In 1984, Guy Laliberté co-founded Cirque du Soleil, and what followed was a remarkable success story. Cirque quickly achieved revenue levels that took other long-standing circus incumbents, like Ringling Brothers, over a century to attain. This achievement was even more impressive considering the circus industry was experiencing a decline.
The secret to Cirque’s success lies in the concept of the business universe, as proposed by professors W. Chan Kim and Renée Mauborgne. They introduced the idea of two market types: red oceans and blue oceans. Red oceans represent existing industries with well-defined competition and boundaries, where companies strive to outperform rivals and capture existing demand. However, fierce competition can lead to market saturation and diminishing returns.
On the other hand, blue ocean strategy focuses on creating and capturing unknown markets, where demand is generated rather than fought over. Cirque du Soleil embraced this approach, blurring the lines between circus and theater. By making their acts more artistic and sophisticated, Cirque attracted a new segment of customers – adults willing to pay premium ticket prices, similar to theater or opera tickets. To achieve this, Cirque eliminated costly animal acts and star performers, setting them apart from the traditional circus.
Cirque’s strategy was a classic example of value innovation, where they pursued both differentiation and low cost. This unique approach allowed them to invent a new market space, creating profitable opportunities without compromising on value or cost.
Based on their study of over 30 industries, Kim and Mauborgne found that companies that create blue oceans typically enjoy a competitive advantage for 10 to 15 years, as they are difficult for rivals to imitate. Cirque’s success showcased the potential of blue ocean strategy in creating sustained growth and competitive advantage.
Cirque du Soleil’s ability to thrive in a challenging business environment was a result of embracing the blue ocean strategy. By charting a course beyond traditional industry boundaries, Cirque created a new market space, revolutionizing the circus industry and achieving unparalleled success. The lesson for other companies lies in the power of value innovation and the potential to discover blue oceans of opportunity in a world of fierce competition.
About Blue Ocean Strategy
Blue Ocean Strategy is a approach to strategic planning that focuses on creating uncontested market space and tapping into new, unexplored opportunities. Coined by W. Chan Kim and Renée Mauborgne, this strategy challenges the conventional thinking of competing in red oceans, where fierce rivalry exists among established players. Instead, it encourages businesses to venture into blue oceans, where competition is irrelevant, and innovation leads to exceptional growth. In this essay, we will explore the concept of Blue Ocean Strategy and outline the key steps to implementing it successfully.
Understanding Blue Ocean Strategy
In the traditional market scenario, businesses often engage in cutthroat competition, trying to outperform rivals by capturing a larger share of existing demand. This leads to red oceans, symbolizing the intense fight for profits and market share. However, in blue ocean strategy, the focus shifts from competing within existing industry boundaries to creating new markets where demand is untapped and uncontested.
The Steps behind Blue Ocean Strategy
1. Reconstruct Market Boundaries
The first step in the Blue Ocean Strategy is to challenge the existing industry boundaries. Companies must identify the factors that the industry takes for granted and rethink them. This involves exploring alternative ways to deliver value and understanding the needs and preferences of non-customers. By doing so, businesses can break away from traditional competition and redefine their market space.
2. Focus on Value Innovation
Value innovation is a crucial aspect of the Blue Ocean Strategy. It involves the simultaneous pursuit of differentiation and low cost. Instead of compromising on value or trying to be the lowest cost provider, businesses must seek ways to create a leap in value for customers while reducing costs. This approach allows companies to offer unique value propositions that set them apart from competitors.
3. Create Buyer Utility
To succeed in blue oceans, businesses must understand the core drivers of buyer utility. This means discovering what truly matters to customers and addressing their unmet needs. By offering products or services that provide significant value and utility, companies can attract new customers and retain them over the long term.
4. Build a Compelling Business Model
A compelling business model is essential for the successful implementation of Blue Ocean Strategy. Companies must align their activities and resources to support the value proposition they offer. This might involve reconfiguring the value chain, partnerships, and revenue streams to optimize profitability and scalability.
5. Execute with Agility
Implementing Blue Ocean Strategy requires flexibility and agility. Companies must continuously adapt to changing market dynamics and customer preferences. This might involve experimentation, rapid prototyping, and a willingness to learn from failures. Being agile enables businesses to stay ahead of the competition and retain their blue ocean advantage.
6. Communicate the Strategy
To ensure that the entire organization is aligned with the Blue Ocean Strategy, effective communication is vital. Leaders must articulate the vision, goals, and execution plan to inspire and engage employees at all levels. A shared understanding of the strategy fosters a culture of innovation and collaboration, driving the organization towards success.
Blue Ocean Strategy offers a transformative approach to strategic planning, guiding businesses away from cutthroat competition in red oceans to uncharted waters of uncontested market space. By reconstructing market boundaries, focusing on value innovation, and creating buyer utility, companies can unlock new opportunities for growth and profitability. Embracing agility and effective communication further solidifies the success of this strategic approach. As the business landscape continues to evolve, Blue Ocean Strategy remains a powerful tool for businesses seeking sustainable competitive advantage and unprecedented success.