Just as the industrial revolution changed the world and brought about substantial increases in production, the two successive centuries have been similarly defined by new ways of operating businesses and satisfying customers.
This constant and often unpredictable level of change has forced businesses to either redefine the way they operate, or get left behind by their more adaptable competition.
It should come as little surprise then, that 63% of Fortune 500 companies failed between 1957 and 1997.
The story of unbundling
But what of the 37% that survived? Their success can arguably be traced back to the phenomenon of ‘unbundling’ – where companies break down their traditional organisational and operational structures to function more efficiently.
The process of unbundling started a few decades ago as a term used to describe the growth of business outsourcing.
Prompted by falling transportation costs, the first unbundling marked the end of the necessity to make goods in the same place as the consumer in order to sell them.
More recently, falling communication and coordination costs have caused a second unbundling – putting an end to the need for manufacturing stages to be performed near to each other.
Latterly, the effects of this have spread from factories to offices with the result being the offshoring or outsourcing of service sector jobs.
Put simply, the first unbundling enabled the geographical separation of the company from its consumers, while the second unbundling physically redefined the offices and manufacturing facilities themselves.
Indeed, this unbundling of office work fostered greater competition within individual jobs, rather than between entire companies, and first became evident in the outsourcing of specific roles such as call centre agents or software developers.
Right now, a third unbundling is underway in every industry from entertainment to enterprise, where the world’s most innovative businesses are increasingly being led by the desire to serve customers quickly and conveniently – directly to their mobile phones, TVs and wearable devices.
Today, individual jobs, processes and services are being optimised with the aid of digital technology; roles that have historically been impervious to disruption are now being dismantled en-masse.
Consider the taxi driver: the third unbundling – as demonstrated by companies such as Uber and Kabbee – is breaking down the notion of the traditional minicab firm by connecting drivers directly with their customers via GPS-equipped devices and cutting out the middle-man booker.
The result is a frictionless, more convenient user experience, where a driver can be at your door within minutes at the click of a single button.
A Silicon Valley state of mind
The third unbundling is reshaping entire industries, as businesses break down enormous operating structures into smaller, more agile and innovative units.
As with most transformational trends, this idea is heavily rooted in Silicon Valley thinking – where companies think big and think disruptive, asking the question, ‘How can we challenge the big institutions that are forcing us to do things in a certain way?’
The ‘Silicon Valley’ mind-set takes the view that by using the right people, processes, tools and technologies, it is possible to remake whole industries for the better.
The services and suppliers that are causing unnecessary hassle in people’s lives are disassembled and then remade as ‘customer first’ businesses.
The point is that although unbundling stems from the San Francisco Bay Area, it’s not just the leading-edge, innovative technology companies of the world that can benefit from this way of thinking.
In fact, there is a lot to be said for the application of Silicon Valley thinking to European enterprise; incumbent, large businesses embracing unbundling in order to increase their chances of survival.
Unbundling for business
The companies that are properly embracing digital technology to augment business processes and drive a competitive advantage, are winning.
Those who are trying to win through a steadfast reliance on traditional business methods are losing.
More importantly, the longer they try to resist change and maintain this status quo, the more difficult it is to remain relevant.
Unbundling on a granular level in the enterprise can help companies to address the problems caused by legacy
IT and software systems, which can accumulate over time, stifle innovation, and make it more difficult for developers to do their jobs.
It’s true that the companies that are meeting the challenges of digitisation and changing customer preferences head-on are relying on open-source, disruptive technologies that support the task of unbundling.
They generally work alongside a third party digital transformation consultant in small teams of no more than four or five people – with the talent and agility to develop products that millions of people use every day.
In this way, unbundling from ageing systems can actually enhance a company’s ability to attract and retain talent, because they can support the developers’ technologies and software of choice, which ultimately delivers the greatest benefit to the business.
Facing the future
The third unbundling is already proving to be the great disruption to traditional businesses, because there is real and lasting value in picking apart the traditional processes and practices that have for so long underpinned entire industries.
While unbundling will force a company to radically transform its organisational structure – a difficult and painful undertaking at best – the one certainty is that those who are not already making these changes are in serious danger of being left behind.
Sourced by Nuno Job, CEO, YLD