Nov 16, 2007 0
Continuing from the previous post – When the long tail becomes exposed… – Part 1, I wanted to dig a little deeper into the exposed nature of the Long tail. These thoughts were inspired from reading this article by Robert Cringely – The Next Microsoft: Google is learning too well from the master, in which Robert Cringely criticizes Google
Nov 14, 2007 0
The following image tells a story.
When I look at the clutter and clunkiness of my site – I’m spurred to act. I only wonder if I will get there.
HT: Prof John Maeda.
Tags: Contrast Yahoo and Google in years, Yahoo homepage, Google homepage, , Simplicity by Prof. John Maeda
Nov 8, 2007 1
Got Long Tail? In this article by Robert Cringely – The Next Microsoft: Google is learning too well from the master, Robert Cringely criticizes Google’s missteps when it comes to its recent moves some of which he outlines in his article. Some of the recent steps that Google has taken to protect its business model are here – Google slapping PageRank Penalties, Official: Selling Paid Links Can Hurt Your PageRank Or Rankings On Google, Is There A PageRank Penalty In Your Future? …
I’m pretty sure that you’re aware of the Long Tail effect and the dramatic success that firms such as Google have had incorporating this into their strategy and execution.
In gobbledygook speak:
In these distributions a high-frequency or high-amplitude population is followed by a low-frequency or low-amplitude population which gradually "tails off." In many cases the infrequent or low-amplitude events-the long tail, represented here by the yellow portion of the graph-can make up the majority of the graph.
Or in plain ol’ English:
If you added together the total volume of all the very popular items that a firm can sell and compare that to the total volume of all the rest of the stuff that the same firm can sell, you would find that the former is less than the latter.
Of course, it is not always the case that one finds this long tail effect but where one does find it, one needs a technology/strategy/plan that addresses both the high frequency and low frequency population and in the mold of the inimitable Porter competitive strategy model – the Long tail of your suppliers and the Long tail of your customers. Google’s deployment of Adsense (Google advertising network) in precisely this manner is acknowledged as one of the major sources of its remarkable success, even by its CEO, Eric Schmidt:
What Google has done is to find and monetize the Long Tails of both advertisers and publishers. These include millions of small companies and individuals who may never have advertised before, at least not nationally. They were considered sub-scale — too small to be worth a call or visit from an ad salesperson, possible too small to even think of themselves as an advertiser at all. But Google ads are self-service, cheap, and performance based (pay-per-click), which all combine to dramatically lower the barrier to entry.
Matching these advertisers are hundreds of thousands of previously sub-scale "publishers", from blogs to niche commercial sites. Most are too small to have their own ad sales business, but they can now run relevant Google ads by just adding a few lines of HTML to their site. About half of Google’s business now comes from such "partners", rather than from ads sold against search results themselves.
Eric Schmidt, Google’s CEO, explained how these millions of small-to-midsized customers represent a huge new Long Tail ad market. "The surprising thing about The Long Tail is just how long the tail is, and how many businesses haven’t been served by traditional advertising sales," he said. Google now has revenues of more than $1 billion a quarter, a least half of which is made up of Long Tail advertisers by this definition. This is, needless to say, just a glimpse of what’s still to come.
So far so good! Google has addressed the Long tail of the customers (which are the millions of small-to-midsized customers who would like to purchase advertisement through Google’s network) and the Long tail of the publishers (which are the millions of blogs and web-based publishers) in a way that neither has any real bargaining power over Google which sits in the middle. In another sense because Google actually pays the publishers if the ads are deployed on the publisher’s site and clicked, the publishers have an incentive to push Google’s ads as much as possible as well and so in a sense, the publishers are also customers when it comes to Google’s ads.
Well, what Google can do, so can any yahoo – well, one Yahoo (YPN) actually does try to do exactly that but its own success has been, how to put it kindly, so so.
