“Stakes,	
  limits	
  and	
  opportunities,	
  how	
  to	
  
take	
  advantage	
  of	
  the	
  crowdsourcing	
  to	
  
o...
  2	
  
	
  
INTRODUCTION	
   5	
  
1.	
   LITTERATURE	
  REVIEW	
   7	
  
1.1.	
   Understanding	
  Main	
  Concept	
   7...
  3	
  
	
  
TABLE	
  OF	
  ILLUSTRATION	
  	
  
	
  
Figure	
  1	
  :	
  Outsourcing	
  Vs	
  Crowdsourcing	
   8	
  
Fig...
  4	
  
ABSTRACT	
  
	
  
Coined	
   by	
   Jeff	
   Howe,	
   the	
   term	
   Crowdsourcing	
   –	
   a	
   composite	
 ...
  5	
  
INTRODUCTION	
  	
  
	
  
Crowdsourcing	
  is	
  a	
  neologism	
  for	
  a	
  business	
  model	
  in	
  which	
 ...
  6	
  
consider	
  each	
  aspect	
  around	
  open	
  models	
  of	
  collaboration	
  such	
  as	
  crowdsourcing,	
  a...
  7	
  
1. 	
  LITTERATURE	
  REVIEW	
  	
  
	
  
1.1.Understanding	
  Main	
  Concept	
  	
  
	
  
By	
  analyzing	
  and...
  8	
  
Crowdsourcing	
   is	
   a	
   form	
   of	
   outsourcing	
   not	
   directed	
   to	
   other	
   companies	
  ...
  9	
  
This	
  short	
  definition	
  of	
  the	
  term	
  would	
  be	
  as	
  follows:	
  
	
  
“Crowdsourcing	
  is	
 ...
  10	
  
First	
  approached	
  by	
  Howe,	
  this	
  process	
  in	
  the	
  business	
  world	
  was	
  then	
  approac...
  11	
  
4. Participative	
  process	
  (the	
  gene	
  how),	
  	
  
5. Crowdsourcer	
  that	
  launches	
  the	
  activi...
  12	
  
creativity	
  must	
  be	
  broken	
  down	
  into	
  very	
  small	
  individual	
  pieces	
  that	
  can	
  be	...
  13	
  
2000).	
  It	
  involves	
  a	
  two-­‐way	
  interaction	
  between	
  customers	
  and	
  companies,	
  as	
  w...
  14	
  
sell.	
  	
  Consequently,	
  Threadless.com	
  is	
  able	
  to	
  measure	
  end-­‐consumer	
  demand	
  for	
 ...
  15	
  
1.2.Business	
  Model	
  Typology	
  	
  
	
  
With	
  the	
  intent	
  to	
  go	
  further	
  into	
  crowdsourc...
  16	
  
	
  
	
  
	
  
	
  
Crowd	
  
Customer	
  
Company	
  
Symbols	
  	
  
&	
  Colors	
  
Synonyms	
  
	
  
User	
  ...
  17	
  
1.2.2.2. 	
  Request-­‐to-­‐Proposal	
  Model	
  	
  
	
  
Members	
   of	
   the	
   crowd	
   are	
  
competito...
  18	
  
of	
  the	
  crowd.	
  This	
  content	
  will	
  be	
  valuable	
  for	
  both	
  corporate	
  accounts	
  (inte...
  19	
  
The	
  finalized	
  product	
  will	
  either	
  be	
  sold	
  to	
  the	
  crowd	
  itself	
  or	
  to	
  real	
...
  20	
  
	
  
Also,	
   the	
   paradigm	
   of	
   collaborative	
   innovation,	
   which	
   includes	
   open	
   inno...
  21	
  
Many	
  authors	
  tend	
  to	
  identify	
  the	
  crowdsourcing	
  with	
  Open	
  Innovation,	
  treating	
  b...
  22	
  
	
  It’s	
   “the	
   use	
   of	
   purposive	
   inflows	
   and	
   outflows	
   of	
   knowledge	
   to	
   a...
  23	
  
Despite	
  the	
  similar	
  elements	
  and	
  characteristics	
  (i.e.:	
  reducing	
  risk,	
  increasing	
  t...
  24	
  
ready	
   to	
   bear	
   some	
   of	
   the	
   costs	
   and	
   risks	
   associated	
   with	
   innovation	...
  25	
  
	
  
To	
  select	
  the	
  right	
  type	
  of	
  collaboration	
  options	
  for	
  a	
  business,	
  Pisano	
 ...
  26	
  
1.3.Formulating	
  Hypothesis	
  	
  
	
  
As	
   exposed	
   earlier,	
   Internet	
   usage	
   has	
   changed...
  27	
  
be	
  innovative,	
  customer	
  friendly	
  and	
  create	
  new	
  levels	
  of	
  customer	
  involvement	
  t...
  28	
  
	
  
Figure	
  10:	
  Crowdsourcing	
  Industry	
  Revenue	
  Growth	
  
	
  
Millions	
  of	
  $US,	
  based	
  ...
  29	
  
It	
  has	
  helped	
  these	
  firms	
  develop	
  new	
  products	
  at	
  lower	
  cost,	
  brainstorm	
  new	...
  30	
  
2. RESEARCH	
  METHODOLOGY	
  
	
  
2.1.Introduction	
  
	
  
This	
  chapter	
  focuses	
  the	
  methodology	
 ...
  31	
  
We	
  will	
  identify	
  patterns	
  and	
  relationships	
  thanks	
  to	
  literature	
  review	
  and	
  Caps...
  32	
  
consuming	
  and	
  Capseo	
  is	
  progressively	
  abandoning	
  it.	
  
	
  
Capseo,	
   thought	
   its	
   p...
  33	
  
-­‐	
  The	
  theoretical	
  material	
  introduced	
  by	
  the	
  staff:	
  formal	
  presentations	
  and	
  b...
  34	
  
	
  
2.2.5. 	
  Research	
  Objectives	
  
	
  
This	
  study	
  aims	
  at	
  understanding	
  what	
  the	
  st...
  35	
  
3. FIELDWORK	
  	
  
	
  
3.1.Capseo	
  
	
  
Capseo	
  was	
  founded	
  in	
  2009	
  by	
  two	
  EMLyon	
  Al...
  36	
  
Influencers	
  must	
  meet	
  qualifications	
  and	
  undergo	
  rigorous	
  testing	
  in	
  order	
  to	
  qu...
  37	
  
3.1.5. Capseo	
  Crowdsourced	
  System	
  
	
  
When	
  contacted	
  by	
  prospects,	
  a	
  dedicated	
  perso...
  38	
  
people	
   “like	
   us”	
   that	
   can	
   easily	
   make	
   us	
   consume	
   what	
   they	
   have	
   b...
  39	
  
The	
   issue	
   is	
   that	
   everyone	
   could	
   see	
   information	
   that	
   was	
   sometimes	
   m...
  40	
  
As	
  a	
  result,	
  the	
  customer	
  has	
  a	
  moderate	
  bargaining	
  power.	
  
	
  
3.1.6.2. Supplier	...
  41	
  
service.	
  	
  
	
  	
  
Economies	
  of	
  Scale	
  
	
  
The	
   threat	
   of	
   new	
   entrants	
   in	
  ...
  42	
  
promote	
  and	
  stimulate	
  traffic	
  to	
  a	
  website.	
  There	
  is	
  also	
  a	
  “pay	
  per	
  click...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your c...
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Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your customers?

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Coined by Jeff Howe, the term Crowdsourcing – a composite of Crowd and Outsourcing, describes outsourcing to the crowd. Afar from cost, advantages and opportunities for a company can be considerable. It can outsource the risk of failure and it only pays for products or services that meet its expectations. This phenomenon covers various situations. Seeking to mobilize external competencies, it has interested a large number of businesses. However, this concept has reach its maturity and its limits seem to be pointed out as bad from professionals of different industries. Crowdsourcing is lacking a general and synthetic view of this concept. The purpose of our paper is to characterize Crowdsourcing in its various aspects. First we describe of Crowdsourcing, and offer examples illustrating the diversity of Crowdsourcing typology, practices, business models and we present comparisons between Crowdsourcing and established theories (Open Innovation, User Innovation).
Relying upon a group of persons (crowd) can be an adequate method, because of its unique characteristics that are made possible by the Internet.
Crowdsourcing offers extraordinary potential for resolving tasks efficiently by tapping into the skills of large groups of people. To illustrate so, we explain how Capseo, a crowdsourcing based company, works with freelancers from around the world to make online marketing campaigns.

Finally, we present some potential benefits and pitfalls of Crowdsourcing and explain how to bypass its obstacles to offer a strong value proposition to customers.

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Stakes, limits and opportunities, how to take advantage of the crowdsourcing to offer a strong value proposition to your customers?

