INNOVATION AT

:The CASE ANALYSIS:

IBS Business School – PGPM

Team 12

Siddharth Gupta

Sipak Mohanta

Tapan Mehta

Ansuman Dash

Suraj Chaturvedi

Honey Goyal

Case Study Flow:

• Brief Introduction• Developments• Innovations• Marketing• Road Ahead• Issues• Recommendations

About Cirque du Soleil• Acclaimed by an audience of over 18 million worldwide, with

numerous prizes and distinctions to its credit, Cirque du Soleil is a unique organization which has reinvented and revolutionized the circus arts.

• Since its beginnings in 1983, Cirque du Soleil has been pleasing the public with a novel show concept that is as original as it is non-traditional: an astonishing, theatrical blend of circus arts and street performance, wrapped up in spectacular costumes and fairyland sets and staged to spellbinding music and magical lighting.

• It was among the first companies to adopt Blue Ocean Strategy, by generating demand, by developing a new market space, where competition was non existent

• It managed to excel in a declining industry by fusing art and entertainment.

• Later on it also introduced its line of apparel and accessories.

• It also produced a number of movies and television shows.

Inception• In the early eighties, a group of young street

performers pooled their talent and dreams and founded the “Club des Talons Hauts” or “High-Heels Club”, aptly named because most of them were stilt-walkers.

• At that time, Quebec did not have a circus tradition as did several European countries. So the Club members decided to organize a festival, where street performers could come together to exchange ideas and techniques.

• They called it the “Fête Foraine de Baie St-Paul” (the Baie Saint-Paul Fair). That was all a few visionaries needed to hatch the idea of bringing all this talent together under one roof, or – why not? – a big top! Cirque du Soleil was born.

CIRQUE DU SOLEIL FACTSHEET

PAST PRESENT (2013)o 100% owned by Laliberte (bought

Gautier’s half in 1987)

o Lalibertè refusing to go public, reasoning that it would constrain Cirque’s creative freedom

o Montreal based (had tried with three regional divisions, NA, Europe, Asia)

o 5,020 employees, from over 40 countries and over 25 spoken languages and generate an estimated annual revenue exceeding US$810 million.

o 8 simultaneous Cirque productions running on 4 continents

o Over 90 million spectators. ()

o Founding Year 1984

o Founded by group of street performers

o Montreal based

o Managed equally by two owners: Guy Lalibertè (Creative) Daniel Gautier (business and finance) o 73 employees

o Touring 1 show at a time, initial 3 years only in Canada

o On average 270.000 spectators per year

Timeline• 1984:Cirque du Soleil is born with the financial assistance of

the Quebec government, as part of the celebrations surrounding the 450th anniversary of Jacques Cartier’s arrival in Canada.

• 1985:After performing in Montreal, Sherbrook and Quebec City, Cirque du Soleil leaves its home province for the first time to take its show to neighboring Ontario. It performs in Ottawa, Toronto and Niagara Falls.

• 1987: Status of Cirque changes from non-profit to a for profit entity.

• Mid 1991: Cirque convinced Fuji Television Network to sponsor Cirque’s tour of Asia. Fuji gave US $40 Million

• 1992: Entered into a year long agreement with Mirage, a Las Vegas hotel perform Nouvelle Experience. This was Cirque’ s first engagement of the kind.

• 1994: Steve Wynn owner f Mirage, built a permanent facility for Cirque at the cost US $20 million at its new resort

Timeline contd….• 1995: Cirque established its first European headquarters at

Amsterdam.• 1996: By this time its sales had increased form $30 million in

1994 to $110 million in 1996.• 1997: Walt Disney constructed a permanent theater near

Orlando, California. ‘Creation Studio’ was setup.• 1998: Cirque’s new production ‘O’ debuted at Bellagio. It was

performed around an Olympic-sized 1.5 million gallon Swimming pool

• 2004: Cirque entered into an agreement with the Beatles stars to create a production to be staged at Mirage. This production was called love and it recreated the life of Beatles before they became famous.

• 2007: The oldest active touring show of Cirque du Soleil, Saltimbanco is converted from a Big Top show to an Arena show. This will allow the show to visit new places where it could not go before.

Recent Developments

• Nov 2010: The Estate of Michael Jackson and Cirque du Soleil announced the official international launch of Michael Jackson THE IMMORTAL World Tour™ written and directed by Jamie King.

• Dec 2010: Cirque Du Soleil entered into partnership with James Cameron and Andrew Adamson in association with Reel FX Entertainment to develop and produce immersive 3D projects.

