take too long and waste valuable police time that could be better spent fi ghting crime. Anticipating this argument, deputy commis- sioner Jack Maple set up a reporting system that covered the city’s most crime-ridden areas. Operating the system required no more than 18 minutes a day, which worked out, as he told the precinct commanders, to less than 1% of the average precinct’s workload. Try to argue with that.
Often the most serious opposition to reform comes from outside.
In the public sector, as in business, an organization’s change of strat- egy has an impact on other organizations—partners and competi- tors alike. The change is likely to be resisted by those players if they are happy with the status quo and powerful enough to protest the changes. Bratton’s strategy for dealing with such opponents is to iso- late them by building a broad coalition with the other independent powers in his realm. In New York, for example, one of the most seri- ous threats to his reforms came from the city’s courts, which were concerned that zero-tolerance policing would result in an enormous number of small-crimes cases clogging the court schedule.
To get past the opposition of the courts, Bratton solicited the sup- port of no less a personage than the mayor, Rudolph Giuliani, who had considerable infl uence over the district attorneys, the courts, and the city jail on Rikers Island. Bratton’s team demonstrated to the mayor that the court system had the capacity to handle minor
“quality of life” crimes, even though doing so would presumably not be palatable for them.
The mayor decided to intervene. While conceding to the courts that a crackdown campaign would cause a short-term spike in court work, he also made clear that he and the NYPD believed it would eventually lead to a workload reduction for the courts. Working to- gether in this way, Bratton and the mayor were able to maneuver the courts into processing quality-of-life crimes. Seeing that the mayor was aligned with Bratton, the courts appealed to the city’s legisla- tors, advocating legislation to exempt them from handling minor- crime cases on the grounds that such cases would clog the system and entail signifi cant costs to the city. Bratton and the mayor, who were holding weekly strategy meetings, added another ally to their
coalition by placing their case before the press, in particular the New York Times. Through a series of press conferences and articles and at every interview opportunity, the issue of zero tolerance was put at the front and center of public debate with a clear, simple message:
If the courts did not help crack down on quality-of-life crimes, the city’s crime rates would not improve. It was a matter not of saving dollars but of saving the city.
Bratton’s alliance with the mayor’s offi ce and the city’s leading media institution successfully isolated the courts. The courts could hardly be seen as publicly opposing an initiative that would not only make New York a more attractive place to live but would ultimately reduce the number of cases brought before them. With the mayor speaking aggressively in the press about the need to pursue quality- of-life crimes and the city’s most respected—and liberal—newspaper giving credence to the policy, the costs of fi ghting Bratton’s strategy were daunting. Thanks to this savvy politicking, one of Bratton’s big- gest battles was won, and the legislation was not enacted. The courts would handle quality-of-life crimes. In due course, the crime rates did indeed come tumbling down.
Of course, Bill Bratton, like any leader, must share the credit for his successes. Turning around an organization as large and as wedded to the status quo as the NYPD requires a collective eff ort. But the tipping point would not have been reached without him—or another leader like him. And while we recognize that not every executive has the personality to be a Bill Bratton, there are many who have that potential once they know the formula for success. It is that formula that we have tried to present, and we urge managers who wish to turn their companies around, but have limited time and resources, to take note. By addressing the hurdles to tipping point change de- scribed in these pages, they will stand a chance of achieving the same kind of results for their shareholders as Bratton has delivered to the citizens of New York.
Originally published in April 2003. Reprint R0304D
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Blue Ocean Strategy
A ONETIME ACCORDION PLAYER, stilt walker, and fire-eater, Guy Laliberté is now CEO of one of Canada’s largest cultural exports, Cirque du Soleil. Founded in 1984 by a group of street performers, Cirque has staged dozens of productions seen by some 40 million people in 90 cities around the world. In 20 years, Cirque has achieved revenues that Ringling Bros. and Barnum & Bailey—the world’s lead- ing circus—took more than a century to attain.
