Unbundling has surged in popularity over the past decade, as companies seek to remain agile and competitive in the ever-changing business landscape. The process involves breaking down a business, its activities or its functions into smaller, more focused divisions or product lines.

Unbundling can be traced back to the late 1990s when large companies like AT&T and Time Warner were forced by the U.S. government to divest the majority of their assets and separate their operations if they wanted to merge. Since then, companies of all sizes have been attempting to gain a competitive edge by unbundling.

The goal of unbundling is threefold: to increase focus, reduce complexity and increase transparency in the company’s operations. Unbundling enables a company to break down its activities and products into smaller, more manageable divisions with upgraded technology platforms, stronger customer service, improved product mix and reduced operating costs.

By taking a close look at its operations, a company can determine what can be unbundled, sold off, consolidated or eliminated in order to improve efficiency and increase value. A thorough and detailed evaluation must be done in order to identify the main areas of opportunity and devise a plan to address them.

Unbundling can also involve breaking up a corporate conglomeration into smaller companies, and spinning-off subsidiaries or divisions to focus on a particular segment or product line. Some companies also undertake partial unbundling, in which select product lineup are sold off, offering shareholders quick returns and allowing the company to increase its focus on products where higher potential for growth is identified.

The benefits of unbundling should not be overlooked. Companies that embark on the unbundling process can reduce costs and processes, while increasing agility and reactivity to market changes. Additionally, it allows companies to focus on their core competencies and reinvest their resources into the most profitable areas that can help drive growth.

The unbundling process has its unique set of risks. Reducing and spinning-off product lines can lead to the closure of outlets and the possible loss of important customers and revenue. Therefore, it is important for companies to understand the full impact that unbundling could have on its operations and its stakeholders before embarking on such a strategic process.

Unbundling presents an appealing alternative for some organizations that want to increase efficiency and improve their financial prospects. However, to ensure success, it is important to senior management and boards of directors to understand the risks and take a strategic approach by gathering a thorough assessment of the organization, its activities, its stakeholders, and its markets before deciding whether the process is right for their situation.