• Diversification:-• In October 2011, the Cirque du Soleil was reported

to be interested in purchasing Maison Alcan, as part of a diversification strategy.

Future productions• 2013• Cirque du Soleil is developing a residency show based on

the music of Michael Jackson, an offshoot of touring Michael Jackson: The Immortal World Tour; previews scheduled to begin May 23, 2013 with the gala premiere date set for June 21 at the Mandalay Bay Resort and Casino in Las Vegas.

• 2014• A new touring show, Cirque 2014 (working title) is currently

in the early stages of creation in Montreal, possibly in time for the company's 30th anniversary in 2014. The concept is unannounced; however, Michel Laprise will be its creator and director. Casting is set to start in early 2013.

• 2015• Depending on the success of Zarkana's run, Cirque du Soleil

has plans to develop a new permanent residency production in Moscow by 2015 and could invest an additional $1 million to $50 million

FEW FACTS AND FIGURES Cirque's assets are worth an estimated $1 billion, its

annual ticket sales have climbed above $450 million, and more than 40 million people worldwide have attended at least one Cirque show.

The Cirque crew gathers diverse talent from all over the world and brings all the performers together into a cohesive whole.

Whether it's a touring show like Alegria or Varekai or a resident show like "O" or "Love" in Las Vegas, all Cirque shows are built around the same two core elements: a unique theme and a unique soundtrack.

The Cirque team avoids straight narrative in order to allow room for the audience to interpret the show any way they want.

The StudioA full-fledged creation, innovation and training

laboratory.

• Established in 1997 to instill creativity in acts of circus.

• Artists training: Performers come from a variety of backgrounds, including artistic gymnastics, tumbling, acrosport, swimming, diving, dance, singing, music and, of course, circus arts. Some fifty nationalities are represented among Cirque du Soleil artists.

• In 2010, over 600 performers will receive customized training in the Creation Studio.

• Physiotherapists and fitness specialists work on site in the Studio to keep performers in good health, help maximize their physical potential, and ensure an optimal environment for their development.

• The Centre for Research and Innovation of Performance

• Research and development have always played a key role at Cirque du Soleil in each and every one of its activities. The Centre for Research and Innovation of Performance (CRIP) at Cirque du Soleil is an office of specialized studies in the development of equipment, environment and physical and acrobatic performance at Cirque du Soleil.

• Cirque did not employ star performers or animals in its shows, it was able to keep the costs low and to provide customers with a value for money experience.

Audience, Innovation and Strategy.

• The company created niche market of live entertainment within the entertainment industry.

• The company started targeting adult audience who visited the theater and opera.

• Shows highlight artistry rather than the thrills that the traditional circus presented.

Concept

Innovation

Organizational culture

Customer centric

strategy

PRODUCT

“We’re not a product company, we’re an artistic works company” – Mario D’Amico – Executive VP Marketing

o Circus combining street performers, clowns, acrobats and gymnasts (no

animals). Latin sounding music that transcends cultural boundaries and top

scale production and lighting.

o Price targeting upper middle class families (Avg. North American ticket

price @ 55 $)

o Diversified commercial activity towards multimedia, publishing and

merchandising.

o 1998 Cirque opened it’s 1st merchandise store in Wald Disney Resort in

Florida

o 1999 Cirque du Soleil Images released it’s 1st film “Alegria”

o 2003 planning to open entertainment complex in Montreal

Innovative StrategyRed Ocean Vs. Blue Ocean

• Compete in existing market space

• Beat the competition• Exploit existing

demand• Make the value-cost

trade-off• Align the whole

system of a firm’s activities with its strategic choice of differentiation or low cost

• Create uncontested market space

• Make the competition irrelevant

• Create and capture new demand

• Break the value-cost trade-off

• Align the whole system of a firm’s activities in pursuit of differentiation and low cost

Value + Innovation

• Value without innovation focuses on value creation but does not make you stand out in the marketplace.

• Innovation without value tends to be futuristic and go beyond what buyers are ready for.

• Value innovation must align innovation with utility, price, and cost

position.

Value Innovation: The Cornerstone of Blue Ocean

Strategy

Value-Cost Trade Off

• Red Ocean companies tend to choose between low cost and differentiation.

• Blue Ocean companies aim for both simultaneously.

