JOURNAL ARTICLE | Harvard Business Review | | March 2007
Creating Blue Oceans
Twenty years after its foundation, Cirque de Soleil is one of the largest Canadian circuses, and is just as profitable as Ringling Bros Circus, one of the most well known American circuses, which had been in existence for 100 years.The authors offer the following metaphor to describe Cirque de Soleil’s success. The universe consists of two oceans: blue and red. Red ocean is represented by existing industries. The industry boundaries in the red ocean are clearly defined and competition dictates the rules of the game. Companies fight for customers. And the more companies enter red oceans, the fewer there remain opportunities for companies to enhance their profitability there. Unique products are quickly benchmarked and the waters of the red ocean become even bloodier.Blue oceans are uncontested market spaces which are not touched by the competitive fights. Here the demand has to be created from zero. Blue oceans are born either when companies create completely new industries (e.g. E-Bay invented a business model of e-auction) or when companies start changing red oceans from within. By destroying the boundaries between the circus and the theatre, Cirque de Soleil created something really new from within the red ocean.The authors (Kim and Mauborgne) studied 150 such cases, which competed in 30 industries over the past 100 years. It turns out that all successful companies used the logic of Blue Ocean Strategy, which has little in common with traditional methods of competition in the red ocean.The authors suggest that finding blue oceans is profitable from the standpoint of company growth and its profitability. If companies understand the Blue Ocean Strategy, they will be more successful in the growing business universe.