  1. 1.   “Stakes,  limits  and  opportunities,  how  to   take  advantage  of  the  crowdsourcing  to   offer  a  strong  value  proposition  to  your   customers?”     The  Case  of  DOZ   Carine  Esteves                   Thesis  submitted  for  completion  of  Master  of  e-­‐Business  Innovation     Idrac  Business  School   Lyon,  2013        
  2. 2.   2     INTRODUCTION   5   1.   LITTERATURE  REVIEW   7   1.1.   Understanding  Main  Concept   7   1.1.1.   Definition   7   1.2.   Business  Model  Typology   15   1.2.1.   Quantitative  crowdsourcing:   15   1.2.2.   Qualitative  crowdsourcing:   15   1.2.3.   Innovation   20   1.2.4.   Open  Innovation   21   1.2.5.   User  innovation   23   1.3.   Formulating  Hypothesis   26   1.3.1.   Traditional  In-­‐House  management,  as  a  stand-­‐alone  strategy,  is  no  longer  enough   26   1.3.2.   Crowdsourcing,  is  an  effective  business  model  for  any  type  of  business   26   1.3.3.   Crowdsourcing  guarantees  quality  work.   27   1.3.4.   Crowdsourcing,  is  suitable  for  any  type  of  business   28   1.3.5.   Every  task  can  be  crowdsourced.   29   2.   RESEARCH  METHODOLOGY   30   2.1.   Introduction   30   2.2.   Methodology  Selection   30   2.2.1.   Qualitative  research   30   2.2.2.   Presentation  of  the  Case  Study   31   2.2.3.   Data  collection   32   2.2.4.   Problem  definition   33   2.2.5.   Research  Objectives   34   3.   FIELDWORK   35   3.1.   Capseo   35   3.1.1.   What  does  Capseo?   35   3.1.2.   Customers   35   3.1.3.   Influencers/Suppliers   35   3.1.4.   Different  roles   36   3.1.5.   Capseo  Crowdsourced  System   37   3.1.6.   Industry  Analysis  Summary   39   3.1.7.   Capseo  new  vision   43   4.   VERIFYING  HYPOTHESIS   46   4.1.   Traditional  In-­‐House  management,  as  a  stand-­‐alone  strategy,  is  no  longer  enough   46   4.2.   Crowdsourcing,  is  an  effective  business  model  for  any  type  of  business   48   4.3.   Crowdsourcing  guarantees  quality  work   50   4.4.   Crowdsourcing,  is  suitable  for  any  type  of  business   53   4.5.   Every  task  can  be  crowd  sourced   53   5.   RECOMMENDATIONS   58   5.1.   Prosourcing  platform   59   5.1.1.   Advantages  of  Prosourcing   60   5.1.2.   Starting  the  Prosourcing  Trend   62   5.2.   CONCLUSION   63   6.   CONCLUSION   65   7.   APPENDIX   66   8.   BIBLIOGRAPHY.   69  
  3. 3.   3     TABLE  OF  ILLUSTRATION       Figure  1  :  Outsourcing  Vs  Crowdsourcing   8   Figure  2:  Store  Model   16   Figure  3:  Request-­‐to-­‐Proposal  Model   17   Figure  4  :  Data  Model   18   Figure  5:  Collaborative  (Peer)  Model   19   Figure  6:  Closed  Innovation   20   Figure  7:  Crowdsourcing,  Open  Innovation,  User  Innovation  and  Open  Source   21   Figure  8:  Open  Innovation   22   Figure  9:  The  four  ways  to  collaborate   24   Figure  10:  Crowdsourcing  Industry  Revenue  Growth   28   Figure  11:  Scheme  of  Capseo's  Organization   36   Figure  12:  Traditional  Organizational  Structure   46   Figure  13:  Prosourcing  System   59   Figure  14:  Prosourcing  Difference   61   Figure  15:  Prosourcing   63        
  4. 4.   4   ABSTRACT     Coined   by   Jeff   Howe,   the   term   Crowdsourcing   –   a   composite   of   Crowd   and   Outsourcing,   describes   outsourcing   to   the   crowd.   Afar   from   cost,   advantages   and   opportunities  for  a  company  can  be  considerable.  It  can  outsource  the  risk  of  failure  and   it   only   pays   for   products   or   services   that   meet   its   expectations.   This   phenomenon   covers  various  situations.  Seeking  to  mobilize  external  competencies,  it  has  interested  a   large  number  of  businesses.  However,  this  concept  has  reach  its  maturity  and  its  limits   seem  to  be  pointed  out  as  bad  from  professionals  of  different  industries.  Crowdsourcing   is  lacking  a  general  and  synthetic  view  of  this  concept.  The  purpose  of  our  paper  is  to   characterize  Crowdsourcing  in  its  various  aspects.  First  we  describe  of  Crowdsourcing,   and   offer   examples   illustrating   the   diversity   of   Crowdsourcing   typology,   practices,   business  models  and  we  present  comparisons  between  Crowdsourcing  and  established   theories  (Open  Innovation,  User  Innovation).     Relying  upon  a  group  of  persons  (crowd)  can  be  an  adequate  method,  because  of  its   unique  characteristics  that  are  made  possible  by  the  Internet.     Crowdsourcing  offers  extraordinary  potential  for  resolving  tasks  efficiently  by  tapping   into   the   skills   of   large   groups   of   people.   To   illustrate   so,   we   explain   how   Capseo,   a   crowdsourcing  based  company,  works  with  freelancers  from  around  the  world  to  make   online  marketing  campaigns.       Finally,  we  present  some  potential  benefits  and  pitfalls  of  Crowdsourcing  and  explain   how  to  bypass  its  obstacles  to  offer  a  strong  value  proposition  to  customers.             Key   Words:   Crowdsourcing,   Collaborative   Innovation,   Open   Innovation,   Web   2.0,   problem  solving,  co-­‐creativity    
  5. 5.   5   INTRODUCTION       Crowdsourcing  is  a  neologism  for  a  business  model  in  which  a  company  or  institution   takes  a  job  traditionally  performed  by  a  designated  agent  (usually  an  employee)  and   outsources  it  to  an  undefined,  generally  large  group  of  people  in  the  form  of  an  open   call.  (Howe,  2006).   Crowdsourcing   is   a   disruptive   business   model   where   customer   engagement   with   a   company  is  at  a  much  higher  level  than  seen  in  any  previous  business  model.  This  level   of  consumer  interaction  makes  it  vulnerable  to  malicious  behavior.    It  brings  out  several   major   concerns   that,   for   a   better   understanding   of   how   companies   can   leverage   crowdsourcing,  need  to  be  discussed  and  analyzed.  Evaluating  and  understanding  the   key   challenges   and   the   stakes   of   this   new   disruptive   business   model   is   necessary   to   avoid  its  pitfalls  and  take  advantages  of  its  benefits.   Crowdsourcing’s  impact  can  be  seen  by  observing  the  numerous  successful  examples  of   crowdsourcing   startups   and   large   old   economy   companies.   Even   thought   it’s   not   a   technology,  many  utilize  this  technique  to  harness  the  ‘wisdom  of  the  crowds’.  From   conventional   business   to   new   business   to   innovate,   differentiate   and   compete.     However,   new   businesses   render   this   principle   insufficient   and   in   some   cases   even   completely  inappropriate.     In   an   era   when   great   ideas   can   emerge   from   anywhere   in   the   world   and   IT   has   considerably  reduced  the  cost  to  getting  access  to  it,  it  is  now  very  usual  that  virtually   companies  shouldn’t’  innovate  on  their  own.     With   the   facility   of   accessing   new   technology,   potential   partners   and   ways   to   collaborate  with  them  have  both  expanded  considerably.  However,  greater  choice  has   made   the   choice   of   the   best   management   options   much   more   difficult.   Should   companies  share  intellectual  property  with  a  community?  Should  it  foster  collaborative   relationships   with   a   few   partners,   wisely   selected?   Should   it   harness   the   “wisdom   of   crowds”?     There  is  no  great  approach  to  leveraging  the  power  of  outsiders  unless  the  companies  
  6. 6.   6   consider  each  aspect  around  open  models  of  collaboration  such  as  crowdsourcing,  and   accept   the   fact   that   choosing   a   different   mode   of   collaboration   involves   different   strategic  trade-­‐offs.  Picking  the  wrong  model  could  cause  falling  behind  in  the  constant   race  to  develop  new  technologies,  designs,  products,  and  services.   Too   often   the   growing   eagerness   of   companies’   not   withstanding   to   crowdsoucing   makes   them   jump   into   relationships   before   even   analyzing   if   their   structure   and   organizing  principles.  Considering,  how  open  or  closed  a  firm’s  network  of  collaborators   should  be?   This   paper   was   developed   to   give   a   simple   framework   to   help   firms   make   decisions   about   the   type   of   collaboration   to   adopt   by   first   going   over   all   type   of   existing   crowdsourcing  business  models.     This  analysis  review  together  with  an  in-­‐depth  study  of  Capseo’s  business  type  brought   out  a  few  issues  on  how  crowdsourcing  is  perceived  by  both  unconcerned  people  and   involved   actors   of   crowdsourcing.   First   quality   control   seams   to   one   of   the   biggest   issues   for   crowdsourcing   and   the   reliability   of   the   crowd   recruited   comes   in   second   position.   Also,   considering   different   aspects   of   a   business,   like   its   organization,   partnership  possibilities  will  differ  considerably  in  the  degree  to  which  membership  is   open  to  anyone  who  wants  to  join.  So,  given  a  business’s  strategy  how  should  it  decide   which  problems  the  crowd  will  tackle  and  which  solutions  could  be  adopted?   The  final  purpose  was  to  explore  what  were  the  options  available  for  Capseo  to  set  up  to   take  advantages  of  what  is  best  from  crowdsourcing  and  improve,  or  rather,  remove   what  is  are  limits  of  it.       And   begin   to   investigate   what   Anji   Ismail,   Capseo’s   SEO,   coined   as   “prosourcing”   options  that  can  improve  the  quality  of  a  “crowd  workforce”.        
