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Competing in overcrowded
industries is no way to
sustain high performance.
The real opportunity is to
create BLUE OCEANS of
uncontested market space
Cirque du Soleil
Founded in 1984 by street performers
Stages productions seen by 40 million
people in 90 cities around the world
Cirque du Soleil has achieved in 20
years time what Ringling Bros. And
Barnum & Bailey the worlds leading
circus more than 100 years to attain
Circus Industry Negatives
When CDS was founded the circus industry
was in decline (and is still declining)
Other forms of entertainment was available
(sports, TV, videos)
Animal rights issues
High priced Circus star performers
Ringling and Barnums name a barrier to
entry (more than 200 years combined)
CdS Blue Ocean Strategy
Revealing Tagline : We Reinvent the Circus
CdS did not make money by competing within
the confines of an existing industry
CDS did not steal from Ringling or Barnum
CdS created uncontested market space that
made the competition irrelevant
RESULT : CdS increased revenues by a
factor of 22 over the last 10 years
BLUE OCEAN
vs.
RED OCEAN
Red Oceans represent all the industries in
existence today the known market space
Red Oceans industries boundaries are
defined and accepted
Red Oceans competitive rules are well
understood
Whats it like in a Red Ocean?
Companies try to outperform rivals in order to
grab greater share of existing demand
Space gets more crowded
Prospects for profits and growth reduced
Products turn into commodities
Increasing competition turns water bloody
What is the BLUE OCEAN?
Blue oceans denote all industries NOT
in existence today
The Unknown market space
Untainted by competition
In Blue Oceans, demand is created not
fought over
In Blue Oceans, growth is profitable and
rapid
2 ways to create Blue Oceans
Companies can give rise to complete
new industries, example : Ebay with the
online auction industry
Created WITHIN a Red Ocean when a
company alters the boundaries of an
existing company, example : Cirque du
Soleil
Authors studies on Blue
Oceans
Cirque du Soleil is just one of more than
150 blue ocean creations
Studies encompass over 30 industries
Data used stretches more than 100
years
Analyzes companies that create blue
oceans vs. companies that are
TRAPPED in red oceans
Insights on Blue Ocean
Strategy
There is a consistent pattern of strategic
thinking behind the creation of new markets
and strategies (called Blue Ocean Strategy)
Blue Ocean strategies part with traditional
models focused on competing in existing
market space
Managers failure to differentiate between
blue and red ocean strategy lies behind the
difficulties many companies encounter to
break from the competition
Once upon a time
The term blue oceans is NEW but it has
always been with us
What industries were unknown 100 years
ago?
Automobiles
Music recording
Aviation
Petrochemicals
Pharmaceuticals
Management Consulting
AUTOMOBILE
Key Blue Ocean Blue Ocean Driven by At time of
Creations created by a new technology or creation, industry
entrant or value pioneering? attractive or
incumbent? unattractive?
Ford Model T New Entrant Value (mostly Unattractive
existing
technologies)
GMs car for Incumbent Value (some new Attractive
every purse and technologies)
purpose
Japanese fuel- Incumbent Value (some new Unattractive
efficient cars technologies)
Structuralist or
Environmental Reconstructionist
Determinism worldview
worldview Market boundaries and
Companies and industries can be
managers are at the reconstructed by the
mercy of economic actions and beliefs of
forces greater than industry players
themselves
The Simultaneous Pursuit of
Differentiation and Low Cost
Blue Oceans are created in the region where
a companys action affects BOTH its cost
structure and its value proposition to buyers
Cost savings are made from eliminating and
reducing the factors an industry competes on
Buyer value is lifted by creating elements the
industry NEVER OFFERED
Over time, costs are reduced further as scale
economies kick in, due to the high sales
volumes that superior value generates