Market Growth In Difficult Environments: Blue Ocean Strategy
This case study is an edited extract from W. Kim Chan and Renee Mauborgne, “ Blue Ocean Strategy” Harvard Business Review, vol. 82, no. 10, (October) 2004
This case study is also published in the book, Blue Ocean Strategy by the same authors and published by Harvard Business Books in 2005
A one-time accordion player, stilt walker and fire-eater, Guy Laliberte is now CEO of one of Canada’s largest cultural exports, Cirque Du Soleil. Founded in 1984 by a group of street performers, Cirque has staged dozens of productions seen by some 40 million people in 90 cities around the world. In 20 years, Cirque has achieved revenues that Barnum and Baily – the world’s leading circus- took a century to attain.
Cirque’s rapid growth occurred in an unlikely setting. The circus industry was, and arguably still is, in long-term decline. Alternative forms of entertainment – sporting events, TV, video games- were casting a growing shadow. Children, the mainstay of the circus audience, preferred Playstations to circus acts. There was also rising sentiment fuelled by animal rights groups, against the use of animals, traditionally an integral part of the circus.
On the supply side, the star performers that other circuses relied on to draw the crowds could name their own terms. As a result the industry was hit by steadily decreasing audiences and increasing costs. What’s more any new entrant to this business would be competing against a formidable incumbent that for most of the last century had set the industry standard.
How did Cirque profitably increase revenues by a factor of 22 over the last 10 years in an unattractive environment? The tagline for one of the first Cirque productions is revealing: “We reinvent the circus.” Cirque did not make its money by competing within the confines of the existing industry or by stealing customers from Barnum and the others. Instead it created uncontested market space that made the competition irrelevant.
Cirque pulled in a whole new group of customers who were traditionally non-customers in the industry – adults and corporate clients who had turned to theatre, opera or ballet and were therefore prepared to pay several times more than the price of a conventional circus ticket for an unprecedented entertainment experience.
At the time of Cirque’s debut, circuses focussed on benchmarking one another and maximising their shares of shrinking demand by tweaking traditional circus acts. They included trying to secure more and better-known clowns and lion-tamers. Efforts raised circus cost structures without substantially altering the circus experience. The result was rising costs without rising revenues, and a downward spiral in overall circus demand.
Enter Cirque Du Soleil. Instead of following the conventional logic of outpacing the competition by offering a better solution to the given problem – creating a circus with even bigger fun and thrills- it redefined the problem by offering people the fun and thrill of a circus and the intellectual sophistication and artistic richness of theatre.
In designing performances that landed both these punches, Cirque had to re-evaluate the components of the traditional circus offering. What the company found was that many of the elements considered essential to the fun and thrill of the circus were unnecessary and in many cases costly. For instance, most circuses offer animal acts. These are a heavy economic burden, because circuses have to shell out no only for the animals, but also for their training, medical care, housing, insurance and transportation. Yet Cirque found that the appetite for animal shows was rapidly diminishing because of rising public concern about the treatment of circus aninmals and the ethics of exhibiting them.
Similarly, although traditional circuses promoted their performers as stars, Cirque realised that the public no longer thought of...