How to Apply The Long Tail: Preventive Healthcare
I first picked up The Long Tail by Chris Anderson after seeing it referenced in a million places across the internet and the business world. As strong as my dislike is for over and oft-inappropriately used buzz words, I had to know the full explanation for this phenomenon.
The Long Tail originates from an article written by Chris Anderson in a 2003 issue of Wired. The basis of the theory, or pattern that is evident almost everywhere we look in the business world today, is that products in many markets sell on a statistical distribution with a “long tail” of many products with a few sales and a “head” of few items that make up the majority of volume sold. With the continuing influence of cheap distribution, almost unlimited shelf space, and proper “aggregators and filters”, more and more of the long tail is being opened up to the market.
One of the simplest examples Chris Anderson uses is music tracks. As music was digitized, storage and distribution costs near zero and, with the help of aggregators and filters like the ratings in iTunes and the customer data driven related categories, more and more sales are starting to happen in “the long tail”. Indeed, the long tail continues infinitely in the iTunes store and in Rhapsody as it never reaches zero, every song sells at least once. In fact, the sum of these long tail sales can account for almost as much profit as the “head” or “hits” sale. However, Wal-Mart, Best Buy, and other brick and mortar retailers can’t capitalize on these sales because of the shelf space so, they are relegated to selling the hits.
What occurred to me while reading this book, beyond the fact that you can see this game-changing phenomenon everywhere, is that it is glaringly apparent in the healthcare business (not just pathology). If you look at the graph on the right from a US Department of Health and Human Services report , it details healthcare expenditure by age. It’s basically a rough power-log distribution with a long tail on the left.
So, big deal you say, people spend more on healthcare when they get older. Yes, and thats exactly what the industry has focused on up until this point, that’s where the money was and still is to a certain extent! Healthcare companies have largely focused on developing treatment technologies for these areas where there are huge windfalls to be made on treatment, largely ignoring the long tail of preventative care where the benefit (and profit), both fiscal and societal, could be as large or larger than the prior treatment “head”.
From this point of understanding, we start to notice the patterns that The Long Tail describes time and again, as focus is put on the long tail and research drives costs down, more and more business in done in the long tail and less in the head. The US government sees the opportunity, your mom saw the opportunity when she told you to take your vitamins (a rudimentary form of preventative care), and now big corporations, like GE Healthcare and Siemens are starting to focus on “Early Health“. Every disease has a few treatments but innumerable causal factors making up the millions of smaller long tails in the large aggregate preventive care long tail.
It’s an exciting time to be starting in the business world, especially in a nation of niches like the one we are in, I hope this concept primer and application helps you not just to appreciate what a revolutionary book this is but, aids you in seeing and capitalizing on The Long Tail in your everyday business life.
Long tail graph credit: The Entrepreneur’s Journey
Full Disclosure: I am employed by GE Healthcare.
This book recommended as one of the 15 Books for Rogue Professionals and How to Read them Fast at No Cost.
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