January / February 2009

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Perspectives on Current Debate

January / February 2009

Should more sports be added to the Olympic Programme?

Lars Haue-Pedersen Managing Director, TSE Consulting

Strengthen your strategy - get rid of something!

When looking at ways to improve your services or products, it may seem obvious to immediately think - what can we do that is bigger and better? Often, however, for a successful business development strategy the solution can be found in the stuff you don't do.

One of Canada's largest cultural exports, Cirque du Soleil, was created just 20 years ago, and already it is the world's leading circus. Over 40 million people, most of whom had no prior interest in watching circuses, have been to see a Cirque de Soleil performance. What makes Cirque de Soleil's rapid growth and success all the more remarkable is that it was achieved within an industry that was deemed unattractive. The circus industry had been in decline for many years, and most analyses suggested that the potential for growth was very limited. Alternative forms of entertainment became more popular where children wanted Play Stations rather than a visit to watch the travelling circus. To make things worse, there was a growing sentiment from animal rights groups against the use of animals in circuses.

The success of Cirque du Soleil certainly occurred against all odds. And the success was not based on taking customers from the already shrinking demand for the circus industry but on creating an uncontested new market space that made the competition from other circuses irrelevant. It reached out to a completely new group of customers - adults and corporate clients - who were prepared to pay a much higher price. Cirque du Soleil succeed not by fighting against other circuses in the traditional market but instead by reaching out to a completely new audience with a completely new offer - while at the same time staying within the very traditional world of circus. Cirque du Soleil moved away from the "red ocean" coloured by the blood of competitors fighting each other for the same customers and looked to the big, open "blue ocean" of non-customers. A perfect example of "Blue Ocean Strategy"

"Blue Ocean Strategy" - what?

"Blue Ocean Strategy" was originally described by two INSEAD professors, W.Chan Kim and Renée Mauborge in the book "Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant".

In the red ocean, 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 more and more crowded, prospects for profits and growth are reduced. Products become commodities, and the cutthroat competition turns the red ocean bloody. Blue ocean, in contrast, is defined by untapped market space, demand creation, and the opportunity for highly profitable growth. While blue oceans are occasionally created well beyond existing industry boundaries, most are created by expanding existing industry boundaries, as in the example of the Cirque du Soleil. In the blue ocean, competition is irrelevant as the rules of the game are waiting to be set.

"Blue Ocean Strategy" - how?

For much more detailed guidelines on how to develop a Blue Ocean Strategy the book of Kim and Mauborge should be studied, but it basically consist of two steps:

The first step in developing a "Blue Ocean Strategy" is to look at the markets where your organisation is currently active and competing. Try to identify some commonalities that your customers are seeking from you in these markets - are there some common elements that all your customers need? Then think about whom else would be attracted by these common things - someone currently not being approached by you or any of your competitors. This group of non-customers could become your new customers! The second step in developing a Blue Ocean Strategy is to make your offering attractive to these new groups of customers by breaking the value-cost trade off. In order to attract new customers to your events, you need to increase the perceived value and then lower the costs - preferably at the same time! In order to do that you will need work on two fronts:

  • to reduce costs you need to eliminate something that new customers don't really care about and reduce other things that are not important to new customers.
  • to increase buyer value you need to create new elements to your events and raise the level of other elements that you think will be attractive to new customers.

Cirque du Soleil dramatically reduced costs by eliminating animals in their shows and they reduced the involvement of stars (the "star clown", etc). Both of these things were seen as absolutely fundamental to a circus but they turned out to be irrelevant. At the same time they created theme led shows and multiple rings (to add new elements to circus) and they raised the level of the tent (to make it more attractive and elegant).

What about sport events? What could be eliminated that new customers don't really need and what could be reduced in order to lower price? And what new elements could be created and which existing services could be raised in terms of quality and attractiveness?

"Blue Ocean Strategy" - why?

This way of blue ocean thinking might be very interesting for sports organisations and sport event organisers. Very often sports organisations end up focusing on the same issues and come up with the same suggested solutions: to get more awareness, increase media coverage, raise spectator attendance for the events, make events more spectator and TV friendly, develop stars to attract a wider audience, etc and etc. The same issues and the same suggested solutions arise across different sports and across different events.

The problem here is that all these sports organisations are striving for the same type of spectators, the same media, the same sponsors, etc. The result is an obvious competition in the red ocean. This is basically why the biggest sport, football in most countries, always wins the competition and continues to grow and what is left of the market goes towards specialized sports e.g. F1, golf and tennis and some regionally popular sports like skiing and ice hockey. Are there ways for other sports to gain some market space? Well, what about developing a Blue Ocean Strategy.

The UEFA Champions League is one of the most successful examples of "reinventing" a sports competition. Perhaps the clever people behind the development of the event did not have a "Blue Ocean Strategy" approach in mind at the time, but still: the rule of the champion from each country participating - seen as fundamentals to the event - was eliminated, and at the same time they reduced the involvement and influence of the local organisers by centralizing the organisation of the individual matches.

Both of these changes did cause anger and heated discussions at the time but they turned out to be key drivers in the success of the league. UEFA, at the same time, managed to create something new - a league - with the event changing from a (cup) tournament to a league and they raised the level of every aspect surrounding the event from TV production to branding. As a result of all this, the Champions League has now been able to reach out to football fans all over the world where the previous version was mainly only of interest to the fans of each of the teams playing the individual matches. Intentionally or not - it is pure "Blue Ocean Strategy" in action!

With the development of the Champions League UEFA also became a "first mover" and this is another advantage of using the "Blue Ocean Strategy". Adopting a blue ocean creator's model can sometimes be easy to imagine but it is actually difficult to do. "A first" is always attractive and even though several other sports have now followed the example of UEFA it will take years for the competition to adjust and catch up with up to the new format/concept.