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March 22, 2005

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» The Long Tail versus the Bottom of the Pyramid from Sumedh Mungee
Chris Andersen visited India recently and explains the difference between the bottom of the pyramid approach to empowering the poor and the Long Tail theory: The Bottom of the Pyramid (BOP) argument is essentially based on commodification. Tak... [Read More]

» Doing Business with the Bottom of the Period from Zmetro.com
The Long tail:The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, like the Long Tail, is about finding ways to efficiently address sub-economic markets. In this case, Prahalad is talking about how to sell goods and services... [Read More]

» Long Tail vs. Bottom Of The Pyramid from My Views / My Views on just about everything
Chris dwelves into the differences between the two in an excellent highly readable post, "So the Long Tail is made up of millions of niches. The Bottom of the Pyramid is made up of mass markets... [Read More]

» To write, to blog … from Preoccupations
Earlier this month, Jyri wrote that 'in my case, the nature of academic writing has proven to be quite blog-averse'. He quotes William Gibson: 'if I’m still blogging, I’m definitely still on vacation'. Contrastingly, there's Cory, quoted, again, by... [Read More]

» To write, to blog … from Preoccupations
Earlier this month, Jyri wrote that 'in my case, the nature of academic writing has proven to be quite blog-averse'. He quotes William Gibson: 'if I’m still blogging, I’m definitely still on vacation'. Contrastingly, there's Cory, quoted, again, by... [Read More]

» Longtail business models from sast wingees blog
I did read Chris Anderson's seminal article on Longtail in the Wired magazine a few months back. But when i ... [Read More]

» Longtail business models from sast wingees blog
I did read Chris Anderson's seminal article on Longtail in the Wired magazine a few months back. But when i ... [Read More]

» Summary of site from my biz

Ideascape is an Internet-Managed Service for creating gigantic learning and development environments on the net. Think of it as a digital meeting place for people to gravitate to and be able to work on ideas together. Ideascape offers user administrati [Read More]

» Long Tail vs. Bottom of Pyramid from Horizon
Got this Chris Anderson piece via EMERGIC : Is the bottom of the pyramid the Long Tail? The similarities are notable. Both theories are based on the notion that if you break the economic and physical bottlenecks of distribution yo [Read More]

» Saturday, May 14, 2005 08:55 PM from Critical Section
Chris Anderson, he of the Long Tail, contrasts the Long Tail vs. the Bottom of the Pyramid. The bottom of the pyramid is all about commodification, the idea that the same things can be made less expensively to serve more people, while the long tail... [Read More]

Comments

Ben Hyde

Or they are both about taking a market and finding the core value proposition that you can factor out that allows the creation of a business that has both sufficient scale to survive and can reach a very very very large population. In one case a population that population is niches of taste in the well to do and in the other the population is long tail of the income distribution. The business puzzle is the same though; finding the key elements that you keep in the business. In this sense the franchising is a long tail business model; the franchise chain aggregates a long tail of outlets. The variation in the outlets is local, or situated, while the core is the bits that achieve scale.

Ranjit Mathoda

The long tail generally refers to a Y axis of popularity (perhaps measured by units sold * revenue per unit) and an x axis ranking items from greatest popularity to lowest popularity. The area under the curve represents total dollar value. So it points out that many businesses for which stocking items carries costs are unable to address much of the total demand, whereas businesses that can have lower costs for stocking an item (because its not stored on retail shelving, or is not editorially looked at as in the case of search keyword advertising) the addressable market can become quite big.

The bottom of the pyramid refers to a Y axis of wealth level, and an X axis that depicts the wealth level * the number of people at that wealth level. The area inside the pyramid indicates total dollar value. So it points out that by dropping the price point or changing the value proposition to better fit the needs of those of lower wealth levels one might actually be addressing a larger potential market, particularly since if you hit the bottom of the pyramid you might also be satisfying the top of the pyramid.

So both ideas are about expanding the addressable market. It's just that they represent different but complementary approaches. Put another way, create a cost structure that permits a wider selection, and a lower price, and you benefit from both the long tail and the bottom of the pyramid. Of course, following this approach does not immunize you from your competitor copying the same business model.

pb

By that reckoning, it sounds like micro-lending would still share some Long Tail attributes. Micro-loans are typically quite customized and not something the short part of the tail is equipped to provide.

Claus Dahl

I think your argument on the difference is wrong, even if your conclusion may be right: As far as I know, successful marketing to the very poor is NOT about economies of scale as you suggest, but always involves taking the scale OUT of the market, just like the long tail does. In general succesful products for the poor are made locally, and while a given success story, like micro loans or high quality low tech water pumps, may be replicated in many places, none of the local successes are dependent on the others. Scale does not matter.
The difference to the long tail is another one than you suggest, namely that the cost of aggregating this wealth within a single company is high, because organization is expensive and ad hoc among the poor in contrast to the cheap standard organization supplied by the internet. So we won't see an Amazon for the poor, because there is no advantage in scale.

