Strategic Management
Ardiff Metropolian University
Overview of Wikipedia’s Strategy
Wikipedia is thought to be the unique example of a market player that implements the principles which have been previously declared. It means that the thesis consisting in creation of the free online encyclopedia was proven by the consequent and following actions, taken by the website. The company has managed to be powerful competitor, when there were other online free information players, such as Britannica and Encarta.com. The former was represented by Microsoft Inc (Blue Ocean Strategy Institute, 2011).
When the online information platform was only being formed, it was the issue of a strategic decision which way of development to choose in order to obtain competitive advantage. Some of the players took a decision to build their development on the model of partial free encyclopedia, allowing the readers to read only limited scope of information. The other data were not available until certain sum of money is paid or premium partnership is obtained which could allow a reader to get aware of the additional information.
Among other decision to be taken, there was the question of whether to collaborate with advertisement agencies. Existence of advertisement is, no doubt, a source of profit for an encyclopedia. Wikipedia has omitted these steps and proven that the strategy, which was chosen, was the right one.
It is demonstrated by the disability of other players to cope with the competitive strategy of Wikipedia: one of the competitors in this field merely reassigned, namely Encarta.com, when Britannica lost a lot of its audience and nowadays functions, generally, as an additional informational resource, despite its traditions and history as an encyclopedia.
Resource-based view
In this review it plays important role to analyze the main strategic capabilities of Wikipedia which made it successful and effective, in comparison with the other online information resources. The resource-based view will be used in order to achieve this goal. The importance of this concept is that it proposes consideration and analysis of the complex of strategies which are aimed at developing company’s capabilities (Teece, 2009).
The approach per se focuses on the fact that it is rather more important to pay attention to the human capital of the company than benefits from producing the goods and services (Teece, p. 513).
According to Thompson and Martin (cited in Chaston, 2012), the resource-based view of strategy analyzes legal entity’s response to the market needs as well as how key capabilities and strategic steps have determined the company’s success. It is the way how the organization struggles for obtaining competitive advantage, when the value of a firm is worth more, than the value of the other companies (Chaston, 2012)
The creator of this approach, Barney (cited in Chaston, p. 102), lists the following resources which the firm is usually based on: certain company’s capabilities, for instance knowledge and experience of the employees, controlled by the company and which could be affected by company so as to improve them.
These are the main features of the resources: they are controlled and can be improved. These resources within the certain entity are understood. These are internal power of the market player. The supporters of the approach often draw attention to the fact that the product which the company creates has to possess certain distinctive characteristics so as to become popular and successful.
Wikipedia has put much accent on the intangible knowledge assets as one of its key capabilities. It is known that company’s competitive advantage tends to be more secure, when there are more intangible resources, than tangible ones (Hill & Jones, p. 103). This has been made in three different forms, defined by Adams (cited in Chaston, p. 36), in particular human and structural capitals.
Human capital is used by the encyclopedia as the source of ideas and innovation (Chaston 2012), when their skills, knowledge, experience, and motivation become integral part of the whole organization to such extent that without such capital Wikipedia could not function.
Structural capital is represented by the encyclopedia’s protection by law, meaning the whole intellectual property results arising on the website are protected by licenses and the work of the people engaged is also protected by the law.
Relationship capital is built on the spread of the ideas and ideals of Wiki within the whole network as well as on the way how people, or customers, become interested in the resource. In this context, it is necessary to highlight that Wiki’s Blue Ocean strategy which makes its articles those which will be found at first, when you use certain search engine, is among the key mechanisms which benefit the resource.
Among other capabilities, implemented into the policy of Wikipedia, its soft security model plays important role, which has incorporated the following main principles. Assume good faith, meaning that people, who visit the website, try to be helpful for the resource (Ayers, Matthews, and Yates 2008). Peer review system ensures that any editing activity will be controlled and no-one will be able to damage the quality of the website (p.336).
Forgive and forget principle demonstrates that the punitive system, or the mechanism of punishment, is not used even if you make a mistake, unless it is made intentionally (p.336). Fair process mechanism ensures everybody’s participating in decision-making process of the encyclopedia (p.336). Everybody is given a voice, when the fate of certain article is disputed. Also, you can always propose changes for further functioning of the resource.
Additionally, Wiki has the following dynamic capabilities: the ability to innovate and to transcend technology cycles and integrate technologies across disparate units creating differentiated structure of the company (Haberberg & Rieple 2008)
Wikipedia is thought to be based on the three core resources which have been the reason for its rapid and radical development: value, profit, and people (Blue Ocean Strategy Institute 2011). Value is defined as those motives, reasons, and targets which make people use Wikipedia as an online encyclopedia.
