It’s generally believed that the way to beat your rival is to outperform or outpace them. But in business, the better way to win is to create uncontested new market space where no competition exists.
Consider Cirque du Soleil, a performance that broke away from traditional circus shows by borrowing ideas from Broadway.
Cirque’s productions to date have been seen by some 150 million people in over three hundred cities around the world. In less than twenty years since its creation, Cirque du Soleil has achieved a level of revenues that took Ringling Bros. and Barnum & Bailey—the once global champions of the circus industry—more than one hundred years to attain.
What makes this growth all the more remarkable is that it was achieved in a declining industry. 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 video games 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.
Ringling Bros. and Barnum & Bailey had long set the standard for what makes a circus, and competing smaller circuses essentially followed with scaled-down versions: offering animal shows, hiring star performers, presenting multiple show arenas in the form of three rings, and pushing aisle concession sales.
In contrast, Cirque du Soleil did away with all of the factors that had long been taken for granted in the traditional circus industry. This included the use of animals, one of the most expensive elements (including not only the cost of the animals but also the training, medical care, housing, insurance, and transportation) and a source of increasing public discomfort.
The lasting allure of the traditional circus came down to only three key factors: the tent, the clowns, and the classic acrobatic acts such as the wheelman and short stunts.
So Cirque du Soleil kept the clowns but shifted their humor from slapstick to a more enchanting, sophisticated style. It glamorized the tent, an element that, ironically, many circuses had begun to forfeit in favor of rented venues.
Seeing that this unique venue symbolically captured the magic of the circus, Cirque du Soleil designed the classic symbol of the circus with a glorious external finish and a higher level of comfort, making its tent reminiscent of the grand old circuses. Gone were the sawdust and hard benches. Acrobats and other thrilling acts retained, but their roles were reduced and made more elegant by the addition of artistic flair and intellectual wonder to the acts.
At the time of Cirque’s debut in the early 1980s, other circuses focused on benchmarking one another and maximizing their share of already shrinking demand by tweaking traditional circus acts. This included trying to secure more famous clowns and lion tamers, a strategy that raised circuses’ cost structure without substantially altering the circus experience. The result was rising costs without rising revenues, and a downward spiral of overall circus demand.
These efforts were made irrelevant when Cirque du Soleil appeared. Neither an ordinary circus nor a classic theater production, Cirque du Soleil paid no heed to what the competition did.
Instead of following the conventional logic of outpacing the competition by offering a better solution to the given problem—creating a circus with even greater fun and thrills—it sought to offer people the fun and thrill of the circus and the intellectual sophistication and artistic richness of the theater at the same time; hence, it redefined the problem itself.
By breaking the market boundaries of theater and circus, Cirque du Soleil gained a new understanding not only of circus customers but also of circus noncustomers: adult theater customers. Cirque du Soleil created a new market space in the entertainment sector, generating strong, profitable growth as a result.
Cirque du Soleil succeeded because it realized that to win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition.
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.”
To understand what Cirque du Soleil achieved, imagine a market universe composed of two sorts of oceans: red oceans and blue oceans. Red oceans represent all the industries in existence today. Blue oceans denote all the industries not in existence today. This is the unknown market space.
In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here, companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cut-throat competition turns the red ocean bloody.
Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth.
By observing issues with the circus industry’s outdated business model, Cirque du Soleil saw an opportunity.
To avoid being left behind, companies need to look across trends and ask themselves probing questions to determine which aspects of the industry’s traditional business model they should reduce or eliminate to manage costs, and what elements they should raise or create to differentiate themselves from the competition.
Having failed to keep up with a changing industry, Ringling Bros. is now forced to play defense, while Cirque du Soleil is continuing to push the boundaries of the circus and awe audiences around the world.
This post is adapted from Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant (2015) and is reprinted by permission of Harvard Business Review Press.