I. Overview of "Unbundling the Corporation".
Three core processes There are three core processes in business; product innovation, infrastructure management, and client relationship management. Each of these activity have different economic imperatives, different cultural aspects and managerial needs. Traditional companies are usually composed of these three core processes vertically integrated and mixed in the business activities. According to Hagel and Singer (1999) there are many incentives to unbundle those three core processes into three different business activities.
Conflicting imperatives The core processes objectives can conflict with each other. Organisations have to resolve trade-offs between different imperatives such as economies of scope and economies of scale. The customer relationship activity for example consists of achieving economies of scope by selling as much as possible to each client and offer a large range of products, wheras the business infrastructure logic is to maximize its capital intensive operations by realizing economies of scale and selling large quantities of the same product. It is impossible for one company to maximise the value of its infrastructure and have the best client relationship possible in the same time. The company has to choose between different strategies which consist in offering few different products and sell them on a large scale, or having a broad range of product and sell few of each to targeted customers. There is therefore a strong business incentive to unbundle those activities into independant businesses so that they can each develop their competitive advantage without any compromises.
Decreasing interaction costs The decreasing costs of interactions accounts for a large part for the unbundling dynamics. According to traditional economic theory, organizations choose to internalize their activities in order to avoid market interaction costs such at negotiations and contracts or sharing...