  7. 7.   7   1.  LITTERATURE  REVIEW       1.1.Understanding  Main  Concept       By  analyzing  and  extracting  common  elements  we  will  first  establish  a  unified  definition   of   the   term   crowdsourcing   and   the   basic   characteristics   of   crowdsourcing   initiatives.   Based  on  existing  definitions,  an  exhaustive  and  consistent  definition  for  crowdsourcing   will  be  presented  and  contrasted  in  different  cases.     1.1.1. Definition       The  name  crowdsourcing  is  formed  from  two  words,  crowd,  making  reference  to  the   people   who   participate   in   the   initiatives,   and   the   word   sourcing,   which   refers   to   a   number  of  procurement  practices  aimed  at  finding,  evaluating,  and  engaging  suppliers   of  goods  and  services.  It  is  a  recent  concept  with  blurring  definitions.       In  this  usage  the  term  crowd,  refers  to  any  group  of  people,  from  corporation,  group  of   researchers  to  the  entire  general  public,  which  itself  does  not  have  to  be  cohesive.  A   group  of  people  answering  questions  on  Quora.com  (Quora  is  a  question-­‐and-­‐answer   website  created,  edited  and  organized  by  its  community  of  users,  wikipedia.com)  may   not  know  each  other  outside  of  that  website,  or  a  group  of  people  betting  on  a  football   game  may  not  know  each  others’  bets,  but  nevertheless  they  form  a  crowd  under  this   definition.     Commonly,   and   mistakenly,   associated   to   any   type   of   Internet-­‐based   collaborative   activity,  such  as  co-­‐creation,  open  innovation  or  user  innovation,  the  existing  definitions   vary  from  an  author  to  the  other.  “Some  authors  present  certain  specific  examples  of   crowdsourcing   as   paradigmatic,   while   others   present   the   same   examples   as   the   opposite”  (Estellés-­‐Arolas  &  Gonzales-­‐Ladron-­‐de-­‐Guevera,  2012)      
  8. 8.   8   Crowdsourcing   is   a   form   of   outsourcing   not   directed   to   other   companies   but   to   the   crowd  through  an  open  call  mostly  via  an  Internet  platform.     Surowiecki   (2004),   Nambissan   and   Sawhney   (2007)   state   that   the   said   crowd   can   be   defined  as  a  large  set  of  anonymous  individuals.     Figure  1  :  Outsourcing  Vs  Crowdsourcing     Source  :  Schenk  E.  and  C.  Guittard  (2009).     There  has  been  discussion  around  whether  or  not  the  term  “crowdsourcing”  came  from   Jeff  Howe,  a  contributing  editor  at  Wired  Magazine.  He  was  supposedly  the  first  to  coin   the   term   but   in   fact   Jeff   Howe   credits   Steve   Jurvetson   with   the   term   from   an   earlier  post  on  flick.  See  Appendix  [1]       Regardless   of   Jeff   Howe’s   deferred   credit,   he   posted   the   first   real   definition   of   "crowdsourcing"  in  a  companion  blog  post  to  Wired  magazine  in  June  2006  “the  Rise  of   Crowdsourcing”.        
  9. 9.   9   This  short  definition  of  the  term  would  be  as  follows:     “Crowdsourcing  is  the  act  of  taking  a  job  traditionally  performed  by  a  designated   agent   (usually   an   employee)   and   outsourcing   it   to   an   undefined,   generally   large   group  of  people  in  the  form  of  an  open  call.”       While   some   might   depend   upon   active   collaboration   within   a   virtual   community   of   individuals,   others   might   benefit   from   the   opposite.   Howe   goes   deeper   into   the   definition.   According   to   him   there   are   multiple   approaches   to   crowdsourcing.    In   his   book   “The   power   of   Crowd”   J.   Howe   breaks   crowdsourcing   into   four   primary   types,   laying  out  examples  of  how  businesses  can  tailor  crowdsourcing  to  each  of  their  own   circumstances.       In   the   first   type,   wisdom   of   crowd   companies   asks   people   inside   and   outside   the   company  to  help  solve  problems  and  suggest  new  products.  The  second  type,  crowd   creation  is  used  by  businesses  to  create  content  such  as  news  segments  and  video  ads.   People   voting   for   their   favorite   photography   or   product   design   at   apparel   maker’s   website,   thereby   illustrates   crowd   voting   and   finally   startups   use   the   last   model,   crowdfunding  to  raise  money  and  fund  microloans  to  individuals.  These  for  types  will  be   outlined  afterwards.  We  will  go  from  Open  Innovation  to  User  Innovation,  which  are   used  in  different  ways  by  different  authors.  Also  each  type  of  crowd-­‐sourcing  will  leads   us  to  questioning  ourselves  about  the  difference  between:  Crowdsourcing,  Co-­‐Creation   and  Collective  Intelligence:  some  might  use  these  terms  as  opposite  while  others  treat   them  as  synonyms  of  crowdsourcing.     1.1.1.1. Crowd  Wisdom       For   Paul   Sloane   it   is   “simply   gathering   ideas   from   the   crowd”.   Basically   this   concept   refers   to   “the   process   of   taking   into   account   the   collective   opinion   of   a   group   of   individuals  rather  than  a  single  expert  to  answer  a  question.”  (Surowiecki,  2004)      
  10. 10.   10   First  approached  by  Howe,  this  process  in  the  business  world  was  then  approached  in   detail  by  Suroweiski  in  his  book  the  “Wisdom  of  Crowds”.  It  is  attempt  to  harness  many   people’s  knowledge  in  order  to  solve  problems  or  predict  future  outcomes  or  help  direct   corporate  strategy.         Social   information   sites   such   as   Wikipedia,   Yahoo!   Answers,   Quora   and   other   web   resources  that  rely  on  human  opinion,  have  pushed  crowd  Wisdom  into  the  mainstream   spotlight.  (Baase,  2008)     The  most  famous  example  of  company  using  the  Crowd-­‐  Wisdom  is:     • Innocentive  –  Connects  research  organizations  with  a  global  community  of  scientists   It   is   common   to   reciprocally   use   the   terms   “Collective   Intelligence”   and   “Wisdom   of   Crowd.  Buecheler,  Sieg,  Fuchsil  &  Pfeifer,  2010’s  publications  the  terms  have  been  used   interchangeably  for  “using  a  large  group  of  individuals  to  solve  a  specified  problem  or   collect  useful  ideas.”  However  there  is  real  difference  between  those  two  terms.       Collective  intelligence       The   term   collective   intelligence   is   credited   to  Pierre   Lévy  in   his   book,   dated   of   1994,   “L’Intelligence  collective.  Pour  une  anthropologie  du  cyberspace”.  MIT  C.I.  Center  gives   a   general   but   simple   and   clear   definition   “collective   intelligence   makes   reference   to   groups  of  individuals  doing  things  collectively  that  seem  intelligent.”     E.  Estellés,  in  its  article  “Crowdsourcing  and  Collective  Intelligence”  dated  of  April  2012,   clarifies  the  relationship  between  both  terms  giving  8  elements  that  should  be  meet  for   something  to  be  qualified  as  Crowdsourcing:           1. Crowd  (the  gene  who)   2. Task  to  perform  for  a  specific  purpose  (the  gene  what),     3. Reward  for  the  crowd  (the  gene  why),    
  11. 11.   11   4. Participative  process  (the  gene  how),     5. Crowdsourcer  that  launches  the  activity,     6. Reward  for  this  crowdsourcer,     7. The  existence  of  an  open  call       8. The  use  of  Internet.       E.   Estellés   adds,   “although   crowdsourcing   is   a   case   of   collective   intelligence,   not   all   cases  of  collective  intelligence  are  crowdsourcing.”     Advantages   of   Wisdom   of   Crowd:   J.   Howe   states,   “Given   the   right   set   of   conditions  the  crowd  will  almost  always  outperform  any  number  of  employees”         Studies   by   Caltech   professor   Scott   E   Page   confirm   that   crowds   consistently   outperform  even  concentrated  groups  of  highly  intelligence  people.    Examples   of  crowd  wisdom  include  idea  jams  and  prediction  markets.       1.1.1.2. Crowd  Creation     As   described   in   Steve   Keifer’s   blog   post  “Four   Types   of   Crowdsourcing”,   “crowd   Creation   is   contemporarily   the   most   popular   form   of   pooling   knowledge   from   the   masses”.    Often  confused  with  the  crowd  wisdom,  which  is  simply  gathering  ideas  from   crowd,  crowds  create  original  works  of  knowledge  or  art,  such  as  individuals  filming  TV   commercials,   performing   language   translation   or   solving   challenging   scientific   problems.  The  crowd  contributes  to  a  movement  and  then  the  company  performed  it.   Paul  Sloane  in  his  book  “A  Guide  to  Open  Innovation  and  Crowdsourcing:  Advice  From   Leading  Experts”  he  complete  the  description  by  stating  the  following:  ‘the  action  of   A  group  of  individuals  has  more  knowledge  for  solving  a  problem  than  any   single  individual.      Collective  intelligence  creates  a  quilt  of  knowledge  that   many  people  can  distribute.    
