Swiss private banking, the business of provid- ing banking services to the very wealthy, was long known as a sleepy, conservative industry. Yet over the last decade the face of the Swiss private banking industry changed consider- ably. Traditionally, private banking institutions were vertically integrated and performed tasks ranging from wealth management to brokerage to fi nancial product design. There were sound reasons for this tight vertical integration. Out- sourcing was costly, and private banks preferred keeping everything in-house due to secrecy and confi dentiality concerns. But the environment changed. Secrecy became less of an issue with the demise of the mystique surrounding Swiss banking practices, and outsourcing became attractive with the breakup of the banking value chain due to the emergence of specialty service providers such as transaction banks and fi nancial product bou- tiques. The former focus exclusively on handling banking transactions, while the latter concen- trate solely on designing new fi nancial products. Zurich-based private banking institution Maerki Baumann is an example of a bank that has unbundled its business model. It spun oΩ its transaction-oriented platform business into a separate entity called Incore Bank, which oΩers banking services to other banks and securities dealers. Maerki Baumann now focuses solely on building Customer Relationships and advising clients. On the other hand, Geneva-based Pictet, the largest Swiss private bank, has preferred to remain integrated. This 200-year-old institution develops deep Customer Relationships, handles many client transactions, and designs its own fi nancial products. Though the bank has been successful with this model, it has to carefully manage trade-oΩs between three fundamentally diΩerent types of businesses. Private Banking: Three Businesses in One The fi gure opposite depicts the traditional private banking model, describes trade-oΩs, and unbundles it into three basic businesses: relationship management, product innovation, and infrastructure management. patterns 60 unbundling business Models bmgen_final.indd 60 6/15/10 5:33 PM