The global financial crisis hit many companies hard. Cash dried up. Jobs were lost. Customers stopped spending. You did not see many deals done. There were a few exceptions though. Walt Disney bought Marvel Entertainment for $4.24bn in 2009. Mickey Mouse now owns Spider-Man, X-Men, The Incredible Hulk and Iron Man.
While others were struggling to survive, Disney was acquiring its competitors. What made Disney different? It makes cash from movies, distributing movies, TV networks, merchandise and theme parks but that does not explain its true competitive advantage. Disney could close its doors and still have cash wash into its bank accounts every month. Even with its doors closed, others will make clothes, stationary, and other products with Disney characters all over them. They will send cash to Disney for the right to do so and the money will roll in even if Disney is closed. Why? Parents grew up with Disney and they want the same for their children.
Wanting to find out more about this company, I recently took out Walt Disney by Bob Thomas from the UCT library. Here are the most interesting bits that got my attention from the book:
Disney was a partnership between brothers. Walt had an older brother Roy, who organised the finances, met with bankers and shareholders. There is a myth of the solo business genius when it is far more likely for teams to succeed. Richard Branson had his cousin as his accountant, Steve Jobs had Tim Cook as his COO. If you have a business idea, who are you going to partner with?
Disneyland has “guests” not customers. It might seem like a small thing, just a word, but it sets the frame for all interactions. The way you treat a guest in your home is very different to how you treat a customer at work. Disneyland wants everyone who visits to feel like a guest in their home. It frames every interaction and decision because happy guests keep coming back for more.
“We will lick ‘em with the product”. Disney owed $4.5m to Bank of America. That was a lot of money at the time. The bank wanted Walt to cut back on expenses but Walt was hiring more people. Why? Walt knew that the best defence against financial default was a superb movie. It could have gone horribly wrong but Disney invested more, not less, and it worked. To gain insight into how Disney creates content today, Creativity Inc is a great read. It speaks about how Pixar (Finding Nemo, Toy Story) operates. Pixar was bought by Disney in 2006 and the Pixar team now heads up Disney animations.
Bankers need to know their customers. Bank of America did get more and more nervous about Disney. So much so that the Board of Directors called both Roy and Walt to a special meeting. The banker who worked with Disney asked every member of a Board a simple question, “Have you seen any of their films?” Many had not. He told them not to make a decision until they had. That was a brilliant move, Bank of America kept supporting them because they could see the difference in products.
Prototype everything. Design thinking, a very popular recent addition to top business schools, has prototyping as an important step. Don’t stay at the level of ideas, make a prototype quickly and see how it operates. Disney was onto this way before the business schools. He insisted on storyboards for all cartoons and films, before committing to the high production costs. He also had a small replica made of everything in Disneyland, to see how the different elements looked together.
Mickey Mouse went seriously viral. I never really understood what a big hit this mouse was. Ingersoll-Waterbury, makers of watches since 1856, were on the brink of bankruptcy in the 1930’s. Mickey Mouse saved them. They sold 2.5 million Mickey Mouse watches in 2 years, growing from 300 to 3000 employees. He represented a “can-do” attitude that connected with many going the great depression.
“Pig, don’t make a hog of yourself!” That is what Walt told a manager when he found out that he had allowed a German beer company to use a Disney song as a jingle in their adverts. Walt knew that he was leaving money on the table, but he also knew that Disney stood for values and quality that should not be compromised. He felt that associating with beer and being used as a jingle cheapened the reputation he had taken years to build. It was not worth the money they were paid.
When gaps appear, take advantage. Disney formed its own movie distribution business (Buena Vista) because it was having trouble getting distributors to sell some of their new films. Walt visited many amusement parks with his daughters but never had the experience he was hoping for, Disneyland was the result. Disney was also the first to launch a full-length animated movie (Snow White). They now own ESPN, Star Wars, Pixar and many other different businesses. When gaps appear, they take advantage.
No doubt Walt Disney had his faults but the company that he built is still going strong. It makes for a fascinating case study.