  12. 12.   12   creativity  must  be  broken  down  into  very  small  individual  pieces  that  can  be  performed   in  “spare  circles”.       The  most  famous  examples  of  companies  using  the  Crowd-­‐Creation  are:     • Threadless.com  –  Creative  consumers  propose  new  T-­‐Shirt  ideas  for  sale  on  the  site   • iStockPhoto  –   Amateur   photographers   contribute   high   quality   stock   photography   images   • Linux  –   Open   source   operating   system   developed   by   community   of   avid   programmers   Since  both  “Crowd  Creation”  and  “Co-­‐Creation”  involve  some  kind  of  collaboration,  the   separation  line  between  the  two  terms  can  be  blurred  at  times.  However  there  is  real   difference  between  both  terms,  which  will  be  outlined  afterwards.     1.1.1.3. Co-­‐Creation       Operating  like  crowdsourcing,  Co-­‐creation  is  a  considered  a  collaborative  initiative,  by   seeking  information  and  ideas  from  a  group  of  people.  However,  one  crucial  difference   between  the  two  lies  with  the  call,  which  is  not  put  to  an  open  forum  or  platform  but  to   a  smaller  group  of  individuals  with  “specialized”  skills  and  talents.     “It   captures   the   ideas   of   the   many   and   work   with   them   through   different   steps   to   ultimately  create  a  better  experience  for  the  consumer.  It’s  about  working  collaboratively   with  a  group  of  people  with  specialized  skills  or  talents.  Crowdsourcing  focuses  on  quantity   and  results  in  incremental  changes,  co-­‐creation  focuses  on  quality  and  produces  innovative   solutions.  Also  co-­‐creation  is  not  about  picking  one  from  many  but  about  working  together.   So  the  main  difference  is  that  co-­‐creation  depends  on  the  skills  of  a  specialized  group  to   work  on  one  solution.  ”  (Teng,  2011)     Co-­‐creation   perceived   as   a   tool   in   the   open   innovation   toolkit.   Co-­‐creation   is   a   joint   effort  of  the  producer  and  the  customer  to  develop  new  products  or  services  (Prahalad,  
  13. 13.   13   2000).  It  involves  a  two-­‐way  interaction  between  customers  and  companies,  as  well  as   peer-­‐to-­‐peer  communication  among  customers.  In  marketing,  co-­‐creation  is  seen  as  a   new  branding  paradigm  (Schultz,  2010)     1.1.1.4. Crowd  Voting       It  consists  in  openly  asking  questions  and  collecting  answers  through  mechanisms  such   as  polls  or  elections.     It  is  a  way  of  using  the  crowd’s  judgment  and  leveraging  it  to  organize,  filter  and  stack-­‐ rank  vast  quantity  of  information  such  as  newspaper  articles,  music  and  movies.  A  great   example   of   crowd   voting   includes   Google’s   search   result,   which   search   engines   are   based  on  algorithms  that  Google  uses  to  give  relevance  to  their  results  via  links  and   page  reviews,  that  is  to  say  give  the  site  popularity.  By  definition,  Google  search  engine   is  built  upon  the  principle  of  Crowd  Voting.       This  form  of  crowdsourcing  generates  the  highest  levels  of  participation.  J.  Howe  cites   the  1:10:89  Rule,  which  states  that  for  every  given  100  people     • 1  will  create  something  valuable   • 10  will  vote  and  rate  submissions   • 89  will  consume  creation   For   the   10   that   vote   and   rate   content   “the   act   of   consumption   was   itself   an   act   of   creation.”   Voting  and  ratings  have  been  made  possible  thanks  to  the  Internet.    Performed  by  end-­‐ users  or  computer-­‐driven  algorithms,  the  mechanism  that  assesses  popularity  via  links   and  page  views  are  numerous.       “In   Real   Life”   a   great   example   of   Crowd   Voting   is   Reality   TV   shows.  According   to   J.   Howe  “American  Idol  is  the  largest  focus  group  ever  conducted”.     Threadless.com  classified  as  Crowd  Creation  also  uses  Crowd  Voting  to  decide,  from  all   the   T-­‐shirt   submitted   on   the   website,   which   ones   to   manufacture   and  
  14. 14.   14   sell.    Consequently,  Threadless.com  is  able  to  measure  end-­‐consumer  demand  for  new   products  before  making  further  investment.       1.1.1.5. Crowd  Funding     The   term   basically   describes   participation   by   the   crowd   in   micro   lending.   Also   considered  as  “fundraising  the  social  way”  it  is  a  “collective  cooperation,  attention  and   trust  by  the  people  who  pool  money  or  other  resources  to  finance  or  help  a  project”.     Steve   Keifer   in   his   article   Four   Types   of  Crowdsourcing   states   that   “Crowd-­‐Funding   circumvents  the  traditional  corporate  establishment  to  offer  financing”    (Keifer)Indeed,   it  gives  individuals  or  groups,  that  cannot  get  credit  or  opportunities  to  obtain  a  loan  by   the  traditional  system,  the  financing  opportunities  that  might  otherwise  be  denied.       Typically,  under-­‐funded  populations  would  include  individuals  or  groups  with  creative   projects  and  ideas  such  as  amateur  musicians.  Well  known  for  the  music  industry,  it  is   quite  famous  for  creative  project  as  film,  and  business  ideas.       MyMajorCompany.com  is  a  great  example  of  crowd  funding.  Its  music  website  connects   investors  and  artists  in  one  place  through  its  online  platform.  Within  the  community,   users  are  able  to  invest  in  artists  they  pick  for  a  return  in  album  sales  (Rupert,  2011)   while   artists   raise   money   to   record   their   albums.   The   platform   fully   operates   as   a   functioning  record  label  headed  by  industry  professionals.          
  15. 15.   15   1.2.Business  Model  Typology       With  the  intent  to  go  further  into  crowdsourcing,  M.  Arfaoui,  writer  of  “Understanding  a   new  typology  of  crowdsourcing  business  models”  paper  (Arfaoui),  developed  a  typology   of   crowdsourcing   that   allowed   him   to   identify   four   different   models   of   qualitative   crowdsourcing.  Out  of  these  four  models,  which  will  be  defined  afterwards,  he  identifies   2  types  of  Crowdsourcing:  Quantitative  and  Qualitative.       1.2.1. Quantitative  crowdsourcing:     This  type  of  crowdsourcing,  calls  on  the  crowd  to  fulfill  quite  simple  and  short  tasks  in   relatively  high  quantities.  Generally,  these  tasks  will  not  need  a  high  level  creativity  and   are  99  %  of  the  time  financially  rewarded.  It  is  most  commonly  called  “micro-­‐tasking”  or   “cloud-­‐labor”.       1.2.2. Qualitative  crowdsourcing:     In   opposition   to   quantitative   crowdsourcing,   the   qualitative   crowdsourcing   requires   more  complex  skills  and  competencies  from  the  crowd  as  companies  use  it  to  resolve   larger   and   complicated   projects.   “The   crowd   is   sourced   to   bring   either   an   opinion,   a   reflection,  an  intellectual  or  an  artistic  work,  or  a  solution  to  a  sophisticated  problem.   Rewards  can  be  financial  or  not.  “     To  better  understand  the  following  figures  of  Crowdsourcing  Business  Models  the   following  legend  is  needed.      
  16. 16.   16           Crowd   Customer   Company   Symbols     &  Colors   Synonyms     User  -­‐  Submitter  -­‐  Creator  -­‐  Contributor  -­‐   Consumer  –  Client  Company  -­‐  Buyer   Business  -­‐  Model  -­‐  Platform  -­‐  Intermediary   -­‐  Website     1.2.2.1.  Store  Model       The  members  of  the  crowd  (group  or  individuals)  sell  their  products  or  service  (mostly   creations)  to  a  crowdsourcing  company.   Present  as  an  outlet.     Companies   using   this   model   mostly   provide  repeatedly  financial  rewards   to   the   actors   of   the   outlet.   M.   Arfaoui  adds  that,  to  be  sustainable,   companies   tend   to   implement   a   ““few-­‐to-­‐many”   relationship   (ratio   crowd/uses   <   1)   and   that   the   companies  make  revenue  out  of  the     Figure  2:  Store  Model     transactions  between  crowd  and  customers”.        
  17. 17.   17   1.2.2.2.  Request-­‐to-­‐Proposal  Model       Members   of   the   crowd   are   competitors   to   each   other.   The   Crowdsourcing   company,   acting   here  as  an  intermediary,  provides   the   crowd   with   the   required   material  to  compete.     The   crowdsourcing   company   operates  as  a  “hub”  to  customers,   most  of  the  time  corporations  and   business.   They   gather   the   information  and  make  a  request  in   the  form  of  an  open  call.       Figure  3:  Request-­‐to-­‐Proposal  Model     The   significant   difference   with   the   above-­‐described   model   (Store   Model)   is   that   this   model  requires  a  “many-­‐to-­‐few  relationship”  to  be  profitable  (ratio  crowd/customer  >   1).     Businesses  processing  this  model  of  crowdsourcing,  promptly  offer  financial  incentives,   in   order   to   attract   many   proposals   but   reward   only   a   very   limited   part   of   them.   “Independently   or   not   from   that,   the   company   will   earn   a   revenue   from   selling   the   access  to  the  crowd-­‐base  itself.”       1.2.2.3.    Data  Model     The  core  of  the  Data  Model  is  the  community.  Social  or  not,  the  crowd  community  will   grow  around  the  company’s  network  system.     The  company’s  challenge  is  to  attract  as  much  users  as  possible  to  create  the  maximum   amount  of  data,  from  contact  information  to  random  content  as  media  and  photos,  out  
  18. 18.   18   of  the  crowd.  This  content  will  be  valuable  for  both  corporate  accounts  (interested  in   massive  data  exploitation)  and  for  premium  users  (interested  in  the  direct  usage  of  the   data  or  the  platform  itself)     Figure  4  :  Data  Model     1.2.2.4. Collaborative  (Peer)  Model       This  model  gives  priority  to  the  creation  through  a  collaboration  platform.  The  crowd,   here  considered  as  collaborators,  works  on  particular  parts  of  a  product.  Collaborators   progressively  propose  a  finalized  version  of  it.    
