Archive for December, 2004
Is the Long Tail wagging the dog?
I recently read the October 2004 Wired magazine article by Chris Anderson entitled, “The Long Tail.” In it, Anderson describes how new distributions models (particularly around the entertainment industry – Amazon, NetFlix, Rhapsody, iTunes, et al.) are turning centuries old economic principles upside down.
Take, for example, the Pareto principle. Also know as the 80/20 rule, it states that for many phenomena 80% of the consequences stem from 20% of the causes. In economics this may be simply stated that in any industry 80% of the sales stem from 20% of the companies. Or, perhaps that 80% of the sales stem from 20% of the products. When I worked in the office furniture industry we stated, with confidence, that 80% of our sales were generated by 20% of the dealers (which was pretty close to being an exact figure).
How are new distribution models turning this principle upside down? The basic concept behind it is one of scarcity – that is, only a finite opportunity for sales exist within any product category. This is a centuries old assumption that guides our economic decision making. A lot of effort and attention has been paid by companies in predicting what consumers were going to choose as their 20%. Stock that product in your stores and you’d be certain to have a good year. It’s no wonder why you can’t always find a favorite old movie at your local Blockbuster. To be profitable, they need to insure that each movie they have in stock will be rented x number of times per month to justify its space on the rack.
When NetFlix (or substitute Amazon, Rhapsody, etc.) entered the scene it changed everything. As it is not as bound by the physical constraints of Blockbuster’s distribution model, they can stock ALL of your favorite old movies. Their cost of distribution is the same for popular AND obscure movies. The 80/20 rule is broken when you discover that this new distribution model actually makes more money by having those obscure titles available. The assumptions of scarcity are turning into assumptions of abundance. Marketing to an extremely wide audience is what is making these companies highly profitable.
So, is the Long Tail wagging the dog? The simple answer is no. But it sure has extended the reach and balance of those companies adopting the approach. It is still a fact that these companies must continue to cater to the 20% because they provide a familiar entrance into their product category. The 20% is still popular for a reason.
Beyond the obvious commercial models, where else could this apply? How about education? Right now colleges and universities are bound to their current distribution model – instructor/class settings. But many institutions of higher education are starting to offer online educational opportunities to augment the classroom instruction. How about extending that approach? Today, although the content of a class may have been created, it will not be offered unless an instructor is available to teach it. Many of the new online education or distance learning platforms (e.g. Blackboard, WebCT, The Connected Learning Framework)provide the infrastructure for self-paced coursework. Create the content once, and it can be offered anywhere, anytime. Consider the possibilities. Interlace this with multidisciplinary approaches to education and the tail slowly starts to wag the mascot.
Think you have customer evangelists?
I don’t think so. At least not until you’ve had a customer spend 3 weeks of his life creating an ad for you.
What is it about the iPod that drive such loyalty and devotion? If your business could tap into just a portion of that kind of passion, you’d see your sales skyrocket…no matter what your industry!
Balance
"The less people like their jobs, the more they focus on balance."—John Wood, ex-Microsoft Asia exec (from the new worthwhile magazine).
There has been an aweful lot of talk about balance in the press lately…especially when it comes to the workplace. It shouldn’t be surprising. The past 4 years have brought their share of stress, extended work hours and little reward for much of the American workforce. However, Mr. Wood’s statement has it all wrong. It is only when people don’t like their jobs that you hear about this struggle in the workplace. For years we have heard it at home.
"Honey, I’m going to be late tonight"
"I have work that I want to do over the weekend"
Balance is about our individual capacities. When we have more capacity, we can take on more tasks. When we are depleted, we talk about our need to back-off.
How full is your bucket?
