A Cirque du Soleil Blue Ocean Strategy
Created in 1984 by a group of street performers, Cirque’s productions have been seen by almost forty million people in ninety cities around the world. In less than twenty years Cirque du Soleil has achieved a level of revenues that took Ringling Bros. and Barnum & Bailey—the global champion of the circus industry—more than one hundred 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, in turn, declining revenue and profits. There was also increasing sentiment against the use of animals in circuses by animal rights groups. Ringling Bros. and Barnum & Bailey set the standard, and competing smaller circuses essentially followed with scaled-down versions.
From the perspective of competition-based strategy, then, the circus industry appeared unattractive. Another 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 Ringling Bros. and Barnum & Bailey. 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 several times as great as traditional circuses for an unprecedented entertainment experience.
Significantly, one of the first Cirque productions was titled “We Reinvent the Circus.”
[Many people] think it means accept failure with dignity and move on. The better, more subtle interpretation is that failure is a manifestation of learning and exploration. If you aren’t experiencing failure, then you are making a far worse mistake: You are being driven by the desire to avoid it. And, for leaders especially, this strategy — trying to avoid failure by out-thinking it — dooms you to fail.
Differentiation between products is driven by the activities of the firm: product design, product performance, quality, branding, advertising, distribution, and so on. The more a product is differentiated along a dimension consumers care about, the higher price premium it can demand. So, Starbucks can charge $3.50 for a cappuccino, Hermès can charge $10,000 for a Birkin bag, and they can do so largely irrespective of input costs.
A company shouldn’t get addicted to being shiny, because shiny doesn’t last.
Any goal can be pursued in a variety of ways. It is the job of strategy to choose the most effective course of action for attaining objectives.