Blue Ocean Strategy

Institute
Making a Blue Ocean
Strategic Move that
Discourages Imitation:
The Case of Wikipedia
07/2012-5694
This case was written by Katrina Ling, Institute Executive Fellow of the INSEAD Blue Ocean Strategy Institute, under
the supervision of W. Chan Kim and Rene Mauborgne, Professors at INSEAD. Special thanks to Dr Zunaira Munir of
Strategize Blue for her research on Wikipedia. It is intended to be used as a basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation.
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How to Create a Blue Ocean That Discourages Imitation
If someone were to test your knowledge of geography, entertainment or the US government,
and you had access to the internet, what is the first action you would most likely take in
response to the following questions?
What is the highest mountain in the world?
How many 750ml bottles of wine make a rehoboam?
What do the first three digits in a US Social Security Number represent?
Most likely, you would type in the keywords such as highest mountain, rehoboam, or
social security number to perform an online search using Google, Yahoo or an alternative
search engine. The first answer returned on the top of the first page will typically be an entry
from the English version of Wikipedia, the free online encyclopedia. For example,
Wikipedias top placement on Google using keywords social security number beats out even
the official US Social Security Online website whose entry is ranked second on the same
page.
When Apple launched its new iPad product on January 27, 2010, the Wikipedia article named
iPad was edited 745 times by 281 volunteer contributors within the first 24 hours, from 8:52
am that day to 8:13 am the next day, according to log entries in the articles history file. Apple
fans and consumer product experts swarmed over the iPad article on Wikipedia to provide
real-time updates as more information became available on this highly anticipated product
unveiling.
In fact, if one performs a keyword search on any of the popular online search engines today,
Wikipedia will likely be returned as a top source of news and reference information. The
Guardian describes the Wikipedia phenomenon as follows:
1
Search at Google.com on evolution or Iraq or Aids or Gordon Brown, and the
same site will appear at the top of the organic list of results: Wikipedia. Alter your
search into one for John Keats or Muhammad Ali or Christianity or platypus or
loneliness, and the same thing will happen. Pacific Ocean? Wikipedia. Catherine
de Medici? Wikipedia. Human brain? Wikipedia. In fact, if you Google any
person, place or thing today, you're almost guaranteed to find Wikipedia at or
near the top of the list of recommended pages.
The Online Encyclopaedia Industry
Launched by Larry Sanger and Jimmy Wales on January 15, 2001, Wikipedia was hardly the
first offering in the online encyclopedia industry. Microsoft Corp. had introduced
Encarta.com in 1993 followed by Britannica.com in 1995, the online version of the
Encyclopedia Britannica, the UK publisher of knowledge and learning products since 1768.
While a portion of the articles on Britannica.com and Encarta.com are available for free, to
access their full articles with expanded reference information in an advertisement-free
1 Carr, Nicolas. The net is being carved up into information plantations. The Guardian, May 17, 2007.
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environment, one would have to pay an annual subscription of $70 and $30 respectively for a
premier membership. By contrast, full access to all Wikipedia articles is available to anyone
with internet access without charge in the form of fees or distracting advertisements.
By March 2009, despite its vast organizational resources and capabilities, Microsoft decided
its Encarta offering was no match for the increasingly popular Wikipedia and announced it
would exit the online encyclopedia industry by the end of that same year. At the time of
Microsofts announcement, Encarta had 62,000 articles compared with over 2.7 million
articles on Wikipedia.
2
Today, Encarta remains an online dictionary, thesaurus and translator
of five languages. As for Britannica.com, its daily traffic ranking as measured by the
number of daily visitors to the website has been slipping vis--vis Wikipedias rapid ascent
since mid-2003, according to Alexa.com, a web traffic tracking service that polls the internet
usage of over 2 million users worldwide.
