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June 14, 2006

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Listed below are links to weblogs that reference Scaling up is good. Scaling *down* is even better.:

» Pure, Unadulterated (and Scalable) Crowdsourcing from Crowdsourcing
I’ve been wanting to give a more in-depth treatment to the T-Shirt company Threadless.com ever since I first encountered them in the course of researching my Wired article on crowdsourcing. Threadless didn’t quite fit within the original parameters of ... [Read More]

» Scaling Down is Even Better from Pajamas Media
Chris Anderson explores another Long Tail competency enabled by the Internet: "In traditional business, small customers are all too often a barely-tolerated distraction on the road to getting big customers. They can cost as much to serve as their riche... [Read More]

» The Long Tail from Pajamas Media
Tammy Bruce asks whether markets which chase the Long Tail will eventually fragment society. At The Long Tail, Chris Anderson notices the biggest part of the Long Tail is the global poor, and even greater fragmentation awaits on the way... [Read More]

Comments

Eric Mattson

Chris,

Great post.

In many ways scaling up and scaling down require the same type of thinking - systems thinking. You can't scale down to millions of personalized user experiences without building a system that scales up to deal with the (search, traffic, support, etc.) demand from it.

One person is hard to scale in either direction - up or down - because of the inherent limits on a single person's mental and relationship capacity. But intelligently designed technological systems and a huge online population make it possible.

Keep up the good work.

Kevin Marks

I noted several other examples when I wrote about this before - Cafepress, Paypal, YesVideo and CustomFlix. In each case the key is to have things that work all the way down the tail, and to either derive revenue from each transaction, or to have such low overhead that you can apply a portfolio theory model to your customers, not needing to pick the winners yourself.
This dovetails very neatly with Christensen's 'Innovators Dilemma' - if you build your cost structure for the tail, you can attack the cherry-pickers from below.

Alex Osterwalder

Interesting post & idea, but where is the data to underline if the "downscaling" really earns Google a lot of money... I understand the long tail argument, but am not sure if it applies to Google's earnings.

Warm regards from Lausanne, Switzerland,
Alex

Robert Worstell

Your four tactics of "scaling-down" are from classic, hard-knocks economics. You deliver the service and then you get paid for it. Anyone in manufacturing knows this to be the case, but we consumers only see the point of paying before you get the service.

What is working is to give introductory services for low or no cost, then upsell to higher-cost services, particularly high-end custom (tailor-made) work.

In rural communities, this is more widely known, since you have to attract and sell to the customer in front of you - repetitively - since your customer is a Long Tail denizen, no matter how you slice it. For all the groceries in Wal-Mart, the Farmers' Market still has more customers than produce - because they deliver better (quality/flavored) goods just the way that customer likes them. Repeating surveys show that people would rather pay slightly more for locally-raised produce and meat than buy something shipped in from (literally) God-knows-where.

Wal-Mart might be getting a large percentage of the local traffic, but only a minority (5%, perhaps) buy all their goods there. Per Pareto, probably 20% of their customers are getting them 80% of their business. This leaves 80% of their customers to buy a minority of their needs through Wal-Mart and the rest through other venues. These other venues only survive by servicing niche/Long Tail markets. I don't get my tires through Wal-Mart as I'd rather pay someone else who only does tires - so my tires stay inflated and last longer. I raise food on my farm and sell the excess off the tailgate or at Farmers' Market locally. But once in awhile, I'll get a Wal-Mart Poor Boy sandwich pre-made, like I occasionally get a craving for a fast-food hamburger or milk-shake.

In smaller communities, companies have to deliver the best service in order to keep getting business. Anyone can sell a milk shake. But some do it a lot better. "Big Box" stores and franchises don't deliver on anything much better than price and speed. I've recently started gravitating away from local commodity feed/fertilizer franchises toward a small outfit, which is much farther away, in order to get my questions answered and also to transition my farm over to organic (which is cheaper to operate and gets much better prices on local markets).

The "Big Box" coop actually sells to the larger grain dealers (ADM) and so is dependent on making every farmer produce identical (commodity) grain. Anecdotal evidence shows that I can get even three times as much for organically-raised grain, which isn't so regulated as to moisture content, etc. This is as the companies who are producing food are seeing that people will pay more for organic-based foods, so they pay the producers more on a direct basis.

The interesting thing about organic food production is that you can always "fall back on" commodity sales if you can't line up someone to buy your organic produce. I was recommended recently to plant food-grade soybeans as you can always sell them as a feed-grade commodity if they aren't quality for food-grade. But you can't plant feed-grade and get food-grade out of it.

Wal-Mart will always be a Big Box store. But the profits, particualrly for small producers, will always be in the niche/Long Tail markets. But the smaller producers are nimble enough to get into and out of these niches before they become commodity-based.

Again, in farming as manufacturing, you have to produce first, then get paid for it.

ankur

I see a lot of potential in micro-finance in changing the landscape of the poor, but unfortunately many scale down schemes are not scalable.. and are too dependent on the implementor

Camera Bags

It has been a while since we last connected. Interesting perspective & feedback. Thank you.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

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