  19. 19.   19   The  finalized  product  will  either  be  sold  to  the  crowd  itself  or  to  real  customers  /  end   users.     Figure  5:  Collaborative  (Peer)  Model     As  it  is  quite  complicated  to  crowd-­‐source  the  full  process  of  creation,  this  model  is  a   “few-­‐to-­‐few”  relation,  or  at  best  “few-­‐to-­‐many”  relation.     The   set   of   characteristics   built   from   incentives   and   crowd’s   role   allow   a   better   understanding  of  the  factors  of  crowdsourcing  business  models,  which,  well,  chosen,   lead  to  a  more  efficient  implementation  and  a  positioning  on  the  markets.       These  four  crowdsourcing  business  models,  allow  us  to  determine  that  by  extension,   crowdsourcing  is  a  collaborative  process.       Developing   a   typological   approach   on   the   elements   of   crowdsourcing   leads   us   to   questioning   ourselves   about   the   related   concept   of   “innovation”.   We   previously   developed  that  the  concept  of  collective  intelligence  (Surowiecki,  2004)  and  co-­‐creation   (Prahalad, 2000)  were  different  but  still  closely  related.    
  20. 20.   20     Also,   the   paradigm   of   collaborative   innovation,   which   includes   open   innovation   (Chesbrough,  2006)  and  user  innovation  (von  Hippel,  2005)  overlaps  with  the  notion  of   Crowdsourcing.       1.2.3. Innovation     Before  going  any  further  into  analyzing  each  of  these  paradigms,  it  is  important  to  take   a  step  back  to  the  description  of  Innovation,  strictly  speaking.       Figure  6:  Closed  Innovation   Source:  Paul  Sloane     Innovation   as   we   know   it,   is   closed   to   any   outside   company’s   contribution.   Meaning   that  everything  is  created  within  the  company.  Ideas  are  generated,  then  developed,   built,   marketed,   distributed,   financed,   and   supported   internally.   “Closed   innovation   exploits  existing  internal  infrastructure  and  capabilities”  (Sloane,  2012).      
  21. 21.   21   Many  authors  tend  to  identify  the  crowdsourcing  with  Open  Innovation,  treating  both   as  synonyms  (CHANAL,  2010),  identifying  crowdsourcing  as  a  particular  type  of  Open   Innovation   (Nambisan)   (Sawhney,   2007),   (Burger-­‐Helmchen,   2010)   Aitamurto,  Leiponen  and  Tee,   inspired   by   Schenk   and   Guittard   ’s   figure   of   Crowdsourcing,  Open  Innovation,  User  Innovation  and  Open  Source  (Aitamurto,  June   2011),  distinguish  each  of  the  following  paradigms  with  the  following  figure.     Figure  7:  Crowdsourcing,  Open  Innovation,  User  Innovation  and  Open  Source     Jeffrey   Phillips,   in   his   chapter   “Open   Innovation   Typology”   of   the   book  “A   Guide   to   Open   Innovation   and   Crowdsourcing”,  distinguishes   the   crowdsourcing   as   a   way   of   implementing  Open  Innovation.  (Sloane,  2012)     Within   the   open   innovation   paradigm,   crowdsourcing   can   be   perceived   as   a   tool   to   gather  ideas,  innovations,  or  information  for  certain  purposes.  It  can  thus  be  viewed  as  a   method   of   open   innovation.   Also   “co-­‐creation”   combines   user   innovation   and   crowdsourcing  and  is  additionally  a  subset  of  the  open  innovation  concept     1.2.4. Open  Innovation       Henry  Chesbrough  coined  the  term  open  innovation.  He  defines  it  as  a  paradigm  that   assumes   firms  can   and   should   use   ideas   both   internal   and   external,   and   internal   and   external  channels  to  market.   Open  Innovation     Co-­‐Creation   User  Innovation     Crowdsourcing  
  22. 22.   22    It’s   “the   use   of   purposive   inflows   and   outflows   of   knowledge   to   accelerate   internal   innovation  and  expand  the  markets  for  external  use  of  innovation.”     Considered   as   “a   new   research   and   development   model”   it   shifts   away   from   the   traditional  closed  innovation  system,  as  defined  previously,  where  innovation  processes   are  mostly  generated  inside  the  organization  and  ideas  from  outside  of  the  organization   are  often  treated  with  “not-­‐invented-­‐here”  mentality.  (Aitamurto,  June  2011)     Open  innovation  establishes  new  paths  to  commercialize  the  innovation  done  within   the  company,  both  by  using  informal  and  formal  ties  to  partners,  for  example  through   exploiting  the  possibilities  for  revenue  streams  by  using  open  application  programming   interfaces.  (Chesbrough,  2006)  (Aitamurto,  June  2011)   Source:  Paul  Sloane     Figure  8:  Open  Innovation     The  similarity  between  the  crowdsourcing  and  open  innovation  is  because  they  are  both   based   on   the   same   paradigm:   knowledge   is   distributed   and   its   use   (in   the   R&D   processes,  for  example)  can  be  a  competitive  advantage.    
  23. 23.   23   Despite  the  similar  elements  and  characteristics  (i.e.:  reducing  risk,  increasing  the  speed   in  product  development),  there  are  author,  such  as  Brabham  and  Schenk  &  Guittard,   which  tend  to  separate  the  two  concepts.  The  two  main  differences  that  prevent  the  full   and   unambiguous   identification   between   the   two   types   of   processes   are   as   follows   (Schenk  &  Guittard,  2009):  (Schenk,  2009)   1. “Open  Innovation  focuses  only  on  the  innovation  process,  while  crowdsourcing   can  pursue  other  goals:  funding  through  crowdfunding,  discover  use  opinions   through  crowdvoting,  etc.     2. Strictly  speaking,  Open  Innovation  describes  the  interaction  between   firms  (through  patents,  joint  adventures,  et),  while  crowdsourcing  describes  the   interaction  between  a  crowdsourcer  (whether  a  company,  institution,  individual,   etc.)  and  the  crowd.”     We  can  surely  conclude  that  there  are  common  areas  between  crowdsourcing  and  Open   Innovation   since   both   can   use   the   same   business   model.   However,  not   all   crowdsourcing  initiatives  involve  Open  Innovation,  not  any  Open  Innovation  activity  has   to  be  carried  out  though  a  crowdsourcing  initiative.  (Estellés-­‐Arolas  &  Gonzales-­‐Ladron-­‐ de-­‐Guevera,  2012)     1.2.5. User  innovation       In  the  manufacturer-­‐centric  model,  manufacturers  develop  products  and  services  in  a   closed   way,   by   using   patents,   copyrights,   and   other   protections   to   prevent   imitators   from  free  riding  on  their  innovation  investments.  Also,  the  user’s  only  role  is  to  have   needs,   which   manufacturers   then   identify   and   fill   by   designing   and   producing   new   products  (von  Hippel,  2005)     In   opposition,   user-­‐centered   innovation   processes   are   very   different   from   this   traditional  model.  Indeed,  users  are  active  contributors  to  the  innovation  process.  (von   Hippel,  2005).  Lead  users  facing  specific  needs  (and  possibly  anticipate  market  needs),  
  24. 24.   24   ready   to   bear   some   of   the   costs   and   risks   associated   with   innovation   drive   the   User   Innovation.   User   Innovation   represents   the   “non-­‐linear”   dimension   of   the   innovation   process:   users   and   market   feedback   are   source   of   novelty   for   the   innovating   firm.   (Schenk,  2009)     The  possible  confusion  between  User  Innovation  and  Crowdsourcing  stems  from  the  fact   that  end  users  are  likely  to  be  found  within  the  crowd.  However  these  concepts  describe   very  different  phenomena.  Crowdsourcing  suggests  that  the  crowd  can  provide  firms   with  resources  under  specific  conditions,  but  it  does  not  imply  customer  feedback  in  the   innovation  process.  (Schenk,  2009)     As   potential   innovation   collaboration   opportunities   proliferate,   it’s   compulsory   understanding  how  best  to  leverage  crowd’s,  thus  collaborator’s  power.     From   crowdsourcing   to   open   innovation,   opportunities   are   numerous   when   using   “collaboration”,   however   to   ensure   its   sustainability,   it   is   necessary   to   study   its   applicability   in   terms   of   governance   and   extent   of   participation   and   define   the   boundaries   of   collaboration.   Each   Mode   of   collaboration   requires   different   dynamics   and  strategies  and  outcomes  vary  from  one  each  other.     Figure  9:  The  four  ways  to  collaborate    
  25. 25.   25     To  select  the  right  type  of  collaboration  options  for  a  business,  Pisano  and  Verganti,  in   their  paper  “Which  Kind  of  Collaboration  Is  Right  for  You?”  recommend  understanding   basics   of   the   four   collaboration   modes.   These   modes   differ   along   two   dimensions:   openness  or  Participation  (can  anyone  participate,  or  just  select  players?)  and  hierarchy   or  Governance  (who  makes  key  decisions—one  “kingpin”  participant  or  all  players?).     There  are  four  basic  modes  of  collaboration  developed  by  Pisano  and  Verganti.  “The   Four  Ways  to  Collaborate”  concept,  defines  the  following  modes  for  user  participation:       • Elite  circle:  a  closed  and  hierarchical  mode,     o The   company   selects   certain   participants   and   decides   which   ideas   get   developed.     • Innovation  mall:  an  open  and  hierarchical  mode,     o Anyone   can   offer   ideas   but   your   company   de-­‐   fines   the   problem   and   chooses  the  solution.     • Innovation  community:  an  open  and  flat  mode,     o Anyone   can   solicit   and   offer   ideas,   and   no   single   participant   has   the   authority  to  decide  what  is  or  isn’t  a  valid  innovation.     • Consortium:  a  closed  and  flat  mode.   o A  select  group  is  invited  to  offer  ideas.  But  participants  share  information   and  intellectual  property  and  make  critical  decisions  together.        
