The Long Tail of Innovation in an Information Economy

Once an innovation ecosystem has successfully created the structure to consistently tackle the big billion dollar opportunities, the system possesses the energy to begin evolving greater complexity, and squeezing out more efficiency. This efficiency will be realized by evolving the ecosystem to support the long tail of opportunities, which is exactly what the startup ecosystem is doing now.

Information age innovation ecosystems start by optimizing to hit the home run and can tolerate extremely high failure rates because the opportunity is so big. This is where venture money operates. Then the industry matures and seed and angel capital becomes more prevalent to support hitting multimillion dollar markets with greater consistency. I suspect for each industry an 80/20 power law applies: 80% of the wealth will be captured by a small number of billion dollar companies a la Google, Microsoft, Apple, Oracle, Facebook etc. but 80% of the opportunities (and 20% of the wealth) exist down the long tail. Just past the head of the power law exists collaboration products like Basecamp and publishing platforms WordPress. Further down the long tail exist products like Etherpad and Disqus. Farther still are where all the little tools and widgets that help us do day-to-day tasks just a little bit better, such as the popular iPhone App Shazam. In WordPress’ case it was a critical last piece to opening up blogging and self-publishing, which has transformed the way society shares information. Having a computer, the Internet, a rich web browser, and a really smart but not technically savvy person was not enough. We needed a simple publishing platform to crack the nut for self publishing.

So we need to create the proper surrounding ecology to make sure the long tail of innovation thrives. Without the right mix of capital, community, information and tools tuned for operating at this stage, the system will not come close to realizing all the opportunities that exist down the far end of the tail.

The incentives are strong for the individual, because even playing down the far end of the long tail is very lucrative and rewarding compared to an entry level corporate job, because you are working on something that matters, have passionate users and the potential to make millions. But the opportunity cost may be very high for those who are choosing between attempting to tackle billion dollar opportunities and opportunities down the long tail. So there are challenges in getting the top talent to tackle niche problems.

But I think it’s very important we figure how to tackle these problems as it’s a flourishing long tail of innovation that will both streamline and build resiliency into our systems. The long tail of products fill the many potholes that will enable us to run smoothly.

For example, I have a few friends who have a number of great ideas about how to solve email for in demand people who are always overloaded. This is a very important problem, that if solved could unlock a lot of productivity for society, because the influential can now more effectively communicate, delegate and make things happen. But the market is simply not that big. So how do talented entrepreneurs justify working on important niche projects vs. bigger problems they could sink their teeth into?

I’m not sure. Maybe they can treat it as a side project and let someone else do the scaling. Maybe as the entrepreneurial ecosystem gets more efficient entrepreneurs who were failing before, or people who weren’t even entrepreneurs before are now able to solve these problems.

Regardless of what the solution ends up being, it’s important we end up getting the incentives right so somebody is attacking these multimillion (but not billion) dollar niche opportunities. I think this last 20% may end up being what enables humanity’s solutions to finally outpace our problems. Achieving this escape velocity will be the difference in allowing the next stage of humanity to unfold.