Sri

I would like to address something Claus brings up - decentralization - appears vital in thinking about addressing the horizontal long tail or the lower layers of the pyramid. How an MNC would want to agglomerate profits is a different matter than some double-bottom-line company trying to spread wealth creation opportunities. Centralization of profits feels like exploitation; decentralization of profit opportunities feels like development.
Thanks Claus.
Sri
Sri

Darin London

I dont think they are the same thing, but the interesting question is to ask how
they interact. Can the development of long-tail markets create new incentives, opportunities, risk-management strategies, etc. which enable businesses to invest in bottom of the pyramid markets?

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r.ramakrishnan

The "bottom of the pyramid" model is a creation by c.k.prahlad based on the "yoga" economic model.

"You sow an action and reap a habit.
You sow a habit and reap a character.
You sow a character and reap your culture
You sow your culture and reap your Destiny.
Hence, Destiny is your own making.
And how you make it.
By your own action."

The "yoga" economic model has "

"UPAYOGA" AS THE BEDROCK OF ANY ECONOMY
i.e. consumption is the bedrock of an economy which depends on the "UPABHOKTA"
the consumers.

"UDYOGA" - production

It is built on the bedrock of consumption.(patterns)

"VINIYOGA" DISTRIBUTION

WHAT IS PRODUCED IS BASED ON WHAT IS TO BE CONSUMED. HERE THE LINKING OF "UPAYOGA" AND "UDYOGA" COMES INTO PLACE "THE WORD YOGA ORIGINATES FROM THE SANSKRIT WORD "YUJ", TO UNITE - TO INTEGRATE - TO COORDINATE.

"SAHAYOGA"

CO-OPERATION / COORDINATION
of consumers and producers through the channels of distribution

"gnanayoga"

knowledge, (which includes skillsets too) creation/retention/distribution

"karmayoga"

the following will elaborate the above:

VEDANTIC MANAGEMENT THEORY

LAW OF CAUSATION

FOR THE BENEFIT OF BUILDERS OF FUTURE

"You sow an action and reap a habit.
You sow a habit and reap a character.
You sow a character and reap your culture
You sow your culture and reap your Destiny.
Hence, Destiny is your own making.
And how you make it.
By your own action."

From the Study of the origin of action, it appears as though one is left with no choice but is destined to act as per one’s own tendencies. This is not true in the case of human beings.

THE DOCTRINE OF KARMA (ACTION OR DEED)

Karma is a Sanskrit term that signifies action or deed. Any physical or mental action is Karma. Thinking is mental Karma. Karma is the sum total of our acts.

Karma means not only action, but also the result of an action. The consequence of an action is really not a separate thing. It is part of the action and cannot be divided from it.

The Law of Karma means the Law of Causation. Wherever there is a cause, there an effect must be produced. For example, a seed is the cause for a tree, which is the effect. The tree produces seeds and becomes the cause for the seeds. The cause is found in the effect and the effect is found in the cause. The effect is similar to the cause. Therefore, the cause is concurrent and inherent in the effect. This is the universal chain of cause and effect.

No link in the chain is unnecessary. This world runs on this fundamental, vital law. This law is inexorable and immutable. This grand law operates everywhere in the physical and mental planes. No phenomenon can escape from the operation of this mighty law. All other laws of nature are subordinate to this fundamental law.

No event can occur without having a positive, definite cause at the back of it. The breaking of a war, the rise of a comet, the occurrence of an earthquake or volcanic eruption, the breaking of an epidemic, thunder, lightening, fire, floods, diseases in the body, fortune, misfortune, etc., all have got definite causes behind them.

The grand law of causation includes the law of action and reaction, the law of compensation, and the law of retribution. All these laws come under one general all embracing heading namely the DOCTRINE OF KARMA. The "EFFECTS" of the past certainly have a pull upon us who are striving in the present (CAUSE). That is precisely because the present is the product (EFFECT) of the entire past. All financial wizards are interested in interest because the interest is calculated on the basis of products, which again is nothing but the number of days of the past multiplied by the loan amount outstanding.

Enquiring into the working of this law of causation, the Rishis of Yore found that it implicitly obeys four fundamental and essential rules of the Law of Causation in all its working:

:2:

THEY ARE: -

A. There can be no effect without a cause;

Advance or loan (loanable funds) is the cause interest income is the effect.

(B) The "EFFECT" is none other than the "CAUSE" itself in another form.

