The Explainer: Blue Ocean Strategy

Summary

In 1984, Guy Laliberté co-founded Cirque du Soleil, revolutionizing the circus industry. By applying the Blue Ocean strategy, Cirque created a new market by blending circus and theater, targeting a sophisticated adult audience willing to pay premium prices. The company eliminated traditional circus elements like animal acts and star performers, achieving both differentiation and low cost. This innovative approach allowed Cirque to thrive in a declining industry and remain competitive for over a decade, demonstrating the power of creating new markets and shifting industry boundaries for sustained success.

Takeaways

• 😀 Cirque du Soleil was co-founded in 1984 by Guy Laliberté, and quickly became a major success in the circus industry.
• 😀 Despite the long-term decline of the circus business, Cirque achieved revenues that took traditional companies like Ringling Brothers over a century to attain.
• 😀 The success of Cirque can be understood through the concept of red oceans and blue oceans, introduced by W. Chan Kim and Renée Mauborgne.
• 😀 Red oceans represent crowded industries with fierce competition, while blue oceans are untapped markets where demand is created rather than fought over.
• 😀 Cirque du Soleil created a blue ocean by blending the circus with theater, attracting a new, adult audience willing to pay premium prices.
• 😀 The company eliminated costly traditional circus elements like animal acts and star performers, creating a more artistic and sophisticated show.
• 😀 Cirque’s success was driven by value innovation, where they achieved both differentiation and low cost, a core principle of blue ocean strategy.
• 😀 Blue ocean strategy involves creating new market spaces by altering industry boundaries, as Cirque did by transforming the circus into a theatrical experience.
• 😀 Companies that create blue oceans can benefit for 10 to 15 years, as their innovation is difficult for competitors to replicate.
• 😀 To realize blue ocean potential, companies should chart a course beyond traditional industry boundaries, creating entirely new market spaces.

Q & A

What year did Guy Laliberté co-found Cirque du Soleil?

Guy Laliberté co-founded Cirque du Soleil in 1984.

How did Cirque du Soleil manage to thrive despite the decline in the traditional circus industry?

Cirque du Soleil thrived by applying the concept of Blue Ocean Strategy, which allowed it to create a new market space by blending circus and theater, attracting a new audience willing to pay premium ticket prices.

What is the difference between red oceans and blue oceans in business strategy?

Red oceans represent existing industries with well-defined competition where companies compete for existing demand. Blue oceans, on the other hand, are new market spaces where demand is created rather than fought over, often by altering industry boundaries.

What are the characteristics of red ocean markets?

Red ocean markets are highly competitive, with companies striving to outperform rivals and grab a larger share of existing demand. As competition intensifies, the market becomes saturated and highly contested.

How did Cirque du Soleil implement Blue Ocean Strategy?

Cirque du Soleil blurred the lines between circus and theater by creating more artistic and sophisticated acts, which attracted a new group of customers—adults willing to pay premium prices. They also eliminated traditional circus elements like animal acts and star performers.

What is value innovation in Blue Ocean Strategy?

Value innovation is the simultaneous pursuit of differentiation and low cost. It allows companies to create a new market space without sacrificing value or increasing costs, as Cirque du Soleil did with its innovative approach.

What are the benefits of creating a blue ocean?

Companies that create blue oceans typically enjoy a competitive advantage for 10 to 15 years, as blue oceans are difficult for rivals to copy. This long-term benefit is due to the uniqueness of the market space they create.

How did Cirque du Soleil attract a new customer base?

Cirque du Soleil attracted a new customer base by offering more sophisticated and artistic performances, appealing to adults who were willing to pay theater-level prices for a circus experience.

What traditional circus elements did Cirque du Soleil eliminate?

Cirque du Soleil eliminated traditional circus elements such as costly animal acts and star performers, focusing instead on artistic performances that emphasized creativity and sophistication.

Why is the concept of Blue Ocean Strategy important for businesses?

Blue Ocean Strategy is important because it enables companies to move away from saturated, highly competitive markets and create new, uncontested market spaces. This leads to long-term growth and profitability by creating demand rather than competing for existing demand.