For decades, when people wanted to see incredible acrobatic feats, animal acts, and larger than life shows, there were two places they could go: Barnum & Bailey and Ringling Bros. As the biggest names in the business, the two companies clawed at each other, desperately fighting for fans in a crowded marketplace. Each wanted to be the top circus, but both became losers to innovative strategy. The winner? Cirque du Soleil, which came along and created a blue ocean—an entirely new market they had all to themselves.
But what is Cirque du Soleil? Is it even a circus? Saying so wouldn’t be completely correct, but saying it’s theater would be inaccurate, too. Cirque du Soleil’s leadership took what worked from circuses, like acrobats and clowns, and ditched the unsavory parts, like cruel animal acts. They borrowed elements from fine theater and the entertainment industry to create narratives but didn’t tell stories in the traditional theater way. The result is a one-of-a-kind show that continues to dazzle millions around the world. That success is in large part due to innovation strategy.
In this article, discover what innovation strategy is, understand what drives a blue ocean strategy, and learn lessons from companies like Cirque du Soleil, Apple, and Disney.
What is Innovation Strategy at its Core?
As shown above with Cirque du Soleil, innovation strategy focuses squarely on the customer, not the competition. Businesses built on innovation strategy provide massive value to their customers. If Cirque du Soleil had focused solely on the competition, they would have created just another circus. Instead, they focused on what the customer wanted.
Value in your customer’s eyes is the right combination of effectiveness, convenience, and price. As leaders pursue delighting customers and providing massive value, they will develop a long-term competitive advantage through new products and services.
How to Create Your Own Innovation Strategy
If everyone is thinking alike, then somebody isn’t thinkingGeorge S. Patton
The vast majority of businesses (94 percent) invest in competitive intelligence. CEOs and executives love to keep tabs on the competition. It’s a natural way of doing business. But the competition doesn’t pay the bills—customers do. Innovation strategy happens when leaders spend more time thinking about the customer than the competition.
Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne details the journey that innovative businesses take to earn business from an under-served market. The general idea is that the majority of businesses focus most of their efforts trying to outdo the competition, leaving the customer’s needs out of the equation. These competing businesses fight with each other relentlessly, leaving the waters red and bloody—a red ocean.
A blue ocean is a market free of competitors, driven solely by an innovative product that delights and attracts customers. So how does your business begin its innovative journey?
Here are four steps to make any leader an innovator:
- Put the customer ahead of the competition. Take a deep dive into what your customers want and need by developing a specific customer profile. As you grow in your knowledge of your customers, you can become an advocate for them in every respect. In turn, you’ll eventually deliver a product or service they want. Notably, this step doesn’t factor in your competition.
- Define the gaps in the customer experience. Once you know your customer, figure out what they want and compare it to what they currently can get. Through your research, you’ll be able to identify these gaps and opportunities for your growth. These gaps will be areas where no one else currently occupies.
- Outline the customer’s missing needs. When you find those gaps, take the time to define them. This is where you can act like an innovator by constantly asking, “why.” Why is the customer unable to get it right now? Why does the gap exist in the first place? Keep asking “why” to find new ways to innovate.
- Develop a solution that meets these needs. Once you start to answer your many “why” questions, you can identify how your company can meet those needs. By meeting those needs, you’ll have to come up with a new product or service, which can lead to a new market. The new market will give you a chance to carve out a space all for yourself.
Above all else, put your customers’ needs at the center of your innovation strategy. When you constantly focus on how to beat your competition, you increase the chances of failure. That also means less innovation for you and the industry as a whole. Keep the customer in mind at every step, and you’ll see the results for yourself.
Innovators Constantly Ask “Why”
When Elon Musk told people he wanted to start his own space travel company, many told him he was crazy. However, Musk is an innovator who has mastered first principles thinking.
First principles thinking is when leaders remove assumptions, break systems and products down into individual components, and then determine what the hard truths are. Musk followed first principles by looking at the exorbitant cost of space travel and broke every element down. He found that only 2 percent of the cost accounted for the rocket building materials. The rest went to other factors, such as staff or design elements.
