978-1259278211 Case 35 Solution Manual

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Teaching Note: Case 35 – Cirque du Soleil

Case Objectives

1. To discuss how leadership can implement strategy and manage innovation.

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The Teaching

Chapter Use Key Concepts Additional Reading and/or

Exercises

PRIMARY CHAPTERS

11: Strategic Leadership

Leadership NOTE additional reading, web-links

12: Managing Innovation Innovation; scope of innovation NOTE see web-links, embedded

video

SECONDARY CHAPTERS

6: Corporate-Level Strategy

Diversification; synergy NOTE web-links, case update

8: Entrepreneurial Strategies Opportunity recognition

Case Synopsis

In 2015 the founder of Cirque du Soleil, Guy Lalibert4, after seeing the firm’s growth prospects wane in

recent years, had to think about expanding his firm in new directions. For three decades, the firm had

reinvented and revolutionized the circus. From its beginning in 1984, Cirque de Soleil had thrilled over

of the company to outside investors by emphasizing a more diversified and disciplined company structure

and growth plan. Would this additional funding be enough to help Lalibert4 and Cirque take on new and

different challenges, or was the rarity gone?

Teaching Plan

This case is best positioned after students have a firm grasp of strategic analysis, including how to assess

both internal and external environments. Cirque du Soleil provides an opportunity to discuss leadership in

ICEBREAKER

As you begin the discussion, it might be interesting to students to view the Cirque du Soleil main website

at https://www.cirquedusoleil.com/en/home/shows/americas/usa.aspx. It might be illustrative to ask:

How many of you have been to a “traditional” circus? How many of you have seen a Cirque du Soleil

performance, either in person or on video? What’s the difference between the traditional circus and

Cirque’s approach to this form of entertainment?

As you look at the Cirque du Soleil main page, does it make you want to click anywhere? What does the

web page signal about the difference in this circus’s offerings? Is it still a “circus”?

The answers to these questions may prompt students to consider how hard it might be to redefine and

reinvent a traditional entertainment format, as well asconsider the challenges of continuous innovation.

Before engaging in discussion, you might want to test student’s basic knowledge regarding the case and

Which statement is most true?

a. Even though Cirque du Soleil’s acrobats do death defying acts at every performance, the

b. Cirque du Soleil’s firs Las Vegas show, Nouvelle Experience, was performed at the Mirage, in the

c. Cirque du Soleil’s innovative and amazing shows have never failed to turn a profit.

d. Guy Lalibert4 was the sole founder of Cirque du Soleil.

ANSWER: b. Cirque recently suffered its first death during a performance, when an acrobat tumbled 94

feet during a stunt in a Las Vegas performance of the show Ka in 2013. In 1992, Cirque du Soleil took a

Cirque du Soleil’s shows are all designed to be performed, first, under the Grand Chapiteau, or Big Top,

before they are modified for other venues.

a. Yes

b. No

ANSWER: b. Even though this was true in the beginning, after the contract to develop Mystere for

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign, and also

which additional readings or exercises to include to augment each discussion. Refer back to the Case

Objectives Table to identify any additional readings and/or exercises so they can be assigned in advance.

1. How has leadership been able to create a new market space in a traditional industry? Is setting a

direction, designing the organization, nurturing a culture sufficient to create a sustainable

business?

2. Cirque du Soleil was known for its innovation. Now that it was struggling, how could it continue

to innovate in new directions?

3. OPTIONAL QUESTION: What strategy can Cirque du Soleil adopt to sustain its competitive

advantage?

Discussion Questions and Responses

1. How has leadership been able to create a new market space in a traditional industry? Is setting

a direction, designing the organization, nurturing a culture sufficient to create a sustainable

business?

Prior to answering the specific case questions, the instructor might want to position the discussion by

reviewing what strategic management really is:

Referencing Chapter 1: Strategic Management

Strategy is all about the ideas, decisions, and actions that enable a firm to succeed. See Chapter 1, Exhibit

01: Strategic management consists of the analyses, decisions, and actions an organization undertakes in

order to create and sustain competitive advantages:

●strategy directs the organization toward overall goals and objectives;

●includes multiple stakeholders in decision making;

As we can see, leaders face a large number of complex challenges. Leaders must be proactive,

anticipating change and continually refining changes to their strategies. This requires a certain level of

An interesting question that the instructor can ask at this point is: what business is Cirque du Soleil in?

