An interesting example of Blue Ocean Strategy

One of Canada’s largest cultural exports is Cirque du Soleil. Though it is quite obvious from the name, but for those who haven’t heard about it, it is a unique concept-based presentation of contemporary circus! A Canadian entertainment company, it self-describes itself as a "dramatic mix of circus arts and street entertainment." Based in Montreal, Quebec, Canada, and located in the inner-city area of Saint-Michel, it was founded in Baie-Saint-Paul in 1984 by two former street performers, Guy Laliberté and Daniel Gauthier.

Cirque’s productions expanded rapidly through the 1990s and 2000s, going from one show to 19 shows in over 271 cities on every continent except Africa (until March 2011, as their arena show Saltimbanco will tour South Africa) and Antarctica. In the span of nearly three decades, Cirque du Soleil has achieved a level of revenues that took Ringling Bros. and Barnum & Bailey – the global champions of circus industry – more than 100 years to attain.

What makes this rapid growth all the more remarkable is that it was not achieved in an attractive industry but rather in a declining industry in which traditional strategic analysis pointed to limited potential for growth. Supplier power on the part of star performers was strong. So was buyer power. Alternative forms of entertainment – ranging from various kinds of urban live entertainment to sporting events to home entertainment – cast an increasingly long shadow. Children cried out for PlayStations rather than a visit to the traveling circus. Partially as a result, the industry was suffering from steadily decreasing audiences and, I turn, declining revenue and profits. There was also increasing sentiment against the use of animals in circuses by organizations like PETA. From the perspective of competition based strategy, thus, the circus industry appeared unattractive.

The compelling aspect of Cirque du Soleil’s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children. Cirque du Soleil did not compete with its major competitors. Instead, it created uncontested new market space that made the competition irrelevant. It appealed to a whole new group of customers: adults and corporate clients prepared to pay a price that was several times as great as traditional circuses for an unprecedented entertainment experience. Thus comes the concept of Blue Ocean. Its theatrical, character-driven approach and the absence of performing animals helped define Cirque du Soleil as the contemporary circus ("nouveau cirque") that it remains today.

Each show is a synthesis of circus styles from around the world, with its own central theme and storyline. They draw the audience into the performance through continuous live music, with performers rather than stagehands changing the props.

A market universe is composed of two oceans:

1. Red Oceans

They represent all the industries in existence today which try day and night to beat each other. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.

2. Blue Oceans

They represent the untapped market space, demand creation and the opportunity for highly profitable growth. Some blue oceans are created well beyond existing industry boundaries, but most are created from within red oceans by expanding existing industry horizons, as Cirque du Soleil did. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set.