Wikipedias Founding Philosophy: Free as in Free Speech
Founder Jimmy Wales describes Wikipedias core mission as free knowledge for free
minds. An entry on Wales personal blog dating back to October 21, 2004 explains the
essence of Wikipedia in this way:
What is free knowledge? What is a free encyclopaedia? The essence is
something that anyone who understands free software can immediately grasp. A
free encyclopaedia, or any other free knowledge, can be freely read, without
getting permission from anyone. Free knowledge can be freely shared with others.
Free knowledge can be adapted to your own needs. And your adapted versions
2 Warmington, Al. Microsoft Encarta discontinued, due to Wikipedia popularity. March 31, 2009.
http://www.t3.com/news/microsoft-encarta-discontinued-due-to-wikipedia-popularity?=38541
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can be freely shared with others. We are the leading edge innovators and leaders
of what is becoming a global movement to free knowledge from proprietary
constraints.
Wikipedias mission to free knowledge from the constraints of traditional copyright
restrictions is often misinterpreted as promoting illegal piracy of published works. In fact,
its mission is to promote free thinking and unrestricted learning yet still protect the
intellectual and commercial interests of its authors by requiring that the original authorship be
always recognized.
Heres how it works: instead of using a traditional copyright licence, under which the affected
content cannot be used without permission from the author(s), whether or not it is intended for
commercial use, Wikipedia articles are protected under the joint licenses of Creative
Commons Attribution-Sharealike 3.0 Unported License (CC-BY-SA) and the GNU Free
Documentation License (GFDL). This co-license allows Wikipedia users to use, copy, and
update Wikipedia articles with more relevant facts, findings and illustrative examples to
promote creativity and viral learning as long as these are for non-commercial purposes and
that the authors are given the proper credit and acknowledgement for their work. If the
modified Wikipedia articles subsequently become commercially viable, then a separate
commercial agreement can be executed between the original author(s) and the party(ies) who
have improved upon the original work. By using this new form of licensing, Wikipedia
creates a win-win situation by removing the restrictions on the global effort to continuously
grow the sum of human knowledge and find new applications for a product or a theory while
crediting the original authorship and protecting the intellectual integrity and financial interests
of the original authors.
People may be motivated to contribute on Wikipedia today because it is fun, interactive and
the topics are so diverse, but understanding this noble mission to create a free online
encyclopedia so that all may learn sheds light on what motivated the initial volunteers,
otherwise known as Wikipedians, to devote hours and days on end to build up this relatively
unknown project back in the early 2000s.
Wikipedias Blue Ocean Strategic Move
Wikipedias early efforts were first noticed by Slashdot, a website that reports on free
software technology news, and then spread quickly through word of mouth. The number of
volunteers grew rapidly from hundreds into thousands and now millions. Collectively, this
group of international volunteers has made it possible for Wikipedia to offer a set of diverse
and relevant articles in multiple languages and to continuously update these articles to
improve their clarity, readability and accuracy. Starting with only the English version of
Wikipedia in 2001, the site now features over 270 different languages, including 3.2 million
articles in English, plus articles in German (1+ million), French (919,490), Polish (679,472),
Italian (662,457) and Japanese (657,615). With news and reference information available in
so many languages, including smaller languages such as Maori (an Eastern Polynesian
language spoken in New Zealand), Upper Sorbian (a Slavic language spoken in eastern
Germany), Basque (spoken in north-central Spain and southwestern France) and even
Esperanto (a constructed language not genealogically related to any ethnic language),
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Wikipedia has not only made itself an online encyclopedia easily accessible in ones own
language, it may also be the only online encyclopedia available in that particular language.
Apart from being a valuable source of online news and reference information, many people
also find it to be a fun, free, neutral forum for personal expression in their own language,
particular as it is so easy to start new articles on Wikipedia.
