Exemplar or exception?

"Real world" examples of some trend or business model are great. Theory is fine up to a point but eventually it's awfully nice to connect up with a concrete example that gives the theory some real cred.

At the same time, examples can mislead us. Often they turn out to be anomalies. Maybe a company is some sort of historical quirk, a product of a very specific time and place. Or maybe some technology approach is valid enough--but only for a very narrow set of needs. One warning sign is seeing the same tired examples trotted out for every discussion, every news article, and every conference.

I see some of that in all the following cases. I certainly won't go so far as to say that the underlying trends or business models are illusory. But I do think they're more limited or further away than their most overenthusiastic proponents suggest.

The Long Tail, as popularized by Wired's Chris Anderson is a hot meme of the blogging and Web 2.0 crowd. Simply put, the Long Tail states that bestsellers aren't in the majority when you tally up the sales at Amazon or Netflix. Rather it's the total of the far more numerous other 80 or 90 percent of content. From a business perspective, the significance is that there's money to be made selling what's in the long tail.

However, the number of true long tail businesses gets thin outside of aggregators of digital media--the companies who have minimal costs to acquire, inventory, and sell incremental low-volume products. Amazon, in particular, is a highly atypical, if not unique, retailer in terms of scale. In fact, we're starting to see a body of evidence that suggests that the long tail is, if not necessarily wrongheaded exactly, more limited in applicability and degree than some of its proponents have suggested.

We've also seen pure Open Source much touted as a viable business model. By "pure," I mean a model that doesn't hold any software back for paying customers only. The hope is that enough users will elect to pay for support and other services to cover a company's cost and profit. Red Hat, a profitable and growing company, is the poster child here.

But Red Hat is exceptional really. It's emerged as the unquestioned leader among enterprise Linux distributions, one of the most visible and core elements of the entire Open Source world. And its financial success is helped, in no small part, because it's selling a value, ISV application certification against Red Hat Enterprise Linux, that doesn't have the equivalent in layered software products. Other pure Open Source plays have also been modestly successful, but we're certainly not talking Oracle or Microsoft levels of success--nor, indeed, Sybase or SAS levels. Even Red Hat pulls in well under $1 billion in annual revenues, and may also be starting to hit the limits of low-cost customer acquisition enabled by free downloads.

Other cases involve long-term trends that almost certainly will have an increasing impact over time. More software is moving out into the network "cloud," and--in an at least peripherally-connected shift--thin clients of various stripes are beginning to move beyond their historical ghettos in call centers and other narrow use cases.  However, the oft-cited Salesforce.com and many Citrix case studies aside, these shifts will be far more gradual and incremental than the enthusiasts would have us believe. Enterprises will be slow to adopt Software as a Service for anything they consider even vaguely core and the traditional fat client PC model may be flawed in a lot of ways, but it is familiar, well-understood, and has huge inertia.

I love examples. They help give me confidence that something has at least a patina of reality. But, in the singular, they constitute anecdotes and not data. And anecdotes don't really prove anything. In fact, they can mislead by giving the atypical more weight than it deserves.