Strategic Insights from Cirque du Soleil: Creating Blue Oceans

1. Bunde Walker James Yost Trent Hemann

2.  Guy Laliberté- CEO  Created in 1984  Canada’s largest cultural export  Achieved a level of revenues that took Ringling Bros. and Barnum and Bailey 100 years to attain- in less than 20 years

3.  Rapid growth was achieved in a declining industry.  Alternative forms of entertainment ◦ Urban live entertainment (Concerts) ◦ Home entertainment (games/movies) ◦ Sporting events  Created an uncontested new market space ◦ Appealed to new group of customers  Adults and Corporate clients

4.  As the market space becomes more crowded, opportunity for profits and growth are reduced. ◦ Creates a Red Ocean  Most blue oceans are created within red oceans by expanding existing industry boundaries.  EX: Cirque du Soleil

6.  Blue oceans are a feature of business life, past and present.  Most of today's industries didn’t exist three decade ago. ◦ 100 yrs ago?  Ex: Automobiles, aviation, music recording… ◦ 30 yrs ago? –  EX: Cell phones, express package delivery, discount retail… ◦ 50 yrs from now…

7.  Industries continuously evolve and never stand still.  In 1997, the SIC system published by the U.S. Census was replaced by the NAICS. ◦ New system expanded the ten SCI sectors into twenty sectors. ◦ Shows the expansion of new industry territories.

8.  Study of business launches in 108 companies ◦ 86% Line Extensions  62% of total revenues and only 39% of total profits ◦ 14% aimed at creating blue oceans  38% of total revenues and 61% of total profits ◦ Performance benefits obvious

9.  Accelerated technological advances  Increasing number of industries  No clear evidence of an increase in worldwide demand  Major product and service categories becoming similar

10.  Business literature uses the company as basic unit of analysis ◦ In Search of Excellence  Within two years of publication companies began to slip  2/3 of firms had fallen within five years ◦ Built to Last  Looking for successful habits of visionary companies  Much of success a result of industry performance rather than companies

11.  Strategic move ◦ Set of managerial actions and decisions involved in making a market-creating business offering  The right unit of analysis for explaining the creation of blue oceans ◦ Evident across industries and through time ◦ Did not find excellent company or industry ◦ Consistent and common patterns of strategic moves

12.  Caught in the red ocean was a result of a conventional approach ◦ Used competition as benchmark  Creators of blue oceans followed value innovation ◦ Make competition irrelevant ◦ Create a leap in value

13.  Take value from another industries but break away from traditional aspects ◦ For Cirque du Soleil  No animals  Not only “star” performers  Audience don’t view equal to movie stars  Eliminate Multiple show arenas (3 ring)  Angst among spectators  Distractions, and fear of missing something  Cost  Aisle concession stands  Audience did not like high prices

14. ◦ Tent  Glamorized by cirque  Others started to move away in favor of arenas  Reminiscent of grand circus tents of past ◦ Clowns  No longer slapstick  Enchanting, sophisticated ◦ Classic acrobatic acts  Reduced focus  More legitimate with artistic flair

15. ◦ Theater aspects  Story lines  Vague  Ties together, harmony  Artistic and Musical  Original score and assorted music  Music and lights become driving force, giving show more sophistication  Dance  Multiple productions  Break away again from circus industry  People want to come back

16. ◦ New form of live entertainment ◦ Similar to theater and circus, but with more value, almost Two for One for audience ◦ Lower cost without high cost elements of circus, better value ◦ Value Innovation is drawn from utility and price, only achieved when a company’s utility, price and cost are aligned ◦ Whole system approach make a blue ocean strategy sustainable

17.  Innovations that affect one aspect are different ◦ Could lower cost but not add utility (not blue ocean ◦ Can secure or lift a company’s position in an industry, will not necessarily create a blue ocean  Value Innovation is more than Innovation ◦ Orient whole system to achieve a leap for customers and the company ◦ Innovation will not necessary create value innovation if not treated correctly

18.  Red Ocean- Industry’s structural conditions are given and firm (structuralist view)  Blue ocean- Market boundaries and Industry structure are not given (reconstructionist view)  By reconstructing create something new, new industry ◦ Cirque a circus or a theater ◦ No agreed on industry name

19.  How do companies succeed in blue oceans ◦ High risk ◦ How to maximize opportunities ◦ If not understood, odds against you  No riskless strategies ◦ Companies do not act on calls to expand industries because red oceans can take all focus ◦ Not taking “blue ocean call” seriously

20.  Blue oceans look across conventional boundaries of competition ◦ 6 boundaries of competition  Alternative industries  Strategic groups  Buyer groups  Complimentary products  Functional orientation of industry  Time

22.  Blue oceans are untapped market space, demand creation, and the opportunity for highly profitable growth.  There is no blue ocean companies, just blue ocean strategies.  Take the classic parts of the industry and use them as a cornerstone to relate back