April 26, 2006

The Long Tail (the book) and
Remnant Inventory Management

Hypothesis: When we look at monetization opportunties in the Long Tail that the Internet promises and is beginning to deliver, remnant inventory optimization is the business model, not an adjunct in the margins.

Optimization has always been of interest to me, and not just the optimization of code. Now, to be clear, I tend to think of myself more as an algorithms type person than an optimization specialist (for example, I abhor Assembly programming for anything and everything), because living in the margins just doesn't seem that fun. In the business world, for example, this usually takes the form of arbitrage of some kind - there's gold in them thar' hills, to be sure, but I don't know - it just doesn't generally draw me in, intellectually.

All that said, I do believe that having a mental framework for optimization - understanding the "why's" of performance (code or business) - is important in designing the right strategy for execution. And that definitely does get me going. (And, yes, when absolutely required, I will advocate Assembly :))

In that vein, one interesting "emerging" category of business optimization is
remnant inventory management. Its not that its new - supply chain operationalists understand well the opportunities, and waste management (er... productivity/production/inventory/etc. optimization, not Sopranos-style) is a lucrative "hidden" field. As I said, mostly this is in the margins, though its a core part of operational excellence for any major company: building to order, material expenditures, lean inventory management, etc., because those margins can be large.

And, of course, people in the advertising business (online and otherwise, especially Print Publishing) know all about remnant inventory - those are those ads in random spots that no one really wants. But somebody's got to buy the ad on the bottom half of page 34, after all - the space it already allocated.

I mention all of this because I came across a new book on Amazon, by Chris Anderson (of
The Long Tail fame), called (appropriately): "The Long Tail: Why the Future of Business is selling Less of More".

I haven't read the book yet (its not out yet :)), but its sure to be a good read, and I agree with at least the title - how's that for a ringing endorsement? :P

My belief is that this New Media Economy will be primarily won or lost by applications, not content . However, I'll posit that in any case, deriving value from resultant traffic/eyeballs/attention will be about tail optimization - and that, in turn, will require scale to be effective.


Anonymous said...

Not sure but remnant inventory management just seems to be a niche application of JIT inventory management?
p.s. yeah the Chris Anderson book's looking good. Its on my '06 reading list :)

Anonymous said...

application supports quality content.if the content were not the driving force (especially when it comes to "audience" - traffic and page views)the applications for which they are built would be redundant.

Sree Kotay said...

While I don't fundamentally disagree with that, Tim, I guess I'm saying that it is applications that will drive engagement and that quality content is not a predictive business component - movie studios and recording companies thrive financially because they have a lock on distribution.

Not for much longer...

Anonymous said...

Review posted