Some students might say the circus; others might say entertainment. The answers to this question will

If the business is the circus, the focus might be on the “three ring” model of individual performers doing

amazing things (but since its founding, many other “circus” firms have copied Cirque’s performance

ADDITIONAL READING NOTE: In a 2015 article about how Cirque du Soleil had had to reinvent itself

after the 2008 economic downturn and the highly publicized death of a performer in 2013, the difference

between Cirque and any other extravagant entertainment experience is still clear: “Cirque, as a corporate

See Chapter 1, Exhibit 06: The primary role of the organizational leader is to articulate vision, mission,

and strategic objectives. Leaders must communicate their initial vision of the organization’s purpose: what

driven by and evokes passion? How well did Cirque du Soleil’s founder Guy Lalibert4 seem to do this?

In 1987 Cirque du Soleil had burst on the art scene in Montreal as an entirely new art form.

Founders Guy Lalibert4 and Gilles Ste-Croix had turned the whole concept of circus on its head. Using

story lines, identifiable characters, and an emotional arc, Cirque du Soleil embodied more than a mere

collection of disparate acts and feats. From the beginning, it promoted the whole show, rather than

The organizational mission also needs to be considered: a mission encompasses both the purpose of the

company as well as the basis for competition and competitive advantages. In writing a mission statement,

Organizations must respond to multiple constituencies if they are to survive and prosper, and the mission

provides a means of communicating to diverse organizational stakeholders. Although vision statements

Anticipating that things might change, an organization’s leadership must then establish strategic

objectives to operationalize the mission statement. That is, objectives help to operationalize the mission

Although Cirque’s creative team tried to do continuous innovation, this didn’t always translate to the

audience, who thought the various shows would all be similar because of the well-known Cirque brand.

customers and satisfy their needs?

Cirque had developed techniques that allowed it to accomplish its strategic objectives, for instance doing

innovative design of custom venues using new technology such as in the 25-foot-deep, 1.5 million–gallon

pool of crystal clear water built for O at Bellagio. It also was not afraid to reach out to other sources for

The basic question strategic management tries to answer is: How can we create competitive advantages in

the marketplace that are not only unique and valuable but also difficult for competitors to copy or

Referencing Chapter 11: Strategic Leadership

See the concept of leadership, the process of transforming organizations from what they are to what the

leader would have them become. This involves:

●Setting a direction

Leadership is proactive, goal oriented, and focused on the creation and implementation of the creative

vision. This definition implies dissatisfaction with the status quo, a vision of what should be, and

The interdependent nature of these three activities is self-evident. Consider an organization with a great

mission and a superb organizational structure, but a culture that implicitly encourages shirking and

Leaders need to set the direction for the organization by continually scanning the environment to develop

knowledge of all stakeholders and knowledge of salient environmental trends and events. Then leaders

Cirque, especially through its founder Guy Lalibert4, excelled at this proactive approach. From the very

beginning Lalibert4 had recognized that audiences might be hungry for a redefinition of the traditional

circus, especially if they were purposively drawn into the performance with strong emotional music rather

than spoken dialogue. Lalibert4 and his creative team were also willing to search for alternatives such as

Leaders are also responsible for designing the organization: a strategic leadership activity of building

structures, teams, systems, and organizational processes that facilitate the implementation of the leader’s

Cirque du Soleil originally designed an organization to be based in Montreal, the home of its founders,

where it developed its shows and tried them out, first, under the Grand Chapiteau, or Big Top, before they

were modified for other venues. However, after the contract to develop Mystere for Treasure Island in Las

This willingness to create systems and structures to achieve desired ends allowed Cirque to grow into an

international entertainment conglomerate with 4,000 employees working in offices around the world,

In nurturing a culture dedicated to excellence and ethical behavior, managers and top executives must

accept personal responsibility for developing and strengthening appropriate behavior; consistently

