Cirque Du Soleil: In 1980, the streets of Baie-Saint-Paul, a town located near the St. Lawrance River in Quebec Canada, were surprised by a company of artists led by Gilles Ste -Croix where the artists juggled, they danced and played music.
ocean-blue-evelynLater in 1984, Guy Laliberté toured on the 450th anniversary of the discovery of Canada, giving an innovative and surprising show, giving it the name of Cirque Du Soleil as it symbolized “youth, energy and strength”.
From this moment on, a series of presentations began, arriving in the United States in 1987 in the city of Los Angeles, finishing the proposal started in Canada.
This circus is the best example of the Blue Ocean strategy, where innovation is sought as the strength of an organization, not to compete against what exists, but to go for what is not yet discovered, and take the opportunity to exploit it.
WHAT IS THE BLUE OCEAN
This term arises from a series of investigations carried out on companies by their authors W. Chan Kim and Renée Mauborgne, professors at INSEAD (France), where they discovered that the market did not remain and grow with fierce competition, but rather by changing the strategy towards “ build trust and commitment ”.
Then a “competitive universe made up of two oceans emerges: the red and blue oceans, where red represents current companies, and blue are those industries that do not yet exist” (Chan, W., & Mauborgne, R., 2005).
It is in the red ocean where the fight for a “piece” of the market is found, with practices of competition analysis, price variations, brands, proposals.
The blue ocean is the place where there are market niches that have not yet been discovered, which is why they become unknown. And consequently of high profitability, since it is considered that there is no established "rule of the game".
This could also be considered a disadvantage, as there is nothing written or a rule to follow, which allows the freedom to create, but increases the risk in it.
An impact study of the creation of blue oceans was carried out, which is shown in the following figure:
Source: Chan, W., & Mauborgne, R. (2005). The blue Ocean Strategy. Bogotá: Norma.
INNOVATION AS PART OF THE STRATEGY
There is a type of innovation known as disruptive, which tries precisely to change current thinking, and promote a culture of radical innovation, generating business opportunities that do not exist, being on the “hunt” for these in the environment, with new practices.
Within the blue ocean strategy is the term value innovation, since innovation without value is directed towards the technological aspect and what exists, while value innovation “occurs when companies manage to align innovation with utility, price and cost positions ”(Chan, W., & Mauborgne, R., 2005).
“Innovation with value is created in the region in which the actions of a company have a favorable impact on its cost structure and the value proposition for the buyer” (Chan, W., & Mauborgne, R., 2005).
Given this, innovation in value is taken as a strategy, viewing the organization from an integral approach. The red ocean provides structures and forces organizations to compete under them, while the blue ocean has no borders or structure, so it can be built from scratch. This is how Cirque Du Soleil broke with best circus practices, creating a blue ocean.
THE SIX PRINCIPLES OF THE BLUE STRATEGY
| Reformulation Principles
1. Rebuild the frontiers of the market 2. Focus on the big picture, not the numbers. 3. Go beyond existing demand. 4. Develop the correct strategic sequence. |
Risk factors mitigated by each principle.
â Risk of the search. â Planning risk. â Scale risk â Business model risk. |
| Execution principles.
5. Overcome key organizational obstacles. 6. Incorporate execution into strategy. |
Risk factors mitigated by each principle.
Organizational Risk. Management risk. |
Source: Chan, W., & Mauborgne, R. (2005). The blue Ocean Strategy. Bogotá: Norma.
TOOLS OF THE BLUE STRATEGY
When an organization already has competition, and the product it produces will not change since the essence of the company would be eliminated, there are tools that allow the organization to be located from a red ocean to a blue ocean.
One of them is the Strategic Framework, which is a "fundamental analytical scheme for innovation in value and creation of blue oceans" (Chan, W., & Mauborgne, R., 2005).
Strategic picture
Its function is to provide a diagnosis that allows to know how the organization is currently with the variables that apply to the business under analysis.
This will allow locating the characteristics of competition, as an example is the wine industry in the United States.
In this scheme it is observed that most of the wines on the market at that time, were on the same scale, not having a factor that generates a difference, locating an opportunity to develop proposals.
Four Actions Scheme
In order to generate a “new value curve” (Chan, W., & Mauborgne, R. 2005) from the identification of the value elements located in the analysis, the four-action scheme is presented, which proposes to question to give direction to the project.
The Eliminate and Reduce questions seek to improve current costs, and the Create and Increase questions allow the opportunity to innovate. This scheme can be applied in a matrix way in order to turn it into actions.
Taking up the example of the wine company; When conducting this analysis, a new product called Yellow Tail was proposed, which made it possible to cover the needs of a sector that was not knowledgeable about wine, that is, it was within the borders of those who drink beer and other alcohol beverages, this did not cause losses to the industry, but expanded the market.
The Value Curve
An important aspect of this analysis is the detected value curve, which must contain three important characteristics: Focus, divergence and a strong central message, in order not to fall into confusion. This will allow the feasibility of the proposals to be analyzed. (Chan, W., & Mauborgne, R., 2005).
- At this point you must select from the variables detected, which will be worked on emphatically, so as not to waste energy. Generate a change that is different from what the competition has. Strong message. Communicate what you are different about and what you are betting on the proposal for.
Something important is that, if in the analysis the company is superior compared to its competitors, this must be reflected in its financial results, otherwise, it is giving more than it should with respect to what customers take as valuable.
SIX WAYS TO INNOVATIVE DEVELOPMENT WITH VALUE
According to the study carried out by the professors who authored this strategy, 6 approaches were discovered to break the constructed scheme of the industry in the market.
