https://www.slideshare.net/atsnakada/ss-80520040
- Startups enter a market dominated by giant companies with āvertical integrationā.
- Startups aim to āunbundleā the vertical integration of giant companies
- Unbundling occurred first in IT industry (mainframe to PC) - same thing is happening in other industries
Q: Why does this happen?
- Why have large companies not been able to remain vertically integrated and remain competitive by making their operations more efficient through IT?
- The simple and seemingly correct theory that ābig business is ignorant of ITā runs counter to the fact that unbundling occurred first in the IT industry.
- Hypothesis: The
- By modularizing some of the functionality that large companies had and increasing interoperability in the form of APIs, etc., the efficiency of using that functionality has increased, and this has outpaced the āefficiency gains from vertical integrationā.
- The efficiency gains from vertical integration were advantageous in the production of goods with high replication costs, but information has low replication costs, so the conditions of the game have changed and the optimal strategy has changed.
- Modules lead to deteriorating global performance. Under strong constraints on global performance, the strategy of assembling integrally and spending man-hours on matching was justified. As constraints loosened, the strategy of modularizing even at the cost of modularization overhead to increase reusability and interconnectivity became more prevalent.
- Just as Arduino and Raspberry Pi have replaced areas that once struggled to reduce the size of programs, but where the constraints can be loosened.
Impact of Information Technology on the World
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