Innovation

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GLOBAL INVESTOR FOCUS Innovation — 14 Photo: Thomas Eugster
GLOBAL INVESTOR FOCUS Innovation — 15 Niche products rather than the mass market: Chris Anderson, editor-in-chief of “Wired” magazine and best-selling author explains the business of the future. Interview Steven Soranno, Credit Suisse Research Team “The YouTube effect is a wake-up call to the mass market.” Steven Soranno: Innovation is commonly believed to involve a high degree of creativity and thinking outside the box. In that sense, it can be thought of as more of an art than a science. What does innovation mean to you? Chris Anderson: Innovation is advancing the ball. It is evolving or creating something that did not exist before. Innovation typically works through the process of cross-fertilization. Newton said: “If I have seen further, it is by standing on the shoulders of giants.” It is now far easier to stand on the shoulders of other people’s ideas, other people’s work, other people’s contributions, and advance the ball. I think there has never Chris Anderson has been editor-in-chief of “Wired” magazine since 2001. A student of physics, he worked for the leading scientific journals “Science” and “Nature.” Thereafter, he was an editor for business magazine “The Economist” for seven years, based in London, Hong Kong and New York, covering the US economy, technology and other topics. been a better laboratory for cross-fertilization than the Internet. Is the impact of digitization on the global economic structure historically unique? Chris Anderson: Digitization is a stepchange in the economics of replication and distribution. We have seen other such changes in the past, such as Gutenberg’s press, but there has never been anything that has dropped the cost of replication and distribution as rapidly and as low as digitization. And what that does is make information, broadly defined, a costless economy, which is to say that it has near zero marginal cost. When things have near zero marginal cost, it completely changes the game. As a result, we now have essentially unlimited access to information. Now obviously, without the likes of Google, it would not be as useful as it could be. So, making sense of information is still a scarcity in the marketplace, but the access to information itself is increasingly becoming ubiquitous and free. And that is the environment in which innovation and cross-fertilization can happen. On the surface, your “Long Tail” thesis and C. K. Prahalad’s “Bottom of the Pyramid” appear similar. Both stating, with a broad stroke, that new technologies are one factor helping unlock the innovative and entrepreneurial spirits of millions of economic value niches, generating new economic paradigms that have far greater productivity curves than would be achievable under the industrial revolution, mass-market paradigm. How would one compare both theories? Chris Anderson: I went to India for a week to do just that. Basically, the difference between the two is that the Bottom of the Pyramid is about commodification – taking a small amount of products and making them very cheap – while the Long Tail is about “nicheification,” which involves changing the economics of the marketplace so you can offer a large number of products to satisfy minority tastes. Both
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Innovation

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