Loanable funds consist of owned funds plus borrowed funds; Interest income is one of the elements of
profits; profits are a part of the owned funds, which again form part of the loanable funds viz. The "cause".

(C) When the "CAUSE" is removed from the "EFFECT" nothing of the EFFECT can remain.

(If a person/institution has no owned funds (i.e. the CAUSE) he will have no wherewithal for borrowed funds too. Hence no lending and hence no interest income viz. The "EFFECT".)

(D) Therefore, the cause is concurrent and inherent in the effect.

(Interest income is the effect; if interest earnings are more, profits are more; if profits are more, owned funds will be more; if owned funds are more, one will be able to borrow more borrowed funds and increase the loanable funds (viz. Cause).

The Rishis of Yore further considered deeply what exactly are the stuff and the nature of the "cause" and the "effect". The causes are sub-divided by them (as triads) into three categories. THEY ARE: -

 THE MATERIAL CAUSE; (UPADANA KARANA)
 THE INSTRUMENTAL CAUSE; (NAIMITTA KARANA)
 THE EFFICIENT CAUSE (VIVEKA KARANA)
 Out of these three causes, the "Efficient Cause" alone is the determinant of the effect. This is explained by the following example in the making of a mud pot. In the making of the mud pot, the entire management philosophy has been abundantly made crystal clear by the Rishis of Yore. How true it is being constantly repeated by the management institutions all over the world will be clear by making an introspective study of this example.

In the making of mud pot, there are the following five elements (THE PANCHA BHOOTAS OF MANAGEMENT) akin to what the modern Management Gurus proclaim as the five "M’s".

1. The Men (The Potter);
2. The Machine (The Potter’s wheel and the kiln);
3. The material (The mud clay, wood, the colour chemicals, etc.);
4. The Moments (The time spent in selecting the clay, mixing it with the water, making it into a "dough" of the required consistency and shaping the clay in the potter’s wheel, the time spend in baking the pot in the kiln):
5. The Money (fixed and working capital spent on buying the clay other chemicals water, purchase of potter’s wheel, the Yagnashala (i.e. the potter’s factory), The cost of potter’s own labour (imputed cost) investment in the construction of the Kiln, the cost of fuel for baking the pot, etc.

Applying the formula of cause and effect, out of the above, the material cause, consists of the material and money. The instrumental cause consists of the potter’s wheel and the kiln for baking the mud pot. The efficient cause consists of the potter’s capacity skill and acumen in the proper organisation of the various resources (PANCHEEKARANAM – the process known as pentamerous combination and its optimum use for obtaining the final product, through the medium of time, by strictly adhering to the following principles: -
..3

:3:

" GUNITA SAMUCHHAYAHA SAMUCHHAYA GUNITAHA"

Translated into English,

"The product of the sum of the coefficients in the factors is equal to the sum of the coefficients in the product".

The Law of Causation works in all planes of activities, through the process of integration (YOGA), similar to the "ENTERPRISE RESOURCE PLANNING".

Before entering into any venture, an entrepreneur frequently broods over various aspects of the venture, as under:

"KAH KALAHA KANI MITRANI KO DESHAHA KO VYAYAGAMOH
KASYA AHAM KA CHA ME SHAKTIHI ITI CHINTYAM MUHUR MUHUHU"

What are the times? Who are my friends? (implying thereby also who are my foes – competitors?)
What is the place? What is the income? What is the expenditure and what is the profit? Where do I stand? What are my strengths? Brooding over these again and again, one should undertake a venture.
After getting the answers to the above questions, based on the YOGA MODEL TRIAD, he undertakes to integrate the resources as under:

UPA(YOGA)  UPA (YOGAT)  UD – (YOGA)
CONSUMPTION  THRO’ CONSUMPTION  INDUSTRY
UD (YOGAT)  VINI (YOGA)  VINI (YOGAT)  SAHA (YOGA)
THRO’ INDUSTRY  DISTRIBUTION  COOPERATION/COORDINATION

THE EFFICIENT CAUSE

This is the most important out of all the three causes. This is the potter himself. Men alone are responsible for all the achievements (both positive and negative) OF THE WORLD. The potter’s technical knowledge, the way he shapes and gives form to the pot, the technical know-how and expertise in selecting and using the proper clay, colour and chemicals, the baking the pot in the kiln at the required temperature, these alone determine the quality of the output viz. The mud pot in our above example. In all the above operations the "efficient" cause works in and through the potter.

He may have a lot of clay and other materials with him. He may have a number of potter’s wheels and kilns with him. It is for him to use these to the maximum extent and derive the maximum benefit. That is why he is called the ‘KUMBHAR’, the "VISHWAKARMA", the "PRAJAPATI", ETC.