Difficulties in implementing the leader’s vision and strategies include a lack of understanding of

responsibility and accountability among managers, reward systems that do not motivate individuals and

Although Cirque du Soleil prided itself on its innovative practices, it had misjudged in certain key ways,

especially around budgeting and control systems, and on how it chose its new venues and crafted its

In addition, Cirque had allowed certain new shows to dilute the brand by promoting them in less than

ideal venues, e.g., Hollywood’s seedy neighborhood and the Chinese gambling capital of Macau. Also,

Certainly Guy Lalibert4 had acknowledged these missteps, and he had taken appropriate action to

examine production costs and expansion plans. Stringent cost controls allowed Cirque to return to

Now Laliberte was seeking to sell 20 to 30 percent of the company to outside investors by emphasizing

the more disciplined company structure and growth plan. The additional funding would help Lalibert4 to

NOTE – WEB LINKS TO ADDITIONAL READING:

To better understand the technological intricacies of a Cirque production, see this story of how it works

behind the scenes in Las Vegas. Creative teams have to work out “the balance between technology and

Another stark contrast between the circus and traditional entertainment is the risk of injury. The 2013

death of a performer on stage and hundreds of other injuries to artists in Cirque’s various shows raises

2. Cirque du Soleil was known for its innovation. Now that it was struggling, how could it

continue to innovate in new directions?

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

One of the most important sources of growth opportunities to achieve competitive advantage is

innovation. Innovation involves using new knowledge to transform organizational processes or create

commercially viable products and services using the latest technology, experimentation, creative insights,

Some of the challenges of innovation involve choosing when and how to continue to innovate, the scope

of future innovation and the pace, as well as whether or not to collaborate with innovation partners. Firms

Although Cirque du Soleil had a leadership team with vision, dedication and drive, Lalibert4’s idea was to

move into areas related to the original vision, but not directly focused on performance. These initiatives

included a musical-theatre production arm, a special events production company, children’s television

company’s original domain of interest, and could they make the best use of the company’s existing

resources?

A strategic envelope defines the range of acceptable projects. Strategic envelope means a firm-specific

view of innovation that defines how a firm can create new knowledge and learn from an innovation

One way to determine which projects to work on is to focus on a common technology. Then, innovation

efforts across the firm can aim at developing skills and expertise in a given technical area. Another

In defining the innovation scope, a firm should answer several questions:

●How much will the innovation cost?

●How likely is it to actually become commercially viable?

●How much value will it add; that is, what will it be worth if it works?

●What will be learned if it does not pan out?

One good thing was that Cirque had already felt the pain of a poorly executed growth strategy, and

appeared to have learned from this failure. This meant that the company was primed to assess and control

One area of possible concern might be the degree to which the new initiatives departed from Cirque’s

original vision and mission. Cirque’s brand was clearly as a creative entity, known for amazing stories,

Certainly the new business units would add financial value and buffer the firm from possible creative

production failures, but would it add value to the brand overall? And if these new business ventures

failed, how could that learning be brought back to help the creative side of the business develop, innovate,

and grow?

As explained above, it’s important to consider all the factors that go into strategic management, and

decide the sequence of strategic actions in order to conserve resources and gain focus. In Cirque du

Soleil’s industry, innovation was critical. Could Lalibert4 deliver on his promise to apply Cirque’s talents

to other businesses?

NOTE – WEB LINKS TO STORIES, VIDEO:

To get a sense of how amazing Cirque du Soleil’s performances are, see this video introduction:

https://www.youtube.com/watch?v=jy8qrUEjEWk and a preview of the technology used in the O

Bellagio production, https://www.youtube.com/watch?v=Vm11jzx7Ka0

Regarding innovation, “Cirque du Soleil enjoys a culture of innovation supported by a vast team of global

talent scouts and media archival researchers. Employing performers from over 50 different countries also

For further appreciation of the technologic advances Cirque du Soleil has pioneered, see this description

of the challenges the design team had to overcome when creating the water venue for O: “With a 1.5

million gallon pool of water that regularly appears and disappears throughout the production, you can

Certainly some of this talent might be put to good use in other ways as Cirque expands into new ventures?