  26. 26.   26   1.3.Formulating  Hypothesis       As   exposed   earlier,   Internet   usage   has   changed   the   way   business   think   and   work.   Customers   are   demanding   more   customized   products,   and   to   meet   this   need,   companies   may   need   to   use   crowdsourcing   to   build   on   the   tacit   knowledge   from   customers’  experiences.  Today's  ultra-­‐competitive  environment  makes  it  difficult  to  be   successful  with  just  great  products,  services  and  traditional  marketing  alone.  Gaining   awareness  requires  great  communication  skills,  in  this  sense  getting  the  customer  to  be   notified   about   one   company's   product   or   service   makes   it   obvious   that   using   new   technologies   help   to   make   them   informed   purchasers.   The   evolution   related   to   the   technologies  leads  us  to  the  following  hypothesis     1.3.1. Traditional  In-­‐House  management,  as  a  stand-­‐alone  strategy,   is  no  longer  enough     Managing  business  processes  and  keeping  them  under  control  are  critical  for  companies   across  all  industries.  However,  for  many  companies  from  various  sectors,  redesigning   business   processes   and   management   often   leads   to   costs   savings   and   increased   efficiencies.  Crowdsourcing  appears  as  an  alternative  to  the  traditional  approach  as  it   takes  advantage  of  the  crowd’s  potential  available.     Under   some   circumstances,   crowdsourcing   is   a   powerful   tool   for   innovation   process.   However,  one  cannot  claim  firmly  that  crowdsourcing  can  always  lead  to  success  since   there  are  still  need  for  research  to  improve  the  process  and  consequently  the  outcome   of  the  crowdsourcing.     1.3.2. Crowdsourcing,  is  an  effective  business  model  for  any  type  of   business       Crowdsourcing  offers  unprecedented  potential  for  solving  tasks  efficiently  by  tapping   into  the  skills  of  large  groups  of  people.    Crowdsourcing  expands  a  company’s  ability  to  
  27. 27.   27   be  innovative,  customer  friendly  and  create  new  levels  of  customer  involvement  that   has  never  been  seen  before.     Products,   whether   traditional   goods   or   services,   rapidly   become   standards,   and   companies   can   find   competitive   advantage   by   differentiating   their   products   in   a   crowdsourcing   process   with   users   and   customers.   Furthermore,   customers   are   demanding  more  customized  products,  and  to  meet  this  need,  companies  may  need  to   use  crowdsourcing  to  build  on  the  tacit  knowledge  from  customers’  experiences.     Crowdsourcing  platforms  appear  to  be  interesting  organizational  forms  that  combine   community  dynamics  and  market  relationships,  internal  and  external  human  resources,   non-­‐financial  and  financial  rewards,  contribution  by  both  experts  and  amateurs,  etc.  It   may  be  that  these  organizations  are  the  prototypes  of  major  evolutions  in  ways  of  doing   business  in  the  near  future.     1.3.3. Crowdsourcing  guarantees  quality  work.     The   principle   of   crowdsourcing   is   that   “the   Many   Are   Smarter   Than   the   Few”.   By   canvassing   a   large   crowd   of   people   for   ideas,   skills,   or   participation,   the   quality   of   content   and   idea   generation   will   be   superior.   Crowdsourcing   actually   increases   the   quality   and   decreases   the   price,   compared   to   in-­‐house   management   or   online   freelancing.   It   can   also   be   a   lot   faster   and   lead   to   higher   quality   work   as   people   are   competing  against  each  other  (as  humans,  we  all  want  to  win  after  all).    The  amount  of   responses  leads  to  larger  choice  of  work.  However,  quality  can  be  difficult  to  judge  if   proper  expectations  are  not  clearly  stated.      
  28. 28.   28     Figure  10:  Crowdsourcing  Industry  Revenue  Growth     Millions  of  $US,  based  on  a  sample  of  15  leading  crowdsourcing  service  providers  (CSPs)     1.3.4. Crowdsourcing,  is  suitable  for  any  type  of  business       Crowdsourcing  brings  together  people  from  different  parts  of  the  world  and  different   sectors   of   business   to   work   together   on   a   project.   This   is   effectively   a   collection   of   different   fields   and   levels   of   expertise   that   would   not   otherwise   be   available   to   any   business.       Companies   of   all   shapes,   sizes   and   business   genres,   individuals,   non-­‐profit   organizations  and  even  government  groups  can  benefit  from  the  crowd  engagement.     Procter  and  Gamble,  IBM,  Dell,  Lego,  Starbucks,  Coca-­‐Cola,  and  Nokia  that  are  large   companies  are  among  the  big  adopters  of  crowdsourcing  practices.    
  29. 29.   29   It  has  helped  these  firms  develop  new  products  at  lower  cost,  brainstorm  new  ideas  and   emerging   trends,   solve   technical   problems,   design   logos   and   packaging,   gather   feedback  and  business  ideas,  and  design  advertising  campaigns.”  See  appendix  [2].       1.3.5. Every  task  can  be  crowdsourced.     Just   about   any   step   in   a   product   development   and   product-­‐marketing   model   can   be   crowd-­‐sourced.   You   can   crowd-­‐source   one   step   or   multiple,   including   fundraising,   naming,   conception,   development,   Q&A,   and   pricing,   depending   on   the   company   resources,  needs  and  goals.  The  biggest  benefit  is  that  crowdsourcing  is  a  very  cost-­‐ effective  way  to  resolve  business  issues.  The  biggest  disadvantage  is  that  if  not  properly   managed,  the  process  can  lose  control  and  spiral  into  a  time-­‐consuming  disaster.        
  30. 30.   30   2. RESEARCH  METHODOLOGY     2.1.Introduction     This  chapter  focuses  the  methodology  adopted  in  undertaking  this  research  and  begins   with   the   description   of   the   method   adopted   in   this   survey.   It   follows   the   four   step   sequences:   methodology   selection,   case   study   analysis,   problem   definition,   and   research  objectives.     2.2.  Methodology  Selection       2.2.1. Qualitative  research   To  gain  a  deeper  understanding  and  to  gather  an  in-­‐depth  understanding  this  thesis  will   be   driven   by   a   qualitative   research   methodology   on   accordance   with   exploratory   research  type.     Exploratory  data  analysis     We   find   ourselves   in   a   context   where   we   seek   to   understand   a   phenomenon   of   substance,  for  which  a  qualitative  study  proves  to  be  the  best  solution.  The  quantitative   study   did   not   seem   relevant   in   this   context,   because   the   phenomenon   in   question   seems  difficult  to  quantify  or  generalize.  Beyond  the  explanatory  function  that  is  the   qualitative  study,  it  will  help  to  develop  knowledge  about  issues  that  have  little  or  no   research  so  far  been  treated.  Therefore,  it  will  have  an  important  exploratory  function  in   order  to  better  understand  the  phenomenon  on  which  it  is  directed.     As  this  study  relies  on  secondary  research  such  as  reviewing  available  literature  and/or   data   and   more   formal   approaches   through   in-­‐depth   analysis   of   the   Capseo   Business   Model   the   exploratory   research   approach   is   the   most   appropriate.   These   data   have   been  analyzed  for  the  purpose  of  formulating  hypotheses.  
  31. 31.   31   We  will  identify  patterns  and  relationships  thanks  to  literature  review  and  Capseo’s       Process.       Problem  >  Data  >  Analysis  >  Model  >  Conclusions     2.2.2. Presentation  of  the  Case  Study     Capseo  is  a  startup  launched  in  France  (Lyon)  in  September  2009.  The  startup  appears   to  represent  a  original  case  of  crowdsourcing  with  high  potential  as  it  offers  a  platform   for   a   community   of   SEOers   and   web   marketing   professionals   to   manage   an   entire   project  management  process,  from  hiring  freelancer,  content  creation,  link  generation   and  eventually  to  payment  of  the  freelancers.  The  case  of  Capseo  is  also  particularly   interesting   in   that   its   aim   is   to   apply   crowdsourcing   to   web   marketing   projects   development   through   a   platform   that,   thanks   to   its   algorithms,   allowing   a   perfect   match  between  what  the  customers  expects  and  the  freelancers  skills  and  knowledge.   The  customer  keeps  an  eye  on  his  project  without  being  directly  in  contact  with  the   freelancers  working  or  even  knowing  who  they  are.       In  the  initial  Capseo  business  model,  humans  through  a  platform  internally  developed   managed  the  projects.  Meaning  that  when  a  new  project  came  in,  the  project  manager   was  in  charge  of  choosing  who  were  the  most  suitable  and  qualified  freelancers  for  a   given   project.   Freelancers   would   submit   their   work   in   that   platform   and   project   manager  would  review  and  approve  the  work.  Following  this  paper  Stakes,  limits  and   opportunities,   how   to   take   advantage   of   the   crowdsourcing   to   offer   a   strong   value   proposition  to  your  customers?  a  new  platform  was  developed  and  built  internally  too,  it   was   publicly   launched   in   the   US   market   and   investors   have   potentially   shown   their   interest  in  financing  the  future  of  Capseo.  The  business  model  was  based  on  the  idea   that  Capseo  would  fully  manage  the  process  management  through  the  platform.  From   customer  order  to  task  management,  an  even  online  payment  and  in  this  way  be  more   cost   effective.   It   became   clear,   however,   that   the   original   model   was   too   time  
