1. Unbundling the Corporation
By John Hagel III and Marc Singer
HBR March-April 1999

2. Key Arguments Falling “interaction costs”
“...represent the money and time that are expended whenever people and companies exchange good, services, and ideas.”
Entire industries will have to reorganize rapidly
Computer industry, Newspapers.
Nature of business changing
generalist to a specialized player
size, reputation and integration
Creativity, speed and flexibility
These advantages belong to the specialist
What business are we really in?

3. Concept of Transaction Costs
Why do (large) firms exist?
Ronald Coase’s concept of “transaction costs”
Search costs
Information costs
Bargaining costs
Decision costs
Policing costs
Enforcement costs

4. NEW INDUSTRY - 1995 HORIZONTAL OLD INDUSTRY - 1980 VERTICAL
Unbundling The Corporation
NEW INDUSTRY HORIZONTAL
OLD INDUSTRY VERTICAL
Sales and Distribution
SUPER-STORE
MAIL INTERNET
DEALERS
RETAIL
Application Software
WORD
WORDPERFECT
WORD
STAR
Operating Systems
DOS/WINDOWS
OS/2
MAC
UNIX
Computer Hardware HP
IBM
DELL
COMPAQ
ETC
Processors
INTEL
MOTOROLA
RISC
IBM
WANG
APPLE
NEXT
UNIVAC
DEC
slide 6 7

5. Rethinking the Corporation
Identify, attract, and build customer relationships with customers
People
Economics
Compete
Culture
Customer Relationship
Management
Infrastructure
Management
Product
Innovation
Conceive of attractive new products and services and commercial them
Build and manage facilities for high volume, repetitive operational tasks
As the interaction costs fall, companies will come under pressure to unbundle their core processes, each of which, has very different economic, cultural, and competitive imperatives.
Rethinking the Corporation

6. Rethinking the Corporation
Customer Relationship Management
identify, attract, and build customer relationships with customers
Product Innovation
Conceive of attractive new products and services and commercial them
Infrastructure Management
Build and manage facilities for high volume, repetitive operational tasks

7. Rethinking the Traditional Organization

8. Organization and Internet
Industries bundling include:
RBOC, Newspaper, Banking, Pharmaceutical
Emergence of Infomediaries on the Internet
a company whose rich store of customer information enables it to control the flow of commerce on the web
Informediary will focus on customer relationship management
Yahoo
E*trade and Banking industry
Auto Industry and AutobyTel

9. Road Map for Unbundling
Decide which part of the value chain to focus on
Product innovation business will be dominated by many small business
For the other two – infrastructure and customer relationships – consolidation will be norm
AOL and Netscape example
Focus, divest, unbundle and rebundle
Build scale and scope for infrastructure and customer relationship businesses