There are two core drivers of economy-wide unbundling [of incumbent corporations by startups]

1. [Startups] are essentially product design teams that are focused on iterating fast to find product-market fit.

They are able to offer fundamentally better products and services than the incumbents because of the product-centric DNA of the management teams. They usually focus their product development on a sub-segment of the millennial demographic because millennial customers don’t have much loyalty to existing brands. Whether it’s consumer packaged goods or financial services, these customers are willing to try new brands and share their experiences openly with each other through rankings and reviews. As a result, momentum builds fast behind companies whose products and services are truly better in the consumers’ minds.

2. These [startups] rent all aspects of operational scale from partners and eliminate any capital expenditures or operational inertia from their execution plans.

They are therefore designed for growth, especially given their lean organizational structures. For manufacturing, logistics, customer acquisition, and commerce, there are third party services and APIs available to scale with customer demand as quickly as necessary. Once these companies have built a relationship with their customers, they quickly go on to re-bundle products and services to increase their share of the customer’s wallet.

This is a structural change. Today’s innovative companies also run the risk of being disrupted by a new generation of nimble upstarts that will use the very same unbundled business model to their advantage. Businesses will need to persistently focus on product and customer success, because for most firms scale isn’t a moat any more. (The monopolistic advantages of scale are shifting to platform companies like Amazon, Facebook, Apple Pay and YouTube. These platform companies are becoming essential to how the economy functions, as power companies and internet service providers have been for decades.)

// HBR succinctly sums up ‘unbundling’ for its readers.