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November 08, 2008

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Sprizouse

I just analyzed a Harvard case study about Haier, the Chinese white-goods manufacturer, for my Global Business Strategy class (I'm an MBA student).

It's a classic long tail case and one you might want to read (I think it's only 8 pages long). It's titled: Haier: Taking a Chinese Company Global.

What I noticed from reading the case was that Haier's long tail model came to them organically. The humongous and diverse Chinese populace forced Haier to adopt a long tail strategy that was able to quickly adapt fridges, washers and dryers to the varying needs of a billion people spread across China’s many demographic markets. I think we, in the west, tend to think of the Chinese and Indian populations as largely homogeneous, but they're not. They’re not even close to being homogeneous in fact.

Anyway, in some of the more rural markets in China, Haier discovered the people were using their washing machines to wash potatoes and beets as well as clothing. Haier had been answering service calls to fix clogged drains and broken washers (from the caked mud) so they created a washing machine capable of washing food as well as clothing. This was just the beginning.

Haier created an innovative modular system for building a bunch of customized products quickly and easily (which you should read about in the case) and now the company is growing at remarkable rates. The question this posited in my mind (and the one I posed to my professor and the class) was whether or not certain industries from certain countries were being forced into long tail economics by their own populations? If so, would these companies gain an advantage over traditional western companies that served much smaller and more homogeneous populations?

As I realized from the Haier case, no matter how Haier arrived at their long tail strategy, it has helped position them to possibly become America’s white-goods leader in the next few years (especially since current western manufacturers seem loathe to adopt long tail strategies).

The digital long tail isn’t the only long tail (as you so excellently noted in your book) and I personally believe western companies are in real trouble if they don’t adapt rather quickly.

Your thoughts?

C. Enrique Ortiz

Isn't the whole issue here interpretation of the LT or how it is being applied?

For example, when popular products are introduced, they will at first generate lots of revenue (volume) at the Head part, but *over time*, most or all of the revenue will come from the LT.

And that LT is directly proportional to popularity and awareness (or lack of).

And, that LT distributions can repeat (or spike/head again) again and again, perhaps many years later, again, if it becomes popular again for whatever reason, and then will fall back to LT behavior.

When it comes to consumption, both lognormal and LT/Pareto distribution are the "same" or embedded within each other, and it all depends how you slide it, based of time-frames and other variables such as popularity, awareness/over time, etc.

Note that I am no statistical person / expert of any kind, but the above is how I've seen behavior over time.

ceo

Bertil Hatt

As a statistician (a job that consist of spending 60% of your time asking: where that data came from) I can only concur. However, one thing can easily be seen: the first 18 top searches are sites so popular it would be wrong to label them as searches. Those are bookmark-use of Google. I doubt those can successfully be sorted out from the head — but you can't talk about it the same way. Search head don't really make sense, does it? Searching for Yahoo! on Google isn't about trying to get information about that company you heard of: it's laziness.

Andrew Knight

Hi Chris,

I'm emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight

Guy Pressault

Adding to the debate and more so to its perenity is this recent strategy post by MacKinsey which most likely has popped up on your screens.
http://www.mckinseyquarterly.com/Strategy/Growth/Using_power_curves_to_assess_industry_dynamics_2222
The question is asked: «As the importance of intangible assets increases across sectors, for example, will power curves in media and insurance resemble the currently much steeper ones found in today’s intangible-rich sectors such as software and biotech?»

Some speak of inequality? But in the LT view, needs being met are still provided by the Long Tail. But will this last as smaller players close shop? Will the promise that we live in a Long tail world remain true? The world's middle-class is a very long tail and still holds most of the value.

Guy Daniels

You might be interested to learn that we filmed interviews with the keynote speakers at the Telco 2.0 conference in London last week, and used the Mobile Music Long Tail analysis as the lead story on our weekly NewsDesk programme. There are comments by the MCPS-PRS alliance economists Will Page and Gary Eggleton, plus mBlox founder Andrew Bud. They give more background on their analysis of the music, and the evidence of a lack of a tail (or rather, a profitable tail). It's free to watch: http://tinyurl.com/5lm72z (or just look for the Newsdesk programme on www.TelecomTV.com.

We'll be producing a longer version of the discussion later this week. They've done some very interesting and comprehensive work, from the sound of it.

Regards
Guy

Head of Content
TelecomTV

Texas Insurance Man

I would agree that I-tunes lack of an adequate music recommendation application is most likely the reason for their patrons limited musical exploration.

Electrician Houston

I would agree with the comment stated above. This generic pricing scheme we have accepted, does not factor in quality and in most cases quantity. For example, I would like to see movies possibly offered without additional content for a reduced price.

Seth Godin

Chris, I think some critics are missing the point, largely because they're ignoring the subject of your new book.

Take a look at this video:
http://www.youtube.com/watch?v=IrTnaPa9BaA
It's an obscure forty year old song, and it's been watched a quarter of a million times.

If I'm interested in an obscure song, I'm much more likely to listen to it once via YouTube than to go to the trouble to find and search a site that may or may not sell it to me. If all you do is count the for money sales on one site, I wouldn't be surprised at all to see it hit focused.

cake recipes

Very interesting article, it's great to see that in fact, even if their are really popular word searches, there is a "long tail" and the industry has to deal with it if they want to keep food on the table. Business today are always hungry for more, they really need to think about this. Loved the article!

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good diverse Chinese populace forced Haier to adopt a long tail strategy that was able to quickly adapt fridges, washers and dryers to the varying needs of a billion people spread

transmetteur fm

The long tail is there but you can't find it on the mobile. The problem is content discovery. The long tail can be found on iPod/iPhone where side loading and content discovery is achievable.

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nice blog about thanks for sharing!!! More Long Tail debate: mobile music no, search yes, this topic is very interesting!!!!!

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

FREE was available in all digital forms--ebook, web book, and audiobook--for free shortly after the hardcover was published on July 7th. The ebook and web book were free for a limited time and limited to certain geographic regions as determined by each national publisher; the unabridged MP3 audiobook (get zip file here) will remain free forever, available in all regions.

Order the hardcover now!