Which factors can you raise above competitors? That will be the next topic as we continue our discussion on value innovation and think about how to effectively compete with your new venture. It's the third element that we'll examine on our discussion of value innovation. So when we think about this element, once you've eliminated select factors and reduced others, raising factors is the next thing to consider. We want to think about which factors really matter. What is going to really be needed to exceed customer desires? And how does raising those factors further differentiate us in a meaningful way versus competitors, and increase our competitive advantage in that space? Britannica, if you're under 30 and potentially if you're under 40, the word doesn't mean anything to you, but for 250 years, almost, it meant quite a bit. It was a preeminent encyclopedia that was available. And it was on the shelves of many homes in the US and abroad. At its peak, they were selling 120,000 volumes per year. That was in 1990. The last print set was sold in 2010, and in that year, they sold a small fraction of what they used to sell at only 8,000 copies in 2010 at a price point of $1,395. So what happened? How do you go from being a household name, how do you go from 120,000 annual sales to 8,000, to 0? Well, there are a few factors that came into play. We may think it was the Internet. We may think that large companies are slow to evolve and that Britannica was overly comfortable with their brand and with their print and that they ignored online altogether. And they ignored digital altogether and they got caught surprisingly. Well, that's not true in this case. What we lurk and learn from Britannica is that they were very aware of the digital market and the transition from print to digital. Then in 1981, they published the first digital encyclopedia. In 1989, they published the first multimedia encyclopedia on CD ROM for use in PCs. Then in 1994, they launched Britannica online. 1994 predates the majority of the large websites that you use and that you're familiar with. So a very early entrant in the digital space. Mobile apps, 2000, kid facing mobile apps, 2010. Continually, Encyclopedia Britannica has been at the forefront of developing premium digital content. But what happened was something called Encarta for Microsoft. Britannica delivered a very comprehensive, very high quality product while Encarta brought along something different that was very inexpensive, that had a multimedia element, that was not-at-all comprehensive but was good enough. And sometimes as entrepreneurs, good enough is what we need to compete. We don't necessarily need infinite detail and infinite accuracy and the highest level of quality to be competitive. Customers may not be willing to pay for that, and that's what we found with Britannica. Microsoft also had something a bit different than Britannica had, which were other revenue streams. Microsoft was able to almost give away Encarta because they wanted to make money by selling the Windows platform and Windows compatible computers as part of that experience. So while Britannica was in parallel trying to sell print copies and digital additions as their only revenue streams, Microsoft had different revenue streams, and Encarta played a very different role that was not the price offering of the company, it was an add on and something that they almost gave away. But that wasn't the final chapter in the story on Britannica or Encarta in that something called Wikipedia came along a few years later. With Wikipedia, it changed the category. It changed the product definition of what's an encyclopedia, and it brought along a low cost, and low in this context is zero. And it created new value. And they cover a much broader array of topics. They cover contemporary individuals, and television shows, and actors, and the characters that the actors played, in addition to all of your traditional encyclopedia type content, and motivated the general public, not only to embrace this new form of encyclopedia, but to contribute in its creation as well via its Wiki platform. It engaged the readers to also be the writers. This raised the timeliness and the breadth of its content tremendously. It also presented a very sustainable model and a sustainable advantage to be very competitive and the preferred mechanism to the existing offerings that had been out there for decades and centuries in some cases. And they did it in a model that was different whereby it was driven by donations. So the Wiki Foundation drives the delivery and the monitoring and the supervision of Wikipedia. So there are paid individuals that play a role in moderating and supervising the content. And they're, in this model, generating approximately $45 million per year in contributions, in donations by Wikipedia users globally to support and sustain the platform. And they spend about 35 million of that that you can see here, delivering the programming, in this case is maintaining the platform as well as other administrative and fundraising activities as well. So you see that Wikipedia is again not free to run by any means but through their donation model. They found that the donation model as a reasonable path for them to sustain and grow their operation. So in summary, we want to recognize that raising select factors is a very important piece in the value innovation puzzle. Thus, the big question is, what are those factors? It's not as simple as saying, there's something that's print, let's make it digital. That's a bit obvious in this age. That's something Britannica tried and that Britannica failed at. What is a bit more difficult and challenging and maybe counter-intuitive is that Wikipedia recognize that the timeliness, the currency, the recentness of the content as well as the breadth of the content was more important to customers than was the accuracy or the absolute comprehensiveness of it that Britannica and others tried to deliver. So when looking at a sea of factors, then we would think all four of these elements are important. The winning entrepreneurial companies can diagnose which two are the more important of the lot and can focus their time and energy on that. Step four of value innovation that we'll explore next time is on creating new factors to compete.