To make its valuable knowledge easy to find, Wikipedia is believed to be highly optimized
for organic search engines, such as Google (#1 most popular), Yahoo (#4), Live (#5), and
MSN (#9), which are themselves top-ranked global web destinations, according to web traffic
tracking service Alexa.com. By using a unique file-naming convention and encouraging its
contributors to make extensive references to both internal and external web content,
Wikipedias pages are consistently returned as the most relevant answers to online keyword
searches. Unlike other e-commerce entities like Britannica.com, which invests in costly brand
building, marketing, advertising and web optimization by third-party vendors, Wikipedia
creates new user demand for its offering by often being placed in the top 5 returned results on
search engines. Users find Wikipedia not by recalling the brand or typing in the web URL, but
by simply clicking on one of the top entries returned by these globally popular search engines.
By making its articles easy to find and removing the legal and technical barriers to edit and
use its articles for non-commercial purposes, even a first-time user and passive web surfer can
become an active contributor, also known as a Wikipedian, at the click of an [edit] link. To
further lower the inhibitions of those with privacy concerns, Wikipedia does not require
anyone to register before creating or modifying its articles. Of the first 281 editors of the
iPad article during the first 24 hours of its launch, 98 contributed anonymously. Just because
some contributors choose to remain anonymous, it does not mean they are ill-qualified to
share their knowledge with others. Using the contributors IP address, Wikipedia has traced
many of these anonymous edits to computers at reputable public and commercial entities from
the United Nations to Amnesty International, from Apple Inc. to the Coca Cola Co. Whether
the contribution is one word or a whole chapter, Wikipedia makes the experience simple,
interactive and fun.
Apart from the websites desire to maintain a neutral point of view, there are really no hard
and fast rules for writing or editing Wikipedia articles. When individuals get into a dispute,
such as an edit war, where they are constantly undoing each others changes, these warring
parties can follow a specific dispute resolution process that is run entirely by volunteer
Wikipedians. First, disputing parties are encouraged to resolve the conflict via peer
discussions on a talk page associated with the specific article. If that does not work, then the
parties can request one-on-one advice from an experienced Wikipedia editor. If that fails, then
a third opinion can be sought from a second neutral Wikipedia editor before the dispute is
submitted to formal mediation and arbitration. Currently, there are eight active volunteers on
the Mediation Committee and 14 active volunteers on the Arbitration Committee. All
committee members have a long history of resolving disputes and have earned a high level of
trust within the Wikipedia community. When disputing parties enter into mediation, a
volunteer member of the Mediation Committee works with them to reach an agreement that is
acceptable to everyone. If they still fail to agree, then the Arbitration Committee can review
the dispute and issue a final decision by which all parties have to abide. This consensus-
driven culture ensures fair process is practised to maintain social order at low cost among the
millions of Wikipedians around the world.
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To further build a sense of community at low cost among its virtual citizens, Wikipedia has
instituted a number of internal programs such as an extensive kindness campaign to promote
civility and wiki-love among contributors, as well as non-monetary awards to enhance a
contributors status among the community. For example, a meaningful way to reward
Wikipedia contributors at no cost is in the form of barnstars, a set of decorative digital
images often in the shape of a five-pointed star that can be displayed on a registered users
profile page. While anyone can use or contribute to Wikipedia, only registered users are given
a profile page on which they can share as much or as little personal information as they
choose. A barnstar can be awarded by any Wikipedia user to recognize the hard work and
determination of individual contributor(s) and to acknowledge the exceptional effort, skill,
and commitment shown by their particular contribution. For example, a contributor can be
awarded a barnstar for good humor, a brilliant idea, diligence, anti-vandalism or
peace.
In general, people are motivated to contribute from a human desire to share information, a
propensity to give advice, or simply an impulse to brag about their knowledge on a certain
topic. Regardless of their motivation, those who contribute on Wikipedia share a sense of
pride and ownership in their contribution and protect the integrity of their articles with fierce
loyalty and diligence. Since Wikipedia accommodates real-time information, it is not unusual
for a casual user to incorporate inaccurate information into one of its many articles. However,
what is unusual about Wikipedia is what happens next: inappropriate changes to Wikipedia
articles, whether from inadvertent errors or intentional vandalism, are generally repaired
within minutes of the initial incursion. Thanks to automatic tracking mechanisms, such as
those displaying recent changes to articles marked by registered users as items on their watch
list, tens of thousands of interested parties can collectively keep watch over the integrity of
articles created on Wikipedia.