  32. 32.   32   consuming  and  Capseo  is  progressively  abandoning  it.     Capseo,   thought   its   platform   is   more   of   an   intermediate,   whilst   continuing   with   the   concept  of  collective  work  done  by  a  community.  The  following  concept  was  adopted:   the  collective  created  work  could  still  be  managed  and  above  all  directly  be  reviewed  by   the   community   leaders.   The   hierarchy   would   establish   itself   with   thanks   to   the   evaluation   of   the   freelancers.   Capseo   would   earn   revenue   on   additional   services   for   firms  such  as  the  use  of  the  platform  for  agencies.  For  example,  web  agencies  would  be   granted  special  access  to  the  platform  and  use  Capseo’s  resources  and  full  database  to   manage  their  own  projects,  content  creation  and  other  requirements  in  collaboration   with  the  communities.  We  will  look  at  the  evolution  of  the  company’s  business  model  in   more  detail  later  on  in  the  company  section  of  this  paper.     2.2.3. Data  collection     The  collaborative  research  process  described  here  covers  a  18-­‐months  period  between   September  2011  and  May  2013.  Over  this  period,  the  research  covered  a  personal  work   managed  project,  customer  feedbacks,  the  comments  of  Capseo’s  staff,  including  the   CEO  of  the  company,  Anji  Ismail,  and,  somehow  the  third  parties  as  the  freelancers  and   the  customers.    This  period  can  be  split  into  two  main  phases.  Phase  1  focused  on  the   management  of  the  project  with  the  first  platform,  that  we  can  consider  as  elaboration   of   the   first   business   model,   the   launch   of   the   platform   and   the   appraisal   of   the   first   results.   After   a   few   months   of   business   activity   with   results   that   could   obviously   be   improved,   Capseo’s   founders   decided   to   rearrange   the   business   model,   giving   it   a   somewhat  different  orientation.  Phase  2  corresponds  to  the  design  and  development  of   this  new  platform,  which  required  the  development  of  a  algorithm  and  a  full  restructure   of   the   platform   as   it   was   thought   initially.   Considerable   modifications   were   brought   when  compared  to  the  first  platform.       The  data  collected  is  as  follows:     -­‐  The  empirical  material  of  the  projects    
  33. 33.   33   -­‐  The  theoretical  material  introduced  by  the  staff:  formal  presentations  and  brought  in   new  ideas  to  be  tested  by  the  CEO  and  to  help  him  in  his  analysis.       The   framework   used   to   guide   the   strategic   reflection   is   inspired   by   other   research   (Chesbrough   &   Rosenbloom,   2002;   Chesbrough   2006a:   109;   Osterwalder   &   Pigneur,   2005;  Schweizer,  2005;  Lecocq  et  al.,  2006;  Warnier  et  al,  2004).       Our   analysis   focused   on   value   creation   and   value   capture,   and   more   specifically   examined  the  three  following  building  blocks  that  characterize  a  business  model:  the   value  proposition  (including  the  offer  based  on  the  technology,  the  choice  of  market   segments   and   the   customer   interface   process),   the   business   model   infrastructure   (including  the  firm’s  resources,  competencies  and  capabilities,  the  structure  of  the  value   chain  and  the  positioning  and  relationships  of  the  firm  within  the  value  network),  and   the  revenue  model  (including  both  cost  structure  and  revenue  model).     2.2.4. Problem  definition       As  developed  previously  in  the  literature  review  marketers  used  to  rely  solely  on  what   has  been  working  for  them  in  the  past  using  industry  standard  approaches,  unwilling  to   explore  new  options.     Many  researchers  have  first  seen  the  crowdsourcing  as  a  competitor  to  traditional  in-­‐ house  management  rather  than  considering  it  as  a  complementary  process  that  could   enhance  mutual  growth  across  multiple  processes  by  building  synergies.     Research  question   Stakes,  limits  and  opportunities,  how  to  take  advantage  of  the  crowdsourcing  to  offer  a   strong  value  proposition  to  your  customers?          
  34. 34.   34     2.2.5.  Research  Objectives     This  study  aims  at  understanding  what  the  stakes  and  limits  of  having  a  crowdsourcing-­‐ oriented  strategy  and  the  impact  of  implementing  as  a  business  model  are.  In  light  of   the   previous   literature   analysis,   the   objective   will   be   to   set   up   a   scalable   strategy   combining  both  social-­‐media  and  traditional  marketing.      
  35. 35.   35   3. FIELDWORK       3.1.Capseo     Capseo  was  founded  in  2009  by  two  EMLyon  Alumni;  Anji  Ismail  &  Faouzi  Elyagoubi.   Though   originally   based   in   Lyon   at   EMLyon’s   incubator,   this   small   start-­‐up   has   expanded  to  the  United  States  by  opening  an  office  at  the  Plug  and  Play  Tech  Center  in   Sunnyvale,  California  in  April  2011.     3.1.1. What  does  Capseo  do?       Capseo   is   the   service   provider   of   an   innovative   e-­‐marketing   platform   based   on   the   power  of  crowdsourcing.  Capseo  acts  as  an  intermediary  between  the  “customers,”  or   the  companies  subscribing  to  their  e-­‐marketing  services  and  the  “influencers”  hired  to   expand   the   company’s   presence   on   the   web.   Capseo   oversees   the   coordination   of   marketing  efforts  generated  by  their  influencers  throughout  their  assignment.     3.1.2. Customers       Capseo   customers   may   be   individual   businesses   with   limited   resources   or   marketing   agencies   seeking   additional   assistance   for   a   project.   Relying   on   Capseo’s   resources   produces   higher   quality   results   in   a   faster   period   of   time   at   a   lower   cost.   Once   subscribing  to  the  Capseo  service,  customers  can  monitor  their  progress  through  the   online  portfolio.     3.1.3. Influencers/Suppliers       All  of  Capseo’s  influencers  are  hand  selected  for  each  task  by  the  staff  based  on  their   special   interests,   number   of   followers,   geographic   location   and   language   skills.  
  36. 36.   36   Influencers  must  meet  qualifications  and  undergo  rigorous  testing  in  order  to  qualify  to   meet  the  Capseo  standard  implemented  to  guarantee  quality  in  their  service.   3.1.4. Different  roles     The  main  process  of  Capseo  is  based  on  an  exchange  on  three  different  levels:       • Capseo  and  its  team,  which  is  the  intermediary  between  the  two  entities  that   follow     • Clients   and   Prospects   who   usually   come   to   Capseo   to   ask   how   do   their   performances  work  and  explain  their  needs  in  improving  their  ranking  in  Search   Engines,  and  at  the  end  possibly  increase  rather  their  conversion  rate  (if  they   own  a  e-­‐commerce  website).       • Influencers,  SEOers,  professional  internet  marketers  recruited  by  Capseo  by  the   intermediate   of   blogs   and   websites   for   their   skills   in   writing,   but   also   their   interests,  place  of  living  (…)     Figure  11:  Scheme  of  Capseo's  Organization       Capseo intermediate and organization Influencers  &   Partners     have  the  skills   Clients  &   Prospects     needs  
  37. 37.   37   3.1.5. Capseo  Crowdsourced  System     When  contacted  by  prospects,  a  dedicated  person  of  the  team  establishes  a  proposal,  or   commercial   proposition   and   a   planning   according   to   strategies   and   goals   with   the   concerned  project  manager  (or  other),  Capseo  concentrate  on  the  different  goals  that  it   has  fixed,  which  also  can  be  subdivided  into  two  main  categories  of  actions:   • SEO  (Search  Engine  Optimization)  or  natural  referencing   • SMO  or  Social  Media  Optimization     The  SEO  part  can  be  subdivided  into  three  other  categories  that  are:  the  technique  (all   that  implies  coding  properly),  the  contents  and  texts  that  need  to  be  improved,  and   finally  the  links  that  redirect  web  surfers  on  their  website  and  counted  by  the  number  of   “clicks”.  Natural  referencing  is  a  concept  referring  to  the  fact  that  websites  are  classified   on  search  engines  “naturally”  or  “organically”  (Google  is  the  major  search  engine  in  the   market,  and  throughout  the  world).  It  is  quite  easy  to  check  whether  or  not  a  website  is   well  structured  and  valuable  to  Search  Engines  such  as  Google.  Upon  that  a  website  will   be  well  ranked  on  search  engines  thanks  to  different  tools.  The  two  metrics  that  are   commonly  used  more  often  are  the  Alexa  Rank,  and  the  Page  Rank.  It  is  not  necessary   to  go  into  further  explanation  of  these  two  metrics.      Both  are  numbers,  the  first  one   telling  the  general  ranking  of  the  website  globally  and  in  its  country  of  origin  depending   on  the  number  of  “clicks”  generated,  and  the  Page  Rank  is  about  the  credibility  and   relevance  of  it.  The  lower  the  Alexa  Rank,  the  better.  The  higher  the  Page  Ranke  the   better.         The   SMO   part   is   on   another   hand   the   management   of   one   or   more   accounts   of   the   client’s   brand/website   on   different   social   medias   personal   or   professional,   from   Facebook   to   Twitter   and   LinkedIn   most   of   the   time.   This   is   often   asked   because   companies  are  aware  that  nowadays,  the  majority  of  the  prospects  and  clients  are  a  lot   more  influenced  on  the  web  than  by  the  TV.  That  comes  from  the  fact  that  our  principal   correspondents   are   people   from   our   siblings,   fellows,   school   or   work,   which   mean  
