Innovation

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