its offering, but rather it was its position as a provider of internet access (i.e., their delivery mechanism,"duck choking-on-a-kazoo" style dial-up). All the surrounding services were accessories. With the rise of broadband, the AOL's essential delivery mechanism has been replaced, and this is why AOL and AOL-style portals are obsolete.
While Birchbox isn't functioning on anywhere near the same scale as cable companies or AOL have at their peaks, it's a clear-cut example of a product being unbundled by shifting the mechanism of delivery.
Birchbox, if you're not familiar with the service, delivers cosmetic and fashion samples to your door, via the post. Prior to Birchbox, the distribution of samples had largely been restricted to the corporate retail structure. Department stores and other brick-and-mortar business used them to gauge which products they wanted to sell. They also used them to give consumers in-store trials.
Where Birchbox innovated was in disintermediating samples from the corporate retail delivery pipeline, making samples a product in their own right. What's especially interesting about this case was that while the internet helps them market their product - the actual boxes of samples - they do so in a manner that many other longstanding retail services do. Their novel delivery mechanism is actually a very old one - the post office!
Can this theory help us looking forward?
Much as "disruptive innovation" theory can help us analyze the past as well as look toward the future - for instance, we've learned to be far more open-minded about how entrants at the low-end of the market might disrupt an established industry - can unbundling theory help us analyze future markets? This summary of unbundling on TechCrunch attempts to look forward:
What does this all mean? It means that in many, many cases, many different players in this ecosystem may need to recalibrate their expectations.
But when you read through the post, it reads more as a "How do we navigate these phenomena?" rather than "How do we measure the value of the bundle, or the unbundled service?" We need to take a look at a big, fat feature-rich, "platform"-style business. Even more challenging, let's take one that launched on the post-dial-up internet (so we can forget about "closed pipes") and has established itself well in the mobile world. You've probably already thought of the example I'm going to use.
Facebook is a suite of social products, one that I need not enumerate here. As I alluded to above, unlike cable TV or AOL, Facebook did not, and does not, rely on proprietary pipes to deliver content. It relies on a mostly open, standardized system, the internet.
Here comes my biggest leap: Facebook's delivery mechanism is not technological nor physical but rather conceptual: your unique personal identity. When you post a photo, status update, event, message, etc., you do it through your personal identity. And like the Yellow Pages of yore, it is the one place on the internet where almost anyone can find you by name, or by your actual countenance. I'm floating the idea here that personal identity is the delivery mechanism, and, accordingly, everything else around it - Photos, Event Planning - are accessories.
Since the days when Facebook expanded beyond the college crowd, it's been asked many times: Will Facebook get so bloated, so diluted, that it will wipe out its utility? The unbundling phenomenon suggests that the array of features on Facebook "wants" to break apart. And to some degree, we've seen that Photos have been unbundled with Instagram, messaging with Whatsapp, and media sharing with Tumblr. So in a way, unbundling pattern seems to hold.
But when you look at it through the lens of the delivery mechanism, where Facebook's delivery mechanism is personal identity, you can formulate an explanation of why the unbundling of its features isn't necessarily a death knell for Facebook: Facebook is still by far the dominant way to be represented by your real identity. When we built Snapix because we wanted the connection to users' real-world identify to deter them from posting lewd photos.
This formulation of the theory might also explain why features that have been unbundled (e.g., content sharing, photo sharing, messaging) were able to do so: They didn't rely on your real-world identity. Tumblr, Reddit (content sharing) rely on an obscure identity, as does Snapchat. Instagram (photo sharing) doesn't rely on your real name. Whatsapp (messaging) relies on your phone number.
And lastly, you might also be able to explain why Google's endeavor with Google+ is such an uphill battle: Their service is a social network based on your real-life identity (via your email address). Their challenge is to usurp the dominant delivery mechanism.
A tentative summary
Here's how I'd formulate the theory-side of the unbundling phenomenon, in short: A product can be unbundled inasmuch as it does not rely on the delivery mechanism used by the bundle.
This is a very tentative theory, and I'm not really steeped in enough experience or research to advance it. But unbundling has been on my mind for weeks now, and this recent formulation has been quite satisfying. If I'm lucky, I'll have some commenters who can help me pick it apart.