SWOT

o innovative, unique showo diversified product portfolio –

movies, TV shows, merchandiseo flexible working force, devoted

artistso established brand nameo well organized logistic

STRENGTH

o high overheads and management costs

o sole owner and decision makero a business model that could be

easily copiedo a lot injuries that need to be

preventedo high staff turnover

WEAKNESSES

o expand to larger number of cities

o diversification of the product portfolio

which could fit to different audienceso increase number of impermanent location based shows

OPPORTUNITIES

o real competition that could enter the

marketo to become too commercial and loose

its spirito overdependence on the existing

ownero economic downturn will lead to

customers choosing lower cost substitutes

THREATS

• MARKETING OF CRIQUE DU SOLEIL

PORTER’S FIVE ANALYSIS

Threat of substitute products-HIGHConventional circus-animals,clowns,etcLow cost substitutes-movies,TV, internetOther substitutes-theatres,concerts, cinemaIn economic downturn customers-choose low cost entertainment

Bargaining Power of Customers – VERY HIGH

Product is highly differentiated/unique

The service of Cirque du Soleil is difficult

to be directly replaced

Not a product satisfying basic needs;

“luxury good”

Competitive Rivalry – MODERATE

Few competitors like Cirque Oz

compete locally

Lots of circuses globally

Barriers to Entry – LOW

Low to moderate entry barriers

Low to moderate costs of equipment

Moderate initial employee costs

Bargaining Power of Suppliers – LOW

High number of suppliers for technical

equipment and logistics

Limited number of suppliers for tents and

scenes

Relatively low supplier switching costs

PESTEL ANALYSIS

•Tax issues

•Stability

POLITICAL

•Energy efficiency

•Global crisis – reduced purchasing power

•Limited number of touring cities

ECONOMICAL

•Cultural entertainment preferences

•Religios views

•Demographic chart

SOCIAL

•Influence of web based free contents

•Automatization of production leading to lower costs

•Higher CAPEX due to short lifecycles of new technologies

TECHNOLOGICAL

•Strict local logistics regulation (eg CO2 emmision)

ENVIRONMENTAL

•Working permits

•Visa policy

LEGISLATION

VALUE CHAIN

SHOW PRODUCTION

MARKETING LOGISTIC ON SITE SALES SHOW

Support activities:

Logistics and infrastructure

Artist recruitment (HR)

Procurement (own and outsourced)

Primary activities:

Road Ahead

• Entertainment Complexes in major cities.• Inspired restaurants,hotels,art galleries, spas & Movie

theatre.• Restaurant would have artist performing while guest

were dining.• Build an experience around the customer.• Montreal into a world centre for circus arts.• Centre of a hub of training, creating and performing

the circus arts.(cite des arts du cirque)• Build cirque the entertainment capital of the world.• Build an experience around the customer.• Transform Montreal into a world centre for circus arts.• Using different production method for every show.

Eliminate-Reduce-Raise-Create

EliminateStar PerformersAnimal showsAisle concession salesMultiple show arenas

RaiseUnique venues

ReduceFun and humorThrill and danger

CreateThemeRefined environmentMultiple productionsArtistic music and dance

Smaller Regional Circus

Ringling Brothers

The Strategy Canvas of Cirque du Soleil

hi

offe

ring

leve

l

loPrice

Fun & Humor Unique VenueAisle Concessions

Multiple Show Arenas Thrills & DangerAnimal Shows

Star Performers

Theme

Refined Viewing Environment

MultipleProductions

Artistic Music & Dance

Cirque du Soleil

© Kim & Mauborgne 2006

ISSUE

They re-invented circus. Everybody has seen it. Now what?

NEGATIVE CONSEQUENCE

o Cirque du Soleil saturated the market – they will stagnate or lower the business

o If Mr. Lalibertè doesn’t decrease his influence (autochratic leadership) it will not be possible to sustain growth level CDS has shown in the past

ALTERNATIVES

Expand geographically• Find new audiences – go to new places• Find places with high inflow of tourists for fixed location shows

Continue diversifying commercial activities• Movies, amusement parks, music, commercial goods

Regional approach – market adjustment To fit to diverse conditions in current markets

RECOMMENDATION

Regional approach – market adjustment

To fit to diverse conditions in current markets

ACTION PLAN

decentralize the decision making (by CEO/owner)

set up regional divisions with separate marketing and market research (economical, demographical, etc.) by regional management/consultancy

define diverse strategic approaches (e.g. pricing policy, level of show production)

Blue ocean strategy doesn’t last forever.

Be prepared for Red ocean!

Thank you for your attention !

QUESTIONS ???