3. OPTIONAL QUESTION: What strategy can Cirque du Soleil adopt to sustain its competitive

advantage?

NOTE: no PowerPoint slides accompany this discussion.

Referencing Chapter 6: Corporate-Level Strategy

Corporate strategy focuses discussion on the questions of what businesses a corporation should compete

Diversification is the process of firms expanding their operations by entering new businesses. Some

possibilities include:

●Mergers and acquisitions

●Strategic alliances

Whatever the choice, it should create value for all stakeholders – employees, suppliers, distributors,

When achieving synergy through diversification, a firm has two choices: related diversification through

horizontal relationships with related businesses, sharing tangible and intangible resources, and leveraging

Core competencies reflect the collective learning in organizations—how to coordinate diverse production

skills, integrate multiple streams of technologies, and market diverse products and services to create

Growth strategies should create value for all stakeholders. Corporations can achieve synergy by sharing

tangible and value-creating activities across their business units; or through the use of common facilities,

Cirque du Soleil’s core competencies lay primarily in its innovative approach to creating amazing live

performances. In this area it had successfully integrated multiple streams of technologies, using common

elements in its value chain, primarily its human resources and technological skills. This meant that it

The theme parks and ticketing service unit were even farther away, perhaps verging on unrelated

Cirque did not appear to be pursuing mergers or acquisitions, but the possibility of selling a stake in the

and what might that do to Cirque’s strong brand identity?

NOTE – WEB LINKS, CASE UPDATE:

News from 2015 was that Cirque du Soleil had “sold itself off to investors in hopes of expanding into

China…. [Cirque has] sold a majority stake to the Texas-based TPG Capital and the Chinese

This sale includes a minority stake for Canadian pension fund manager Caisse de d4pôt et placement du

Qu4bec, which will allow Cirque to maintain its headquarters in Montreal. It also reduces Guy Lalibert’s

Other analysts see no chance for Cirque du Soleil in China, primarily because it had failed in its previous

attempts to entertain Chinese audiences. Its first-ever Chinese shows in Shanghai were not well attended,

possibly because, “in China at least, Cirque du Soleil offers very little in acrobatic spectacle (rope tricks,

spinning plates, death defying heights) that the Chinese haven’t been doing on stage, in their own circus

performances, for centuries.” Cirque also had failed to cater to local Chinese tastes, not understanding

Referencing Chapter 8: Entrepreneurial Strategy and Competitive Dynamics

Entrepreneurship involves the creation of new value by an existing organization or new venture that

For an entrepreneurial venture to create new value, three factors must be present—an entrepreneurial

opportunity, the resources to pursue the opportunity, and an entrepreneur or entrepreneurial team willing

See Exhibit 8.1 and the opportunity analysis framework: the relationship between an entrepreneur, the

Entrepreneurs need to understand the concept of opportunity recognition: the process of discovering and

evaluating changes in the business environment, such as a new technology, sociocultural trends, or shifts

Good entrepreneurial opportunities are those that are attractive to the marketplace (there must be demand

for the new product or service), achievable (it must be practical and physically possible to do), durable

Resources are an essential component of a successful entrepreneurial launch. The most Important

resource is usually money, but human resources, strong and skilled management, is also an essential asset.

Launching a competitive venture requires a special kind of leadership involving courage, belief in one’s

convictions, and having the energy to work hard. Three characteristics of entrepreneurial leaders are:

●Vision

●Dedication and drive

To achieve excellence, venture founders must understand the customer, provide quality products and

In the beginning, Cirque du Soleil demonstrated a clear ability to do opportunity recognition: it correctly

gauged the public’s appetite for innovative athleticism paired with good story telling and a stunning visual

and auditory spectacle. Because of the founders’ ability to use their social capital to attract diverse talent

performers themselves, who were gaining new skills. However, in the face of market saturation, was

Cirque now able to learn how to exploit changes in the current environment, and did it have the resources

to be able to do this?

Firms can grow via joint ventures or via internal development, or entrepreneurial ventures. At Cirque du

Soleil, certainly the leadership has shown vision, dedication and drive and a commitment to excellence in

the past, and the opportunities for entrepreneurial ventures are there, worldwide. In the past the firm has