Innovate or perish

The Manila Times
Business Times p.B3
Thursday, September 22, 2005
http://www.manilatimes.net/national/2005/sept/22/yehey/business/20050922bus12.html

LEARNING & INNOVATION
By Moje Ramos-Aquino, FPM
Innovate or perish

CANADA’S largest cultural export—Cirque du Soleil—was created by a group of street performers in 1984. It has entertained almost forty million people since then and has achieved a level of revenues that took industry leaders, Ringling Bros. and Barnum & Bailey, more than one hundred years to attain. This also made Cirque very attractive to many serious, multitalented circus performers.

The authors W. Chan Kim and Renee Mauborgne relate in their book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, what makes this rapid growth all the more remarkable is that it was not achieved in an attractive industry, but rather in a declining industry in which traditional strategic analysis pointed to limited potential for growth.

Kim and Mauborgne also write that another compelling aspect of Cirque’s success is that it did not win by taking customers from the already shrinking circus industry, which historically catered to children. Cirque did not compete with Ringling and Barnum. “Instead, it created uncontested new market space—blue ocean—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.”

Kim and Mauborgne continue to describe a different strategic logic they call value innovation. “What consistently separate winners from losers in creating blue oceans was their approach to strategy. Instead of beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

“Value innovation places equal emphasis on value and innovation. Value without innovation tends to focus on value creation on an incremental scale, something that improves value but is not sufficient to make you stand out in the marketplace.

Innovation without value tends to be technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept and pay for. In this sense it is important to distinguish between value innovation as opposed to technology innovation and market pioneering. Value innovation occurs only when companies align innovation with utility, price and cost positions.”

Back to Cirque, instead of outpacing the competition by offering a better solution to the nagging problem, 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. “This led to a whole new circus concept that broke the value-cost trade-off and created a blue ocean of new market space. Whereas other circuses focused on offering animal shows, hiring star performers, presenting multiple show arenas in the form of three rings, and pushing aisle concession sales, Cirque did away with all these factors.

“The lasting allure of the traditional circus came down to only three key factors—the tent, the clowns and the classic acrobatic acts. Cirque 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 designed the tent with a glorious finish and a higher level comfort, making its tents reminiscent of the grand epic circuses. Gone where the sawdust and hard benches.

“Acrobats and other thrilling acts are retained, but their roles were reduced and made more elegant by the addition of artistic flair and intellectual wonder to the acts.

By looking across the market boundary of theater, Cirque also offered new noncircus factors, such as storyline and with it, intellectual richness, artistic music and dance and multiple productions.”

By injecting all these value innovations into the well-loved, traditional circus, Cirque has given people a reason to come to the circus more frequently and dramatically increase demand.

Innovation, indeed, help companies rise beyond mediocrity and outrun competition not by engaging in a head-to-head competition, but by creating new, blue ocean markets and strategies for itself. In whatever business you are in, remember that nothing ever stands still—innovate or perish.

Teacher Training: RCQC North will conduct accelerated learning workshop for the 120 teachers of elementary schools in Quezon City, namely Aurora Quezon, Betty Go Belmonte, P. Tuazon and Valencia. To make your contribution, please e-mail paradigms@mydestiny.net or call 0917-8996653.

(Moje is president of Paradigms & Paradoxes Corp. and the Rotary Club of Quezon City North. Send feedback to moje@mydestiny.net)