In this context, it is necessary to highlight that the high quality of Wiki as a resource is caused by the following factors: ability of audience to become aware of certain information in one’s own language; easiness of use of the resource; absence of advertisement and need to pay for the information; great amount of the information.
Here two aspects are to be mentioned. First one is the sustainability of Wikipedia, meaning it is not possible for the website to be closed, since it functions within the legal borders having specific licenses which enable the website to use any source, including scientific, without even previously obtained permission or consent.
Second one is the validity of the information present on the website, since the quality and accuracy of any article is controlled by the specially created department and is backed up with the resources, from which the information was extracted. Under the resource-based view, it is the factor which can explain the success of the encyclopedia, since the concept tends to see performance differences across different entities as a result of not market power, but this is the result of the company’s efficiency (Montgomery cited in Chaston 2012). It could explain how Wikipedia managed to deal with Microsoft Inc. and Britannica, which, on the other hand, had previous large social and financial capital.
Being a non-profit entity, Wikipedia manages to cope with the costs which are necessary to be spent so as to finance its activity. In this aspect the encyclopedia has managed to get partnership with lots of powerful media corporations. The last element of Wikipedia strategy, namely people, in contrast to many other resources, includes any person who has written an article on the website. Among the main strategic decisions Wikipedia has taken in context of resource-based view, the issue of people contribution is to be mentioned. People are used as a resource by Wikipedia. They are empowered to increase the level of knowledge, information, proposed by the website.
It can be concluded that soft management is applied, since people, or even workers, are committed to Wiki, being informed about its mission (to share unlimited amount of information for free and without any preventive measures), strategies how to achieve the mission, and about current level of success, for instance about number of articles published, state of affairs of the competitors etc. (Thompson & Martin cited in Chaston 2012).
Additionally, people as a strategic capability of Wikipedia are trusted. They are trusted to take rights decision rather than controlled at every stage (Thompson & Martin cited in Chaston 2012). This is how they are motivated to participate in entity’s activity.
Under the concept of intangible resources, proposed by Hall, there are people-independent intangible assets and people-dependant ones, among which specific licenses and reputation belong to people-independent assets and special people’s skills, knowledge, and competence create the core of people-dependant assets (Nothangel 2008). They are also called static and dynamic ones.
Wikipedia incorporates both types of resources having simultaneously working within the legal framework and making lots of motivated people participate in its activity.
Wikipedia’s leadership on the market is not possible to be explained using only one concept. In contrast, different approaches are to be applied so as to comprehensively analyze how the encyclopedia’s goals have been achieved. In order to deal with the explanation of Wiki’s success, the conventional models, chaos and complexity theories will be applied.
Conventional models are usually built on the following process: formulation of objectives, then strategies to achieve them, later on, the appropriate programs and actions will be implemented so as to achieve the fixed goals (Mintzberg cited in Chaston 2012). Wikipedia is united on the principles of the free informational resource, meaning that there could be no limits, when somebody searches for knowledge. Additionally, you are not obliged to resister your account or donate money for being a member of the community.
Wikipedia, as it was previously mentioned, is thought to be based on the three main values which differ it from the similar resource, namely value, profit, and people (Blue Ocean Strategy Institute 2011). Value is created on the basis the above-mentioned need for information, no matter whether it is necessary to write a course paper or an essay. It is necessary to highlight that the high quality of Wiki as a resource is caused by the following factors: ability of audience to become aware of certain information in one’s own language; easiness of use of the resource; absence of advertisement and need to pay for the information; great amount of the information.
Regarding the accent of conventional models on the economic benefits as well as other financial consequences (Fowler 2009), it can be claimed that it could not explain the nature of Wikipedia which was based on other principles and is considered to be non-profit organization and is aimed at uniting people by creating common place for different categories of people searching for knowledge.
Among the capacities respected within the Wikipedia it is necessary to emphasize on absorptive capacity involving recognizing the value of new knowledge and applying this further development (Adams & Lamont 2003). It is the core principle of Wiki, namely never to stop broadening the horizons by writing new articles.
It has been decided by the Board of Directors of Wiki to conduct the following strategic approach: the approach is to be built on transparent, collective, vision, open collaboration, and stakeholder involvement, including the following principles transparency, participation, collaboration, developing consensus strategy (Paroutis, Heracleous, and Angwin 2013).
The Development of the resource is to be conducted in the direction of reader conversion, expanding content, Wikipedia quality, and technology (Paroutis, Heracleous, and Angwin 2013). From McKinsey’s 7S framework the main accent is put on the following elements: style and skills, namely the individuals capabilities create Wiki’s own style, when the audience decides how the articles have to look like (Sekhar 2010).