A joint study conducted by MIT and IBM
3
showed that the active Wikipedia community
rapidly and effectively repaired most damage in general and was able to repair one particular
type of vandalism, the mass deletion of an articles content, within 2.8 minutes. Separately, an
independent study conducted by Nature, a weekly scientific journal, compared 50 pairs of
articles on Wikipedia versus Britannica.com
4
and found the level of accuracy across a wide
range of scientific disciplines to be roughly the same. With Wikipedia ranked as the worlds
#1 online encyclopedia and the #6 most popular website overall by Alexa.com, a web traffic
tracking service, its users appear not to be overly concerned about either a possibly lower
level of data accuracy or reliability relative to a more controlled source like Britannica.com.
During its 2009-2010 fund drive, Wikipedia received 240,000 contributions from individuals
all over the world who donated an average US$33 to keep the free website going. On the
institutional side, their noble mission has created new sources of monetary and in-kind
donations in services and equipment from private foundations and corporate entities who
share the same mission. The Wikimedia Foundation, a non-profit entity set up for managing
Wikipedia and its 12 sister projects, raised over $8.1 million during their 2009-2010 fund
drive, almost $2 million over the $6.2 million they raised in 2008-09, and nearly double the
3 Fernanda B. Vigas et al. Studying Cooperation and Conflict between Authors with history flow
Visualizations. http://alumni.media.mit.edu/~fviegas/papers/history_flow.pdf
4 Giles, Jim. Internet encyclopaedias go head to head. Nature, 438 (2005), 900-901.
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$4.4 million raised in 2007-08. This increase in funding has allowed the organization to build
up its technical capacity to offer even more knowledge projects around the world.
While its operational costs may be rising with expanded scope and increased funding,
Wikipedia keeps its administrative overhead very low thanks to a corps of dedicated
volunteers. Unlike Britannica.com, which maintains a paid editorial board of 12 advisors, 96
paid editors and over 4,000 paid contributors, Wikipedias writers, editors and even its board
of trustees are all volunteers. Wikipedia has a staff of about 30 employees to support an
average 346 million unique monthly visitors who access over 11 billion page views. By
comparison, Britannica.com has about 20 employees who provide support to 8.4 million
unique monthly visitors and an average 18.75 million page views. On a per employee/per
month basis, Wikipedias staff supports 27 times more unique visitors and over 400 times
more volume in page views than the staff of Britannica.com.
Wikipedias Three Strategy Propositions
Wikipedia creates new demand and a new market space in online knowledge authoring by
offering a set of compelling value, profit and people propositions that is both differentiated
and low cost. In the case of Wikipedia, its value is defined as the compelling reason for
people to use Wikipedia as an online source of news and reference information, its profit is
defined as a sustainable business model, and its people comprise its staff, corporate partners
and the millions of volunteers who are deeply committed to supporting its mission. By
creating a strong value proposition, within nine years of its launch, Wikipedias popularity
has surpassed that of trusted household names for online news, such as CNN, the New York
Times, the BBC News, the Wall Street Journal, and online reference information such as
Merriam Webster and Britannica.
By leveraging its unprecedented value proposition, Wikipedia also creates a powerful profit
proposition which has enabled its parent organization, the Wikimedia Foundation, to continue
to raise new funds while lowering its marketing and administrative costs. After raising a
record $8.1 million during the 2009-2010 fund drive that ended on January 15, 2010, the
Wikimedia Foundation received an additional $2 million grant just one month later from
Google Inc. Charitable Giving Fund of Tides Foundation on February 17, 2010. Wikipedia
intends to apply its new funds towards making its website even more accessible to the
unexplored masses of target contributors who have knowledge to share but are not actively
participating because they may be less savvy with technology. Wikipedias blue ocean
strategic move illustrates how an organization can produce exceptional results that are hard to
imitate by aligning its value, profit and people propositions around both differentiation and
low cost.