Cirque’s rapid growth occurred in an unlikely setting. The circus business was (and still is) in long-term decline. Alternative forms of entertainment—sporting events, TV, and video games—were cast- ing a growing shadow. Children, the mainstay of the circus audience, preferred PlayStations to circus acts. There was also rising senti- ment, fueled by animal rights groups, against the use of animals, tra- ditionally an integral part of the circus. On the supply side, the star performers that Ringling and the other circuses relied on to draw in the crowds could often name their own terms. As a result, the indus- try was hit by steadily decreasing audiences and increasing costs.
What’s more, any new entrant to this business would be competing against a formidable incumbent that for most of the last century had set the industry standard.
How did Cirque profitably increase revenues by a factor of 22 over the last ten years in such an unattractive environment?
The tagline for one of the fi rst Cirque productions is revealing: “We reinvent the circus.” Cirque did not make its money by competing within the confi nes of the existing industry or by stealing custom- ers from Ringling and the others. Instead it created uncontested
market space that made the competition irrelevant. It pulled in a whole new group of customers who were traditionally noncus- tomers of the industry—adults and corporate clients who had turned to theater, opera, or ballet and were, therefore, prepared to pay sev- eral times more than the price of a conventional circus ticket for an unprecedented entertainment experience.
To understand the nature of Cirque’s achievement, you have to realize that the business universe consists of two distinct kinds of space, which we think of as red and blue oceans. Red oceans repre- sent all the industries in existence today—the known market space.
In red oceans, industry boundaries are defi ned and accepted, and the competitive rules of the game are well understood. Here, com- panies try to outperform their rivals in order to grab a greater share of existing demand. As the space gets more and more crowded, pros- pects for profi ts and growth are reduced. Products turn into com- modities, and increasing competition turns the water bloody.
Blue oceans denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample oppor- tunity for growth that is both profi table and rapid. There are two ways to create blue oceans. In a few cases, companies can give rise to completely new industries, as eBay did with the online auction industry. But in most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing indus- try. As will become evident later, this is what Cirque did. In breaking through the boundary traditionally separating circus and theater, it made a new and profi table blue ocean from within the red ocean of the circus industry.
Cirque is just one of more than 150 blue ocean creations that we have studied in over 30 industries, using data stretching back more than 100 years. We analyzed companies that created those blue oceans and their less successful competitors, which were caught in red oceans. In studying these data, we have observed a consistent pattern of strategic thinking behind the creation of new markets and industries, what we call blue ocean strategy. The logic behind blue ocean strategy parts with traditional models focused on competing
Idea in Brief
The best way to drive profi table growth? Stop competing in over- crowded industries. In those red oceans, companies try to outper- form rivals to grab bigger slices of existing demand. As the space gets increasingly crowded, profi t and growth prospects shrink.
Products become commoditized.
Ever-more-intense competition turns the water bloody.
How to avoid the fray? Kim and Mauborgne recommend creating blue oceans —uncontested market spaces where the competition is irrelevant. In blue oceans, you invent and capture new demand,
and you off er customers a leap in value while also streamlining your costs. Results? Handsome profi ts, speedy growth—and brand equity that lasts for decades while rivals scramble to catch up.
Consider Cirque du Soleil—which invented a new industry that com- bined elements from traditional circus with elements drawn from sophisticated theater. In just 20 years, Cirque raked in revenues that Ringling Bros. and Barnum
& Bailey—the world’s leading circus—needed more than a century to attain.
in existing market space. Indeed, it can be argued that managers’
failure to realize the diff erences between red and blue ocean strat- egy lies behind the diffi culties many companies encounter as they try to break from the competition.
In this article, we present the concept of blue ocean strategy and describe its defi ning characteristics. We assess the profi t and growth consequences of blue oceans and discuss why their creation is a ris- ing imperative for companies in the future. We believe that an un- derstanding of blue ocean strategy will help today’s companies as they struggle to thrive in an accelerating and expanding business universe.