By analyzing the problem instead of accepting the price as a universal truth, Musk figured out a way to make space travel more affordable by bringing a 65 million dollar rocket down to 1.3 million dollars. He started by asking why something was expensive and refused to quit until he found an answer.
In this example, Elon Musk followed Simon Sinek’s advice in his seminal book Start With Why. As Sinek writes, great innovators flex their innovative leadership by never settling for the expected answer. At their heart, innovators are critical thinkers who look at a question and ask “why” multiple times. They follow first principles to discover core truths. From there, they can innovate further.
Business leaders who pursue innovation strategy must have the same approach and the same mindset on their teams. If you want to see innovation strategy take hold, fill top leadership teams with critical thinkers. A CEO faced with a team that can’t think will find themselves falling behind. With everyone seeking strategic innovation, the bandwidth for thinking will grow, leading to more unique solutions to your core business offering.
What Does Innovation Strategy Look Like in Practice?
Innovation strategy has turned into a buzzword over the last few years, constantly overused and sorely misunderstood by self-proclaimed “innovators.” Because of the vague and prevailing definition, it’s natural to roll your eyes when you hear companies described as “innovative.”
Once you see it in practice, you will understand its impact and how it applies in the real world.
Apple: While people knew Apple for their computers, Steve Jobs saw an opportunity no one was taking advantage of in the music industry. In the early 2000’s, people were downloading billions of music files illegally, something the music industry fought with little success. Jobs saw the potential of digital music, and Apple created iTunes in 2003. They effectively carved out a space that was all their own, working with major music companies to provide digital music downloads at a reasonable price. No one else was doing this at the time, making Apple a true innovator in the field. In the end, record companies, music artists, and consumers were all happy. This business innovation turned the music industry on its head and is still going strong today.
Disneyland: Before Disneyland came along, amusement parks were like glorified carnivals. Walt Disney imagined something different—a place where he could have fun with his kids. His park would be pristine and utilize the latest technology so everyone could have fun. On top of that, the theme of every part of the park would play an important role in immersing each visitor, letting them leave the real world behind. Recognizable characters would also be part of attractions and events, further enticing people to see what the park had to offer. Needless to say, no one else had thought to make an amusement park quite like this. Disneyland quickly became a highly sought destination for families from all over. More Disney parks worldwide have opened since, and Disney has even disrupted the cruise industry with cruise liners focused on unique Disney experiences.
Netflix: For years, chains like Blockbuster and Hollywood Video dominated the video rental market. Netflix came along with a mail-in DVD service, a business model innovation that upended the market. That innovation would spell the end for video rental stores, which failed to see where the market was heading. Netflix would continue to innovate through its streaming video option, now in use on all kinds of streaming platforms.
Airbnb: If you wanted to stay somewhere far from home, pretty much your only choice was to stay in a hotel. Airbnb came along and changed all that with its strategic innovation of an online marketplace for staying in other people’s houses. The service has grown tremendously in the past decade, with many people turning to Airbnb first before even thinking of booking a hotel room.
Harmon Brothers: Harmon Brothers is an ad agency that has made waves in the marketing world through innovative, informational, and hilarious advertisements. Some of their biggest clients are Squatty Potty, Purple, FiberFix, and Poo-Pourri. Their ads display quirky humor that do wonders for their clients because they produce ads that tell a story, make you laugh, and convince millions to purchase a product. They’re the type of ads you can watch just for the entertainment value alone, which encourages people to share it with others. Now many other marketers are scrambling to replicate Harmon Brothers’ strategy.
Albert Einstein: While not a business, Albert Einstein displayed an innovation strategy-type mind with how he tackled problems. Through his innovative thought experiments—not to mention his brilliant mind—he came up with groundbreaking ideas (such as the theory of general relativity) that have revolutionized the world.
Take a Break from Competitive Insights
Leaders from all verticals have been conditioned to look at their competitors to benchmark their own success and failure. However, innovation is driven by meeting the customer’s needs, not by playing the corporate version of keeping up with the Joneses.
Start with first principles thinking and asking your team members “why?” more often than you do now—even multiple times in the same conversation. When you find your team moving past basic assumptions, you’ll know you’re making progress. Look at the guidelines and examples above and see what innovation strategy you can implement. Your blue ocean strategy is out there and you’re the only one who can create it.