Author: Chris Anderson
The Business world has gone through disruptive changes during the past decade – one of the main reasons being content (ex: music, books, photos) is created, maintained and consumed. Internet was instrumental for fueling this change, thanks to digitization of anything and everything. The new ‘digital’ way has literally changed (in some cases ruined) many traditional business models, which is been working for decades together. One classic example is Apple iTunes, which has democratized the way music is created and shared across billions of people across the world. Another major aspect of digitization is about providing equal opportunity for niche players by connecting them with niche audience, which did not exist previously. As the digital infrastructure can be scaled overnight (that too with global availability), many innovative models are emerging around it.
In his book ‘The Long Tail’ author Chris Anderson introduces a new model which he calls as ‘endless choices creating unlimited demand’. He explains it with the power law graph (see image on the right). The left side of the graph is about ‘hits’, which has maximum number of non-niche customers. The right hand side is about ‘non-hits’ which reaches niche customers, which also has a huge number, at least comparable to mainstream non-niche customers. The ‘Long Tail’ of business is about selling to niche customers, aided by digital infrastructure.
Let us take an example of creating and distributing rock music in the form of albums. During earlier days, a particular rock band will create an album and approach some or the other major music distributors for making a production (in form of CD/DVD) and distribution out of it. From the distributor’s point of view, they will take a very stringent approach for short-listing these bands as they want to really ensure that the album becomes a hit. This is mainly because the distributor needs to make an upfront investment of creating the physical network (CD/DVD creation, distribution to channel partners/retailers, staff expenses etc…). While this ‘hit’ based world/approach still exists, the niche based items also gaining high importance due to the digital transformation. Today any rock band can still create the music, edit is using freely available tools, make an album out of it and upload into the Internet (ex: MySpace). By doing this, they are completely getting rid of traditional distributors, thereby targeting niche audience who are bored with popular bands and interested to explore something new.
According to Chris the ‘Long Tail’ is created because of three factors:
- Democratization of tools for production (MySpace online tools)
- Democratization of tools for distribution (Internet)
- Connecting the demand and supply (MySpace social networking platform)
The similar model can be extended to other industries, using which organizations like Apple (iTunes music, iPhone Apps), Amazon (Online retailing, which can literally list infinite number of items), Google (Ad-sense, Ad-words), Wikipedia (democratic content ecosystem) has become a global success by leveraging Long Tail customers. From the consumer side, the behavior has changed as they are expecting more and more choices which can be met only by such system.
Throughout the book, author explains above mentioned aspects in detail across different chapters, thereby giving complete perspective to readers. In few chapters I felt he repeated same information multiple times, but he takes examples from different industries makes it an interesting read. In order to understand the recent business changes, aided by Digitized Internet, Chris Anderson’s Long Tail provides an excellent framework where one can put things into perspective.