"These pathways question the six fundamental assumptions on which the strategies of many companies are based" (Chan, W., & Mauborgne, R., 2005).
Across industries. In this way there are substitute or alternative options for those existing in the industry, but that have the same purpose.
Through strategic groups. This route seeks to offer an alternative option to those that already exist in the market, and that are consolidated as successful.
Through the chain of buyers. This difference between who makes the purchase and who is the end user of the product, for example the design of a product that is easy for a patient to use, but which a doctor would recommend and would have influence on the end user's purchase decision.
Through complementary benefits / offers. It is about thinking beyond selling the product, in which it could be improved or worked once it has reached the customer's hands, and in this way, provide an improvement that allows the user to value the investment.
Through functional and emotional appeal. Industries generally lean towards one or the other, and the proposal is that alternatives be generated that complement what we have, that is; companies that have an emotional appeal integrate functionality into their proposals and vice versa.
Through time / trends. This refers to the trends that can be observed in the environment, whether financial or technology among others, for example Apple with the use of digital music in increasing, generating the proposal of an Itunes music store.
It is important to create demand for what is being innovated, because being something new there is no customer expectation.
THE FOUR STEPS TO APPLYING THE STRATEGY
Visual awakening. It implies that the management is perceived to be in need of a change, generally they come with a crisis or a convinced change agent.
Visual exploration. It is recommended that senior management go to the field to make an observation.
Visual Strategy Fair. Share what is captured, in no more than ten minutes to ensure that it is an uncomplicated idea.
Visual comunication. Share the new strategy obtained from the proposals with the staff and ensure their understanding.
CORRECT SEQUENCE OF APPLICATION OF THE STRATEGY
This sequence is proposed by the author in order to make it a viable, strong and profitable strategy for the company, each step takes to the next level, considering that the strategy can be discarded in the analysis carried out in each of them, the helper tools for each sequence are presented below.
Utility for buyers
All innovation must represent utility for the company, otherwise, it does not have a reason to undertake, since this would waste resources and would not represent an advantage for it.
That is why the author provides a utility map, in order for the proposals to be evaluated and thereby reduce investment risks.
In each of the stages of the shopping experience, questions are asked to assess where you are, if there is already a product on the market that is within that matrix, then you are not in a blue ocean.
Prices
Another important point of the strategy is not to affect existing industries, which is why it contains a methodology for price allocation, which starts from the identification of the product price band, to continue to specify the price level within from the band.
Costs
It is necessary to guarantee the profitability of the company, which is why a model is established to estimate costs.
You cannot always meet costs that provide a large profit margin for the business; It seeks to rely on the “levers to rationalize and innovate in costs, and establish alliances”: (Chan, W., & Mauborgne, R., 2005) but when these are insufficient they rely on a third lever called innovation in price, although you can innovate in it from the beginning.
Blue ocean ideas index
Within the adoption sequence, there are adversaries that must be taken into account; employees, allies of the organization and the general public.
Resistance to change is present in every company, especially the fear of the unknown, for which it is necessary to work on communication and integration of all those involved, making them feel involved and considered.
The blue ocean index is a test to assess whether it has been worked correctly to provide strength to the new strategy.
| Blue Ocean Ideas Index | Innovation | Competition | |
| Utility | Is there an exceptional utility? Are there compelling reasons to buy the product or service offered? | ||
| Price | Is the price easily available to the bulk of buyers? | ||
| cost | Does the cost structure meet the cost goal? | ||
| Adoption | Have barriers to adoption been resolved from the beginning? |
Source: Chan, W., & Mauborgne, R. (2005). The blue Ocean Strategy. Bogota: Norma
EXECUTION OF THE STRATEGY
Once the profitability of the developed strategy has been analyzed, it is carried out, considering the following barriers as the most frequent presented in this stage.
The electric sewer
It is recommended that employees “experience first hand” the worst operational problems. (Chan, W., & Mauborgne, R., 2005) to avoid using the imagination and a real perception can be obtained.
Dealing with unhappy customers
It comes from the experience of the operation by the management, where they will know the perception of the client first hand.
Overcome the resource barrier
Once you have become aware of the need for change, a barrier is the resources necessary to carry out the changes, for which 3 factors are recommended to release them, the hot zone, the cold zone and the negotiation.
Hot zone
The hot zone is the activities with the greatest impact with little effort, the cold zone is the opposite of this, that is; little impact with a lot of effort, and the negotiation is to exchange the surplus resources of one area to use them in another that is required.
Overcome the barrier of motivation
In order to make the changes take place, it is necessary to awaken that need in people by locating key personnel who have influence in the organization, and their adherence to the changes to motivate others.
The political barrier
When change is generated in the organization, there are interests that are affected, the strategy presents as angels those who find the change positive, demons those who do not see a benefit, and the counselor who is knowledgeable about the problem and an element respected by the members of the organization, this can be part of the team that initiates the change
CONCLUSIONS
The blue ocean strategy provides an option to the competition seeking joint growth of organizations, aligning benchmarking, sharing best practices, and motivating disruptive innovation, for creating value, where the financial growth of the organization is.
THESIS TOPIC PROPOSAL
Implementation of Disruptive Innovation Circles to detect business opportunities in the organization
REFERENCES
Recovered from https://www.cirquedusoleil.com/es/about–us/history
Chan, W., & Mauborgne, R. (2005). The blue Ocean Strategy. Bogotá: Norma.
Memoirs, original lecture Richard Bliss. Retrieved from: http://web.usbmed.edu.co/usbmed/egresados/docs/memorias/MEMORIAS%20CONFERENCIA%2 0ORIGINAL% 20OCEANOS% 20AZULES_Richard% 20Bliss.pdf
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