Until now, Google had the supplier and customer sewn up, so to speak – a collection of small to mid-size customer and small to mid-size publishers cannot effectively take on Google, their bargaining power is simply non-existent. But for Google’s advertising customer, their small size (and even smaller budgets) can be a liability because they can go out of business quickly, from prevailing macroeconomic conditions if not from Google’s own missteps. In other words, Google is exposed to considerable risks from its customer base, the advertisers who use Google’s advertising network, even though the risk is distributed over millions of Adwords budgets – small as they are. While Google may use the Long tail effect to its own advantage, the long tail, I argue, is in fact an exposed long tail. But before I get into why it is an exposed Long tail, I need to explore one more salient fact – what contributes to the success of aiming at the Long tail:
The potential for a Long Tail market (or attention) distribution exists when the fixed costs of production, distribution, and buying are reduced by technology or other means. Then you don’t need as many units of whatever to amortize the fixed costs to a competitive point, and niche products are supported with a decent ROI.
And the reason why Google has had remarkable success against Yahoo’s own YPN is probably because of first mover advantages more than anything else. That sort of covers the Industry competitors – Rivalry among existing firms of the Porter’s competitive model.
In the next post, I will explore why I think this Long tail is an exposed long tail.
Tags: Long tail, Google’s Long tail, Why does the Long tail work?, Long tail exposed
Oct 30, 2007 3
Why I never hire brilliant men? is an article resurrected at taoyue.com that recounts the personal observations of a businessman from the 1920s as printed in February 1924 issue of The American Magazine.
Why bring up an article so well worn out its reprint? I’d argue that it offers a window into the observations of other people with regards to human nature and human behavior. It is one reason why I prize historical reading of any kind – biographies, autobiographies, scripture, wisdom readings and whatever else one can find i.e. within the cultural milieu of the historical reading, you find several actors making decisions and plans to deal with the issues of the day; instructional or otherwise, they offer a window into types of human behavior.
The Why I never hire brilliant men? piece falls into that category but like all generalizations, they are likely to be largely true. I work with some very brilliant men but I can vouch for their excessive attention to detail and completeness in their work. I also have a sneaking suspicion that we might be generalizing in the absence of good insights into the decisions that brilliant men make.
Some excerpts though:
The article explains all the faults that the author found endemic among brilliant men. They start well but never finish, they get excited over revolutionary developments but grow weary at repetitive small tasks.
At taoyue.com, Tao Yue, remarks on the contrast between the article from 1920s and this article – "What Is Google’s Secret Weapon? An Army of Ph.D.’s" by Randall Stross.
WORKING in Google’s favor is its practice of putting new Ph.D.’s to work immediately in the exact areas where they have been trained — in systems, architecture and artificial intelligence. Google, the company, may falter, but Google, the human resources experiment, is unlikely to be the cause.
Perhaps, the world has changed, stumbling towards abstractions and distractions on multiple levels and a firm may actually need a PhD or several of them to spur them along some line of thinking but the essential has remained – the esoteric must be made practical and more importantly, connected to reality. Couple that with the laws of business and human nature, one could have quite a stirring combination requiring the hiring of brilliant men. But read both articles and see where you might wager your bets?