  38. 38.   38   people   “like   us”   that   can   easily   make   us   consume   what   they   have   because   we   trust   them  more  than  TV  commercials.     The   next   step   for   Capseo   is   to   search   for   adapted   and   qualified   influencers/writers/bloggers  to  have  matching  skills  and  expertise  to  clients  according   to   their   needs.   Most   of   the   time,   the   participation   of   influencers   is   about   articles   published   and   remunerated   that   are   called   sponsored   posts,   which   provide   more   backlinks  to  the  clients  in  the  SEO  section.       Freelancers  are  all  evaluated  to  be  part  of  the  Capseo’s  members.  To  prove  their  level  is   acceptable  freelancers  should  get  certified  by  first  answering  a  questionnaire  and  then   by   doing   assigned   tasks.   They   are   also   evaluated   all   along   their   membership.   Each   accomplished   task   is   evaluated   and   provides   points.   The   more   point   they   get,   the   higher  they  are  paid.  However,  if  a  task  is  refused,  the  freelancers  will  loose  points.         In   order   to   provide   clients   and   partners,   such   as   freelancers   with   a   real   interface   to   communicate  more  rapidly,  Capseo  created  and  is  monitoring  a  platform.    It  allows:   • Capseo  to  submit  the  tasks  to  the  selected  freelancers,     • The  customer  to  monitor  his  own  campaign     • The  freelancers  to  process  their  task                         Figure  13:  Capseo  Crowdsourcing  System       Capseo   PROJECT     Customer   Country:  USA   Task  1:     SEOer   Task  2:     Blogger     Country:  France       interacts       interacts        never  interacts  but   see  each  other    
  39. 39.   39   The   issue   is   that   everyone   could   see   information   that   was   sometimes   meant   to   be   confidential.  For  example,  Capseo  didn’t  want  the  customer  to  see  the  contact  details  of   the   freelancers   working   on   his   campaign   because   the   customer   could   get   in   contact   with  the  freelancers  and  ask  him  to  work  directly  for  him  rather  than  letting  Capseo   manage  the  campaign.     .     3.1.6. Industry  Analysis  Summary       Search  Engine  Marketing  (SEM)  and  Search  Engine  Optimization  (SEO)  are  some  of  the   most  common  ways  of  advertising  for  Internet-­‐based  companies.  Both  SEM  and  SEO   are  used  to  increase  the  visibility  of  websites  on  search  engine  page  results.     Google  continues  to  close  in  on  70  percent  market  share,  moving  up  0.1  percent  again   this   month   to   take   a   U.S.   record   67   percent   of   all   search   traffic   in   November,  comScore  reported.     An   expected   growth   of   16%   will   come   from   an   increase   in   spending   on   SEO,   social   media  marketing  and  mobile  advertising  while  another  54%  of  businesses  are  planning   to  increase  their  SEO  budget,  compared  to  10%  who  are  planning  to  decrease  it  (Brent   Rangen,   2011).   Another   study   shows   that   88%   of   US   marketers   are   increasing   their   social  media-­‐marketing  budget  in  US.  ("88  percent  of,"  2011)  If  the  SEM  industry  follows   the  current  trends,  it  will  be  a  $26  billion  industry  by  2013.     This  industry  analysis  is  based  on  the  model  of  Porter’s  five  forces.     3.1.6.1. Customer  Power     Over  90%  of  the  U.S.  companies  use  SEO  and  SEM  for  website  optimization.  SEM  has   become  essential  for  website  optimization  regardless  of  size  of  company.  As  demand   for   SEO   and   SEM   has   grown   over   the   past   10   years,   suppliers   have   also   steadily   increased   to   maintain   place   in   the   market.   However   there   is   a   more   need   of   SEM   marketers  as  the  budget  is  increasing.    
  40. 40.   40   As  a  result,  the  customer  has  a  moderate  bargaining  power.     3.1.6.2. Supplier  Power       We  can  consider  two  types  of  suppliers  for  Capseo:    Search  Engines  &  Influencers       For   search   engine,   Google   is   the   strongest   supplier   to   Capseo   as   Google   already   dominates  the  search  engine  market  share.    Search  engines,  such  as  Google,  Yahoo!   and   Bing   etc.,   as   well   as   social   media   sites,   such   as   Facebook,   Twitter   etc.   Google   dominates  the  American  search  engine  market  with  over  65.5%  of  the  market  share   (Brian  Womack,  2011)  and  Facebook  is  a  social  media  giant.       Also,   other   main   suppliers   are   the   influencers,   web   marketer   professionals,   bloggers   and  content  writer  for  which  the  bargaining  power  is  low.  If  freelancers  refuse  to  work,   there   are   thousands   of   people   can   replace   them.   If   content   writers   or   bloggers   that   supply  content  increase  price,  there  are  other  content  writers  and  bloggers  in  the  same   space  that  do  the  same  exact  work.  Capseo  can  hire  any  content  writers  and  bloggers  it   chooses  to  accomplish  tasks  and  can  bring  the  work  in  house  or  hire  new  contractors  or   new  companies  to  complete  the  work.       Therefore  the  bargaining  power  of  the  suppliers  in  this  industry  is  moderate.     3.1.6.3. Threat  of  New  Entrants       Capital  Requirement  and  Time     If   we   consider   the   competitive   advantage   of   Capseo:   its   algorithm   and   platform,   it   needs   goods   developers   and   engineers   to   develop   an   algorithm   and   site   (platform)   similar  to  Capseo  for  a  new  entrants.  And  it  takes  a  efforts  to  build  up  the  company  and   attract  users.  It  is  not  likely  that  competitors  will  enter  the  market  on  a  similar  platform.   However   a   big   company   with   millions   dollar   available   could   easily   develop   such   a  
  41. 41.   41   service.         Economies  of  Scale     The   threat   of   new   entrants   in   search   engine   market   is   relatively   low   because   competitors   are   all   over   the   world   and   has   captured   so   many   skills   about   search   engines,  a  new  entrant  would  have  easy  access  to  all  the  required  data  and  information   to  learn  how  to  do  SEO.  It  should  however  provide  even  better  search  results  at  faster   speed  and  presents  information  from  diverse  sources  in  a  more  unified  and  customized   way.   Absolute  Cost  Advantage     In   this   competitive   market,   the   new   entrants   have   to   possess   an   absolute   cost   advantage  comparing  to  others;  for  example,  new  entrants  have  to  come  up  a  better,   cheaper  and  more  efficient  plan  to  do  SEO  internationally.  New  entrants  should  have   lower  cost  of  producing  the  services  compared  to  Capseo.       Brand  Loyalty   For  new  entrants,  brand  loyalty  is  not  a  tough  entry  barrier  to  overcome  unless  the  rival   product   offering   is   of   fundamentally   and   significantly   greater   value.   However,   the   market  now  is  mature  enough,  without  a  necessary  path  dependency  to  gather  data  on   both  the  content  of  web  pages  and  the  search  histories  of  users.  With  such  competitive   and  growing  market  and  strong  competitors,  the  threat  of  entry  rather  high.     If  we  consider  only  the  activity  of  SEO  and  SEM  marketing,  it  has  been  around  for  few   years.  The  competitive  advantage  of  Capseo  should  make  the  difference  within  a  few   years.  However  for  now  it  is  relatively  easy  to  learn  SEO  and  SEM  marketing  and  start  a   company.    For  this  reason,  entry  barriers  for  newcomers  are  weak.     3.1.6.4. Threat  of  Substitutes       Despite   being   common   concepts,   SEO   and   SEM   are   not   only   utilized   as   methods   to  
  42. 42.   42   promote  and  stimulate  traffic  to  a  website.  There  is  also  a  “pay  per  click”  and  “pay  per   impression”  medium  of  advertisement  widely  used  for  marketing.  However,  SEO  and   SEM  are  cheaper  mediums  of  advertisement,  therefore  the  threat  of  substitutes  is  low.     Competitive  Intensity       The  intensity  of  competitive  rivalry  is  high  because  of:       Low  Exit  Barriers     Termination   of   a   low   number   of   workforce,   goodwill   and   legal   issues   would   not   too   much  to  quit  the  business.  Capseo  has  built  its  brand  value  laboriously  but  such  could   moderately  be  ignored.     New  companies  and  freelancers  offering  SEO  and  SEM  advertisement  are  growing  to   fulfill  a  high  demand  of  the  market.  Barriers  to  entry  are  low  while  the  customer  and   supplier  bargaining  power  is  moderate.  However  SEO  and  SEM  are  the  most  essential   marketing   services   and   have   the   advantage   of   being   relatively   inexpensive.   Google   AdWords,   Yahoo!   Search,   and   Microsoft   AdCenter   are   major   players   in   pay-­‐per-­‐click   advertising;   Facebook   in   social   media   marketing   and   Odesk   and   ELancers   in   hiring   freelance  SEOers.  Since  there  are  no  sign  of  a  slowing  growth,  Capseo  has  the  potential   to  be  very  profitable  in  this  industry.     3.1.6.5. Conclusion     The  Five  Force  model  helps  analyzing  the  external  environment  of  Capseo  in  a  detailed   and  organized  way.     It  shows  that  the  threat  of  entry  is  low  because  of  the  domination  of  a  few  companies  in   the  market.  Besides  that,  the  bargaining  power  of  customers  is  strong  as  their  switching   costs  are  low.  Moreover,  the  bargaining  power  of  supplier  is  medium  as  the  number  of   suppliers  is  huge  in  the  market.  Furthermore,  the  intensity  of  competitive  rivalry  is  high  

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