The Long Tail Concept
As a subscriber of the Wired magazine, i chanced upon the article that Chris Anderson wrote in Oct 2004 which talked about the Long tail concept for the first time. It didn’t hit me the first time i read it. Almost 6 months later, i came across Joe Kraus’s blog post about Long tail and his explanations and the charts he published made me really understand the concept. Make sure to read the powerpoint slides he has attached to his blog post as well. [In case you didn't know Joe Kraus is the founder of Jotspot, now part of Google. Also note that some of stats he quotes about Amazon, Netflix etc were later revised making the long tail sales of Amazon/Netflix not as stark as these charts show.] To be sure, Long tail is just a new way of looking at what Pareto pointed out long ago about winner-take-all-power- law distributions. While Pareto focused on the head of the curve, Chris Anderson, has brilliantly pointed the whole world at the tail of the curve - hence the term, Long Tail.

Long Tail Presentation titled “The Economics of Abundance”

Chris Anderson gave a great presentation. Compared to Dan Tapscott’s earlier presentation, this was less entertaining. But Chris covered his ideas extremely well. I found a version of his presentation on Slideshare and i have embedded it below.

| View | Upload your own

The main idea he was presenting was that the whole internet revolution has given us the abundance (Amazon can
list as many books as there are available) as opposed to the scarcity we have faced (Barnes & Noble has only a limited
shelf space for books). He made the point that we need a whole new mindset to manage in the world of abundance. If you
look at slide #22 (next few slides give more contrasts) in the above presentation - in the scarcity dominated world, we need
to think about ROI whereas in the Abundance dominated world, we can figure out the ROI later because it is very cheap to experiment. I could personally identify with it. When we started our internal blogging, I had no idea about the ROI and when
i looked at the cost of running a blog server (we use the open source Wordpress), it was so tiny that i realized ROI doesn’t matter.
So i went ahead and now it is a raging phenomenon within the company pulling in 3 million page views a month. If you want a
public example, look at how Guy Kawasaki started Truemors with just $12,000. With that type of costs, it is just much easier to experiment and figure out than write a
big business plan and run after VCs for investments.

The Long Tail Book Ever since I came across the concept, i have been following Chris Anderson’s long tail blog and bought the book as soon as it came out more than a year ago. The book definitely lived up to my expectations.
The Long Tail book has a lot more examples and they all serve to reinforce the idea better. The book explains the 3 forces that are driving the long tail

1. Democratize Production - how digital video cameras, blogs, pod casts etc have put the power of production in the hands
of the masses. He calls them “Producers”. 2. Democratize Distribution - How Amazon, Netflix, iTunes are able to create a vast distribution channel for niche content. He calls them “Aggregators”. 3. Connect Supply & Demand - how Google, blogs, recommendation lists etc are helping connect supply and demand. He calls them “Filters”. He devotes a chapter each of the 3
forces and explains them in detail with lots of examples.

In sum, Anderson shows how the culture has shifted from the water cooler talk - “did you watch the <popular sitcom> episode last night” forcing us all to be in sync with each other to a culture driven by individual needs, desires and tastes.

Win a copy of the Long tail book

Now to the contest. Just after Chris Anderson’s presentation i was talking to my colleague and he was debating me on how
the Long Tail doesn’t apply to software development outsourcing companies like the one i work for? I disagreed with that assertion, of course. So here is the contest - the best response to the question - how does the Long Tail affect software development outsourcing companies? wins a copy of the Long Tail book - I have a spare copy to give away.

Notes & References:
1. I wrote an article titled “Egocasting” on ITOTD. For some reason, unbeknownst to me, i failed to mention the Long Tail concept even though i encountered it before writing this article. I have recently amended the article. It will give you a good idea on how the power is shifting in the media world.

2. Rashmi Sinha expresses her contrarian views on the Long tail concept. In my view, she has just explained how the internet accelerates and accentuates power law effects. In fact, i would argue that her Slideshare business is actually a long tail business.

3. Tim Wu of Slate slams the Long Tail with his article titled “The Wrong Tail”

4. The long tail post i did a while ago.

ShareThis

Updated 30th Oct 2007 : Rajesh Kumar joins the conversation with a post on Wikinomics.

I am at our annual customer conference and had the privilege of listening to a fantastic lecture by Dan Tapscott, the best selling author of Wikinomics.

I am of the strong belief that virtual communities are going to be the key to progress in the future. As many of know i have been at the forefront of creating virtual communities within my company. Don Tapscott’s lecture was music to my ears.