Tags: Why I never hire brilliant men?,
Sep 10, 2007
0
How IBM makes radical collaboration work is a special report that BusinessWeek has up at its website. Since I work at the site that forms the ground zero of this radical collaborative venture at and through IBM, I am at the vantage of seeing this happen not so much in evaluating how each of these partners are actually collaborating and creating value but in ensuring that the chip designs and processes of the collaborators actually get executed in the best way possible. First, Steve Hamm lays out the financial picture of IBM prior to embarking on this radical venture. By late 2003, IBM’s decision three years earlier to pump $5 billion into its chip business wasn’t looking so smart. The division had lost more than $1 billion in 2002 and was on its way to losing $252 million more in 2003. Investors urged Big Blue to quit, but that wasn’t going to happen. IBM saw leading-edge chip technology as vital to keeping its lead in the highly profitable business of making powerful server computers. Still, clearly, something had to be done. I must note two different actors in this drama, their respective actions and their reasons which are important to evaluate not so much because they can be pigeonholed as primary reactions but as a sort of chicken-egg dilemma. As reported, the financial fact is that IBM is bleeding money in its semiconductor division. In IBM’s view chip-making is a source of competitive advantage in its high-margin server business and so it views its chip-making (and perhaps chip design) as an important upstream activity. Investors on the other hand, privy as they are to a set of financial facts and numbers, will view a bleed as something that has to be fixed. There are scores of examples that one can find where unprofitable businesses are spun-off or shut down by parent companies that go on to find, fund, nurture and defend other sources of competitive advantage. So why not in this case? What bridges these two camps is the need for a new story, a new strategy, a set of steps that must not only staunch the bleeding but also refresh the bleeding patient. And that’s what IBM has done, IBM has built what it calls an "open ecosystem" of chip R&D with nine partners, including Advanced Micro Devices, Sony, Toshiba, Freescale Semiconductor, and Albany Nanontech, a university research center. All told, in five separate alliances, IBM partners have contributed more than $1 billion to help expand the company’s facilities and buy the latest chipmaking equipment. But just as important, they’re providing brainpower, including more than 250 scientists and engineers who now work in East Fishkill. As a result, IBM’s chip operation boomed, and, even now, during a cyclical downturn in the chip industry, it’s still making a profit. How far this sort of collaborative innovation will go is anyone’s guess but it is a stab at the future. What you will note is that there isn’t a magical software that is enabling this sort of a collaboration. If you read more of the article, you will note that this sort of collaboration involves actual engineering teams sitting down together and circumscribing the terms of the collaboration while being open to the road ahead. So mark this down as an important milestone in the collaboration journey: 1. Collaboration requires partners to get down to brass tacks and structure it or at the very least draw a few boundaries and open up a few channels – it also involves the commitment of resources.
How IBM makes radical collaboration work?
Aug 22, 2007 0
And the caveat line should be – pending some tradeoff analysis. The fact of the matter is that I’ve made up my mind but I need some numbers behind my intuition even though I think that the numbers will also bear me out.
The surest question that I will be asked is – You shop at Walmart? Perhaps, @ SCM is now on the blacklist of many a reader. So let me give you the list of reasons that didn’t go into making this decision and those that did loom large.
1. I’m not doing this for the Mom and Pop stores. I am a big fan of small businesses but it is because, strategically speaking, they are nimble actors who can identify, supply and defend niches at first and then grow from there. In a sense, I like small businesses because they compete in different ways from large businesses and some small businesses go on to become big businesses because they’ve profited from insight, positioning and in most cases from a good dose of luck. Or to abstract it a layer further, I like small businesses because they have a good deal of pluck and a whole lot of spunk.
2. I’m not doing this because Walmart treats their employees "poorly". There is no doubt in my mind that I will not do the kind of jobs that Walmart employees do. Unless I have no choice but to do so. I do not think that it is beneath me. There is nothing more mind numbing than punching in the item SKU code whenever the reader cannot read it, deal with "some" customers (more of that later but I think you know that special subset of customers that I am talking about) but these guys do it day in and day out. What’s more that they don’t make a lot of money and they don’t get much (if any) by way of health care etc. I am more or less certain or perhaps I "believe" that in the long run (and that’s the shame of it – it is the long run and not the short run), employers who don’t value their employees are just not going to cut it.
3. I’m not doing this because Walmart imports stuff from China. Or India. Or Tahiti for all I care. Undeniably, there is an impact that such wholesale import of goods from every port in the world including Timbuktu (such as on the trade balance between nations for one and its attendant issues) creates in the importing country but if you think that a Ferrari F430 is worth buying and you can do so, I think that a china made floor lamp is worth having and would like to obtain it at the cheapest price. And besides, I need the light a whole lot more than you desire the thrill of the ride. And yes, I am quite aware that such choices affect American manufacturing (and that American manufacturers have to compete with an artificially pegged yuan and so on and so forth) but this land was once the Wild West. I get the distinct feeling that a lot of Americans think of this land right now as the Mild Rest – a significant something has been lost in that transition. The fact that Walmart imports a lot of stuff from China is the effect of that transition but not the cause. To locate the cause, you have to find, metaphorically speaking, the time when the saddle was traded for the armchair.
