Sorebrek's Musings and Ramblings

In search of the holy grail of an MBA (class of 2008 hopeful), this space will hopefully chronicle the search and my other quixotic pursuits.

Saturday, March 12, 2005

Long Tail or Tall Tale?

I remember visiting the headquarters of Excite in the Silicon Valley in early 2000. We were trying to figure out if Excite might be interested in the technology we were hawking. Little did we know at the time that Excite was tanking like several other tech shops in the area. But the sad part is that this was no 10-person startup. There were hundreds, if not a few thousand employees working from those glass and steel buildings, and poof, one day it was gone, just like that. I think the Excite facility still remains unoccupied. Any way, I digress.

So there is this post by Joe Krauss, co-founder of Excite and currently associated with Jotspot that caught my eye. On his blog about entrepreneurship (talk about hind-sight being 20/20), Joe presents an argument that demolishes the commonly held 80-20 notion about market distribution, which postulates that 80% of your sales come from 20% of your market. He however contends that in several industries, uniqueness of customer needs and wants is the rule rather than the exception. Apparently, only those companies that figure these out (he cites Google, Amazon and Apple iTunes as examples) will succeed in the long run. Excite did not and went down the tube.

Personally, I think IBM figured it out in the enterprise software. They recognized that selling software to organizations is not the same as selling shrink-wrapped software to consumers. Organizations need solutions, not platforms and IBM builds platforms and backs them up with armies of consultants who customize the solution for the company in question. In the process they end up serving the customer's need better and making more money. Only time will tell if this method of throwing man-power at the problem rather than developing smarter software is the right approach or if it is even feasible. In the meantime, in a market where companies are doing neither, IBM gains ground.

So, is this the old (Alvin) Toffler customization wine in Chateau Krauss bottles? Ok, so metaphors are not my forte, I will get to my point: yes and no. The trick, I think, is in picking out the segmentation distribution within your own industry. If it is a long tail industry, this might actually work. But in a bell-curve market, you're probably better off cookie-cutting your offerings to take advantage of the economies of scale.

Are long tail industries increasing in number? I suspect yes. Will long tail focused applications become more prevalent? Very likely. A few months back, I had started using Excel quite seriously, writing macros and googling for Excel power user tips. It occurred to me that I was not solving problems but discovering tools, admittedly quite awkwardly like an otter using a piece of rock to crack open a clam. The rub is that my work is seldom done in isolation. I would make the models first and then have several other people fill in their numbers. What if someone developed a software that took in a spreadsheet, analyzed the formulae and generated an application out of it on the fly? The application would display standard forms like you would see on the web and allow users to interact with it just like any other web-based application. If done in an open-source fashion, this could be the mother of modular, collaborative software of the future (I forbid you to snicker, you'll have your chance). You could then deploy it on to standard application platforms and all of a sudden, the tools that you had collected over the years have become applications that can now be shared. I could see investment banks lining up outside sorebreK Inc to buy the coveted software. A google search later, my Archimedes moment turned into an Al Gore gaffe; once again someone's already been there, done that, seen the movie and bought the t-shirt :-(

Anyway, is long tailing becoming a trend? I suspect yes. More information and more access to it refines the consumer's outlook and expectations - one size fits all suddenly seems passé. Long tailers like Google and Amazon are burgeoning in numbers and business volume. What got my neurons all fired up are the unique marketing challenges this presents. Traditionally, you would divvy up your markets into segments and address those segments individually. A 'mischievously' hypothetical segment could be baby boomers with, er, recreational ED. A lab accident provides the innovation and targeted marketing manifests itself as an ad showing a 'horney' middle-aged guy. I jest. In a long tail market where the baby boomers' aforementioned tastes are, shall we just say eclectic, when it comes to popping an aphrodisiac, you end up with as many segments as there are boomers. What does this bode for the marketer and the strategist? Not wanting to leave you on a titillating note, here, check out James Cherkoff's thought provoking article on Open Source Marketing.

14 Comments:

  • At 10:01 AM, Blogger PowerYogi said…

    talk about timing. i spent the better part of monday putting first touches to my Kaplan B-plan competition idea and I then I come across your post.

    what fascinates me, lengths of tails notwithstanding, is the what-comes-first conundrum. Should, as someone exploring an idea, one try to fit into these theories; or are the theories a product of ideas gone places never been before? the former approach could limit the creativity required in said endeavors; while the latter increases the risk of failure.

    is there an obvious middle ground?

     
  • At 11:38 PM, Blogger sorebrek said…

    At the risk of pontificating, here're my views on it:
    I harbor the opinion that a startup of 5 people needs nothing more than a great idea backed by nimble and solid execution (grounded in old-fashioned economic principles). In fact, I will go to the extent to postulate that an MBA running a 5-person startup may actually be detrimental - feel free to blow-torch me on this one. I see a generational lifecycle for a company - a certain kind of mindset is called for to run a 5-people startup, another one for taking it from 5 to 50 employees and yet another one for taking it from 50 to 500. However, I think that the segmentation distribution (the tail check) is independent of this. It is really the nature of the beast that your idea is. Is it a mass-market product that no one thought about (e.g. sliced bread) or is it one that needs targeted treatment (e.g. custom-fit shoes)?
    Call me skeptical, but these days I think world-changing business ideas are few and far. I think a business idea can only be world changing if it has either direct or indirect economic potential for changing the way we do things - tail or no tail. I am curious about your middle of the road approach.

     
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