Alignment of the Three Strategy Propositions
Whether an executive decides to take a structuralist approach to strategy or a
reconstructionist approach to strategy, the three strategy propositions of value, profit and
people must be aligned to produce high-performing and sustainable results for the company.
Under a structuralist approach, where structure shapes strategy, strategy is developed to
exploit the industrial and economic environment in which an organization operates. As such,
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the three strategy propositions must be aligned with the distinctive choice of pursuing either
differentiation or low cost, each being an alternative strategic position in an industry. Under a
reconstructionist approach, where strategy shapes structure, strategy is developed to
reconstruct the industrial and economic environment in which an organization operates. This
depends upon the three strategy propositions being aligned to break the value-cost trade-off
by pursuing both differentiation and low cost.
The three strategy propositions correspond to the traditional activity system of an
organization: the outputs of an organizations activities are value for the buyer and revenue
for itself, and the inputs are the costs to produce them and the people to deliver them:
Value Proposition The utility buyers receive from an offering minus the
price they pay for it.
Profit Proposition The revenues an organization generates from an offering
minus the cost to produce and deliver it.
People Proposition The positive motivations and incentives put in place for
people needed to support and implement the strategy.
If the value and profit propositions are strong but the people proposition does not motivate its
employees and business partners to implement the strategy with energy and commitment, then
this misalignment will likely result in execution failure. Similarly, if the organization offers a
motivating people proposition but lacks a strong value or profit proposition, then this
inconsistency in strategy formulation will likely lead to lacklustre performance for the
company over the long run.
Questions for Interactive Class Discussion
1. Choose three topics below that are of most interest to you. Perform a search online using a
search engine (e.g. Google, MSN, Yahoo) and both Wikipedia and Britannica.com to find
the answers to your selected questions:
Who won the Nobel Prize in Physics in 1965 and for what discovery?
What is Occams Razor?
How many lettered rings are there around the planet Saturn and what are they made
of?
Which member countries founded the Asia-Pacific Economic Cooperation (APEC) in
1989?
Take note of your online information search experience on both Wikipedia and
Britannica.com so you can use it to derive the key factors that represent the value proposition
of the online encyclopedia industry on a strategy canvas.
2. How would you draw the value proposition of Wikipedia and Britannica.com on the
strategy canvas of the online encyclopedia industry?
a. Create a list of 8-10 key factors that describe the value of the online
encyclopaedia offering to buyers: i.e. what motivates buyers to use either
Wikipedia or Britannica.com?
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b. Using the four actions framework, draw on a strategy canvas what Wikipedia
has eliminated, reduced, raised and created vis--vis Britannica.com to pursue
both differentiation and low cost.
3. How would you draw the profit proposition of Wikipedia and Britannica.com on the
strategy canvas of the online encyclopedia industry?
a. Create a list of 8-10 key factors that describe the business model of the online
encyclopaedia offering: what are the respective sources of revenues and costs
for Wikipedia and Britannica.com?
b. Using the four actions framework, draw on a strategy canvas what Wikipedia
has eliminated, reduced, raised and created vis--vis Britannica.com to build a
sustainable business model that is both differentiated and low cost.
4. How would you draw the people proposition of Wikipedia and Britannica.com on the
strategy canvas of the online encyclopedia industry?
a. Create a list of 8-10 key factors that describe what motivates the staff,
corporate partners and volunteers of Wikipedia and Britannica.com to support
their respective strategies and achieve their missions.
b. Using the four actions framework, draw on a strategy canvas what Wikipedia
has eliminated, reduced, raised and created vis--vis Britannica.com to keep its
people highly motivated at low cost.
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