Work, business & professional services
Is the longtail effect the new tipping point?
First, in the 1980s, it was ponytails, now, in the noughties, it’s longtails. The longtail effect has long been used by statisticians to describe ‘power-law’ distributions, such as the usage of certain words in the English language (words occurring frequently followed by a slowly trailing ‘demand’ curve). But following an article in Wired magazine last year, the phrase has become the buzzword of choice in management consultancies and venture capital firms. The reason for this is that longtails explain the fragmentation of consumer markets and the shift from mass to niche marketing. For example, due to the aggregating effect of the Internet, it is now possible to make money selling obscure products and services. Traditionally, a book retailer would focus on big sellers because it did not have enough physical space to stock every book ever published. But now, Amazon makes 30% of sales on book titles outside the top 130,000 sellers. Another example of a business making money from low-volume products is i-Tunes.
What does this mean for business? One implication is a shift away from ‘hits’. Another is a move away from researching what people want – just put it out there and find out. This in turn means moving away from conventional marketing and media advertising to investment in intelligent filtering (ie, ‘collaborative filtering’ software used by Amazon). From a cultural point of view, the trend is also interesting because we may also be witnessing a shift away from ‘shared culture’ (which is hit dependant) to a more individualised culture that is not. Add to this trends like customer-created content and things are about to get very interesting indeed.
Ref: The Economist (UK), 7 May 2005, ‘Economic focus: profiting from obscurity’. www.economist.com See also The Times (UK), 21 May 2005, The long-tail effect’, D. Rowan. www.timesonline.co.uk
Rules for radical innovation
As Albert Einstein said “if at first an idea is not absurd, then there is no hope for it'. In a similar vein, any radical technological innovation will at first appear ridiculous to people when they first hear about it. This is Technology Review magazine’s view of some of the rules of the game for would-be tech innovators. As an example, the magazine refers to John McAfee, founder of an antiviris software company. In 1989, McAfee was one of the first people to give away software in order to sell it. Today this is the business model of choice for many Internet companies. McAfee’s second business was arguably the world’s first social-networking company. Unfortunately it failed, but this just proves the second rule of radical innovation – that the first attempt to make money out of a technical innovation hardly ever succeeds. This is usually because the inventor or entrepreneur is too far ahead of his or her time. The market does not yet exist and the originator does not know how to commercialise the invention. In other words, first-mover advantage is actually second- or third-mover advantage.
Ref: Technology Review (US), May 2005, ‘The rules of innovation’, J. Pontin. www.techreview.com
More rules for business revolutionaries
According to Nicholas Carr (author of Does IT matter? Information technology and the corrosion of competitive advantage) there are two kinds of disruptive innovation. The first is ‘bottom-up’ innovation where a company introduces a product or service that initially maintains the status quo but ultimately changes it. An example is steel minimills, which were originally written off by the industry because they produced cheap low-grade, low-margin steel. But the minimills soon improved their processes and products and became a major threat to conventional blast furnaces. The other type of disruptive innovation is ‘top’ down’. A good example is FedEx who, in the 1970s, spotted a gap in the package delivery market and figured that some companies would pay a price premium for fast delivery of time-sensitive material. Again, this idea was written off by the incumbents, because the service was too expensive. However, the trend of time famine was on FedEx’s side and the company soon launched lower-cost services on the back of scale economies and fat profits. So what are the lessons here? First, while paradigm-shifting ideas are usually expensive and initially find only a small market, costs soon drop which opens up a broader market (ie, niche becomes mass). Second, established firms often find it difficult to compete because of investments in other areas or because of a focus on fine-tuning what they’re already got. A more contemporary example of disruption is satellite radio, which is expensive and has no audience (relatively speaking). However, it looks increasingly like satellite radio is the next cable TV.
Ref: Strategy + business (US), Summer 2005, ‘Top-down disruption’, N. Carr. www.strategy-business.com
See also the Innovator’s Dilemma: When new technologies cause great firms to fail, by C. Christensen.
What’s next at work?
This is a little old but given that it’s about the future it probably doesn’t matter. Last year the California Job Journal made the following predictions about the workplace of the future. Over the next 15 years, the number of American’s aged 65+ will rise by 26%.
At the same time the number of 40-54 year olds will decline by 5%. By the year 2015 this will lead to a ‘human capital crisis’ where employees will be in very high demand. This will present challenges and opportunities to employers, employees, government and society as a whole. Here are ten predictions:
- Growth in online job auctions. You can buy almost anything on eBay so why not people? Companies will cut out recruitment companies and go to the market direct. This partly exists already at reEmploy.com.
- With people staying on at work long over the age of 65, we will see three or four generations working alongside each other. This will create a need for ‘generational consultants’ advising on everything on the right age mix in departments to mediating age-related conflicts.
- The transition from work to retirement will become more complex driving the need for retirement counselling and consulting.
- Part-time work will be redefined on a calendar basis, not by the clock. Employees will seek more flexible hours and this will mean people demanding 2,000-hour annual packages not 40-hour weeks. People will also demand extended sabbaticals or month-on/month-off contracts.
- As the employee pool dries up, employers will act to make their workplaces more attractive to certain groups, especially women. This means less discrimination, better conditions (eg, on-site childcare) and more opportunities for promotion.
- Big companies will follow the military and NBA (National Basketball Association) models in terms of recruitment. This means hiring straight from school, bidding on pay and conditions or offering scholarships. Also expect to see the creation of corporate universities and on-site education facilities.
- More young people will want to work for themselves because of perceived rewards and flexibility. Employers will therefore have to make room for entrepreneurs and innovators inside their organisations if they wish to harness this talent.
- Tagged employees. Most people lie about their resumes so why not implant a tamper-proof resume chip into the workforce? ID chips are already used on pets so why not people? Suitably equipped chips could also provide security access to buildings or passwords for computers.
- In the US, there will be a ‘civil war’ between public and private sector employers, especially in areas such as defence transportation and state. The deciding factor will probably be healthcare.
- The Internet will be a major force not only in the creation of new jobs but also in the provision of recruitment services and online identity checks.
Ref: California Job Journal (US) January 2005. www.jobjournal.com
More prognostications and predictions
A recent issue of the Innovation Watch newsletter suggested that some or all of the following might happen over the next 10 to 20 years.
- Three-dimensional laser printers (to print solid objects)
- Quantum computers
- 3D teleconferencing in the office
- Sensory networks to link intelligent objects
- The rise of climate neutral companies
- Environmental accounting for organisations
- Growth of ‘cradle-to-landfill’ waste management (companies that ‘own’ their products from inception to safe and environmentally-responsible disposal).
Ref: Innovation Watch newsletter (US) 4.08, 16 April 2005. www.innovationwatch.com