He gave some superb examples of collaboration and i am listing the ones that caught my attention:

1. The brilliant example of the Gold miner corp which did the unthinkable for a mining company - posted its geo data online and requested the community to find potential gold mines. This is from Ross Dawson’s Living Networks book (which i haven’t read). Ross has written about the Goldminer example on his blog.

2. He talked about how they used the community to create Doritos ad and the winner was aired during the Superbowl - what an honor for a small time amateur ad maker! The winner was this one about the check out girl [must see video clip]. He played the one that won the contest and the one that he liked the best - the mouse trap. [This is a must-see video clip, please follow the link]

He gave several examples like Flickr Vs. Kodak Photo Gallery, Youtube Vs. MTV, Wikipedia Vs. Brittanica etc. The overall point being that Community approach always wins over the “Content is King” approach personified by the losing companies.

He talked about a 7 point framework that lays out the strategy of the Wikinomics approach. You can read more about these 7 points in the Business Week Wikinomics special series:

1.Peer Innovation and Production
2.Ideagora, a Marketplace for Minds
3.Hack This Product, Please!

4.The New Science of Sharing
5.Opening Up to Collaboration
6.The Global Plant Floor
7.The Wiki Workplace

Overall, the lecture has convinced me to add this book to my to-do list. If any of you have read this book already, please chime in, in the comments section.

ShareThis

ShareThis

Although co-ops tend to operate with little fanfare and are often unrecognized by the financial press, they account for 83 percent of Dutch agricultural production, 55 percent of agricultural production in Italy, more than 50 percent of banking services in France, and 21 percent of Spanish health care (according to the Commission of the European Communities). In continental Europe, these companies employ approximately 4.8 million people, 20 percent more than the total work force of large corporations in the same region. The largest cooperatives boast sales that rival those of any business. In 2004, sales figures included d9 billion ($11 billion) each for Coop and Coop Norden (consumer cooperatives in Switzerland and Scandinavia), more than d30 billion ($36 billion) each for Edeka and ITM Enterprises (retailer co-ops in Germany and France, respectively) and d40 billion ($48.5 billion) for the German retailer REWE Group.

Right here in India, Amul is India’s largest food company and is one of the most successful cooperatives with 10 million milk producers as members. 2. Coops may be a better model than investor owned companies when it comes to ethical and legal lapses:

Cooperatives are often assumed to be merely local affiliations of small and midsized companies, and therefore limited in scope and reach. But their deep roots in their countries of origin — as well as their surprising pervasiveness and stability — are exactly what puts cooperatives in a strong position in the new global economy. Through their highly participative governance models (involving both members and employees in making decisions), the cooperative system is particularly well suited to combining entrepreneurial and social objectives. Because it encourages internal checks and balances and general transparency, cooperative structure also makes it easier to avoid the ethical and legal lapses that have brought down the management of many investor-owned companies.

3. But can they withstand competition from big-pocketed competitors?

During the last few years, Unicoop Firenze faced unprecedented competition from retailers entering Italy, including several European giants: Carrefour, Panorama, Esselunga, and E. Leclerc. “These entrants triggered a full-blown competition over prices and distribution,” says Maura Latini, channel director of Unicoop Firenze. “Luckily, we had prepared for this over the previous years by competing against each other.” Before this competition set in, COOP’s management had moved to create internal competition between the chain’s supermarkets and “hypermarkets” (larger outlets that combine features of supermarkets, department stores, and specialty stores, introduced in Europe to compete with the influx of Wal-Mart and similar retailers). This helped COOP establish price leadership in products across the board and ensure better food quality. “Management had decided to introduce this mechanism so that our employees would get used to competition before we had to face it directly,” adds Ms. Latini.

4. Okay, what are the failures?

Success, in Europe or elsewhere, is not assured. Cooperatives have faltered at times. This happened most recently in the 1990s with Great Britain’s famous “building societies,” cooperative banks that had pioneered low-interest mortgages for their working-class members. In a series of publicly criticized moves, the boards of some major cooperatives rewrote the governance rules to make directors less accountable, sold the companies to more conventional businesses (for example, Lloyds Bank took over the Cheltenham & Gloucester Building Society), and allowed a few directors to pocket disproportionately large gains. Observers concluded that cooperatives, like many idealistic experiments, would simply not stand up against conventional business practice; they would need special legal protections to survive.

As the article details further, there are several other advantages and disadvantages like anything else. In countries like India, where large sums of capital are hard to come by, cooperatives can really be a workable alternative by creating a network of micro-entrepreneurs. I recently read a report that a package shipping company (called couriers in India) has formed in South India using a cooperative business model. They want to take on the Fedex, UPS and DHL of the world. Sorry, could not locate a reference on the internet to link to.

ShareThis

ShareThis