The Rishis of Yore finally came to realise that the play of the "cause" and "effect" takes place only in the medium of ‘’Time Concept". THE "CAUSE" IS ANTERIOR IN TIME. THE "EFFECT" IS POSTERIOR IN TIME. IN SHORT, THE "PAST" IS THE CAUSE AND THE "PRESENT" IS THE EFFECT AND THE PRESENT ITSELF BECOMES THE "CAUSE" WITH REFERENCE TO THE "FUTURE".

Interest, exchange, commission, brokerage, rent, rates, taxes, duties, levies, sales, purchases, profits (losses too), - in short the completion and commissioning of a project – all have the TIME concept for its accrual, for its measurement. Since, we exist in the present, we are not only the "EFFECT’ of the "PAST" but we are also the "CAUSE" for the "FUTURE". Thus, we can, if we intelligently live in scientific self-discipline, become the "CHARTERED ARCHITECTS" of our own FUTURE!

Consider a log of wood floating down on a river, which is flowing at a speed of say, two miles an hour. The speed of the log of wood should then be the same as speed of the river (two miles an hour). Now, suppose, we fix a diesel engine on the log, and start the motor to run at 10 miles an hour, then the log of wood will float at 12 miles an hour down the river or 8 miles up the river.

The log of wood with motor under its CAPTAIN is "free" to move down the river or up the river, among the right or left bank of the river and the alert CAPTAIN can safely negotiate it by the right or left of the obstacle en route. Yet it cannot "ESCAPE" the rate of flow of the river. THINK, COGITATE, AND REFLECT ON IT PLEASE.
The animals and the plant kingdoms like pieces of logs of wood merely float down the river of life without any freedom to order any direction or to supply any definite purpose to the pilgrimage. Man, however, as the log with motor, has his rational discriminative intellect and under the CAPTAINCY of his intelligent direction, he will have the unfettered freedom to go down the river or up the river to avoid the obstacles en route and reach the chosen destination of his pilgrimage as the saying :

"JINDAGI EK BADI MAHAAN SAFAR HAI
GARBHASTHAN SE KABRASTHAN TAK"
"LIFE IS A GREAT GRAND PILGRIMAGE
FROM THE WOMB TO THE TOMB"

The "effect" of the past upon us is called "DESTINY" (In Sanskrit it is called "PRARABDHA") and the new initiative that we undertake intelligently and strive for to be accomplished in the future constitute the "FREE WILL" – (IN SANSKRIT IT IS CALLED "PURUSHARTHA".)

In short, according to the Upanishads, wherein we have the entire science of the self, the Rishis of Yore concluded their intelligent investigations and declared a soul satisfying philosophy of life. THEY CONFIRMED AND DECLARED "WHAT YOU MEET IN LIFE IS "DESTINY"; and "how you meet them" is "FREE WILL". Pause and think please.

THUS, LOOKING AGAINST OUR PAST, WE ARE NOW HELPLESS VICTIMS OF OUR PAST ACTIONS, BUT LOOKING AHEAD OF US, WE BECOME THE CHARTERED ARCHITECTS OF OUR OWN FUTURE BUILDING.

Human as we are, let us never look back for a moment but dynamically march forward creating a glorious future of magnificent achievements by rightly exercising the independent self-effort, which is man’s prerogative.
-----oooOOOOOooo-----

umesh

you wrote "I visited a hospital that was offering advanced health care to the poor by increasing the utilization rates of its expensive CAT scan and X-ray machines by a factor of 100 by running them 24/7 and using digital imaging rather than expensive film. They also brought top-quality consultation to remote villages by having low-skill technicians place sensors on a patient's body while a high-skill doctor evaluates the results in real time via a communications link from a hospital in the city"

this is only oneside of the coin. the otherside is ghastly henious. you will be appaled to the fact that the hospital staff force the doctors to recommend CTSCAN to each and every patient even if it is not required because they(hospital staff) need to make money out of this expensive equipment. and the impact is that the poor who struggle to get atleast one sqaure meal a day are made to cough up 1200 to 2000 rupees to get the scan done.....which is cruel and criminal...........isnt this an absolute failure of comoditization?

Bruce Bird

Umesh comments that forcing the poor to pay for scans demonstrates the failure of the principle.
Surely, what that demonstrates is the failure of human ethics to control the process. There is also an assumption that they must have all the patients taking the scans as though there is some shortage of patients and they must use all of them. Whereas the reality is more likely that if they were more selective then they could carry out more scans of additional patients.
Again, a failure of the human management process rather than of the priniciple itself.

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Tidbits

The Long Tail by Chris Anderson

Notes and sources for the book

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