Blue Ocean Strategy
It is said that Wiki has become successful because of absence of other competitors on the market and entered merely However, this attitude ignored the fact that there were already Microsoft’s resource and Britannica which had their audience and produced similar product, however, in a different manner. Of course, blue ocean strategy helps to understand such innovation, created by Wikipedia, as value innovation which is the first step for further success, according to the mentioned strategy, however, innovation per se could not cope with the competitors who could make the same step. Thus, Wiki’s success could be to some extent explained by Blue Ocean logic, namely the creation of value and its innovate character, however, further company’s development is better explained by other theories, namely chaos and complexity ones.
Chaos theory
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The theory explains the behavior of different social agents with a help of chaos. For instance, certain behavior is often caused by so-called attractor, e.g. point attractor, such as self-interest, cycle attractor, torus attractor, and strange attractor (Gharajedaghi 2011).
Blair (n.p.) insists on three R’s which are to be taken into account while applying chaos theory on practice: first one consists in the need for recognizing that each step the entity does is under serious scrutiny.
Last step means that all actions, despite their scope and aim, must be self-monitored on a regular and consistent basis, for their content and continuous appropriateness, and for the reactions that they might incur (Blair, n.p.).
Wikipedia per se illustrates its activity in context of chaos concept in the following way: having no process or not working to established process leads to chaos: we use process to give some consistency in similar situations making it feel fair; to reduce the redundant effort of making each and every decision from the first principles; to encourage institutional learning and lead to a higher overall quality of decision making (Ayers, Matthews, and Yates, p.217).
Complexity theory
The complexity theory is based on the principle that comprehensive regulation and total order cannot satisfy the needs of a large company as well as cannot provide enough flexibility which is necessary within the market realities (Curlee & Gordon, 2011). The theory incorporates both formal and informal way of organizing the working process.
This concept characterizes the organization which has adopted this strategy by the following features: self-organization of structures and rules of interaction with the ability of stakeholders to innovate (Dann & Barclay, p.23). It means that there are no formal subordination rules and authoritative leadership, but only cooperation and transformational leadership concept can be applicable. In context of Wikipedia, it explains how during the first stages such organizational structure was built with everybody’s ability to participate, innovate, and act. Second feature is agent-driven interactions, interactions and interchanges with market and distribution of information process with the ability to solve problem (Dann & Barclay, p.23). All that leads to existence of formal and informal process within the company. When there is organized
When the matter of informal processes which differ this concept from conventional ones is discussed, the following aspects are meant: existence of certain culture, namely of the ability to apply transformational model of leadership with further share of one’s vision (Dann & Barclay, p.25). It can be concluded that Wikipedia has come through the following stages so as to build its own product which is now highly appreciated by the consumers. According to Teece (2009), at first, it was necessary to select features to be implemented into the product or service. Wiki has chosen the free public access to all the resources for everybody, or even to free knowledge from the constraints of traditional copyright restrictions (Blue Ocean Institute, 2011). Secondly, it was necessary to determine benefit to the customer from using the product/service (Teece, 2009). The benefit is easiness to search the information.
Then, the market segments were necessary to be identified: that was free online encyclopedia branch of market (Teece, 2009). And the last step was the strategy how to capture value and how not to lose the clients. It was done by the democratic way of functioning of Wiki: if somebody is not satisfied with the quality of certain article or thinks that it is biased or not neutral, there is always a possibility to substitute certain information.
Other elements of complexity theory which were developed by Wikipedia and which belong to its informal components are strategic development adherence of which is controlled by the appropriate stuff, namely team of leaders; well-trained and educated people participating in the activity of the company; existence of informal groups of influence forming certain interests among the members (Dann & Barclay, 2006).
Complexity theory can be the called the appropriate tool which explains the success of Wikipedia as one of those concepts which emphasize on the important role of human capital factor in the company. The role of audience (writers) is also explained within the complexity theory, since it creates the term of autonomous agents which denote those people who contribute the activity of a company, but are not bound to be in formal relations with the company (Banerjee, 2013). Such structure is also interpreted by the supporters of this theory as differentiation, or independencies structure (Gul & Khan, 2011).
Conclusion
In order to explain the market success of Wiki it is not enough to merely claim that it was due to absence of competitors, since there were, at least, two other corporations working in this field. In contrast, the attitude towards the exploration of resource’s successful campaign can be explained, if all the complex factors will be analyzed, particularly the corporate strategy, relationships between the company and the stakeholders etc. Wikipedia, which engaged more than 1 million people around the world to participate in its activity, demonstrates how people need such engagement and participation. Complexity theory, in contrast to other concepts, acknowledges that the company is an open system and people, who are not employees, but rather stakeholders, are parts of this system which help it function normally.
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