To Infinity and Beyond: Disney’s Alignment with Magic
No other corporation in America has more effectively monetized the key thing we all hold dearest to our hearts, MAGIC. To adults and adolescents alike, Disney caters to the inner child in all of us. Making us feel that much closer to the fantasy of eternal innocence, Disney has the ability to makes us believe, just for a moment, that “when you wish upon a star, your dreams come true.”
Note: Video of Disney’s Wishes – A Magical Gathering of Disney Dreams Fireworks display. Play video while reading.
Business Model
Founded in 1923, Disney was built on one man’s dream to forge imagination into a “physical existence that directly influences the experience of others in a positive way.” Delivering MAGIC to its consumers, whether in the form of an experience, or customer service, has been central to Disney’s Business model from the start. As Disney grew in scope, however, Walt Disney identified the need to infuse this magic across all of his business segments.
Published in 1957, the drawing below captures Walt Disney’s early vision to permeate the value of one central film asset, supported by an array of related entertainment assets. As new subsidiaries and lines of business developed through the years, this synergy map has grown significantly but the commitment to delivering special experiences has remained at the crux. From the iconic park operations, to the production of blockbuster hits, to charitable initiatives, and the management of subsidiaries, this commitment has manifested itself into every inch of Disney corporate DNA, and is perhaps the reason behind Disney’s well aligned Operating Model.
Operating Model
Labor: Disney’s human capital has played a huge role in delivering the value of magic to its guests and audiences, and its success has largely been attributed to the aligned processes it has in place for training and hiring. At the top of the pyramid, senior leaders are guided by 10 management principles, including:
1) Make everyone’s dreams come true.
2) Never a customer, always a guest.
3) Capture the magic with storyboard.
Under such guidance, deliberate actions have been taken to ensure full alignment among all employees. On the client facing side, as a corporate mandate, Theme Park employees are required, quite literally to end every sentence with, “have a magical day.” On the R&D side, an entire department of Imagineers are tasked with the sole job of dreaming up and designing creative ideas of turning fantasy into reality, directed by no other guidance than to Dream, to Believe, to Dare and to Do.
Intellectual Property: Disney today has amassed a humongous portfolio of intellectual property. In large part, many of Disney’s acquisition decisions have been guided by the search for franchise magic that can sit in the center of the aforementioned synergy map. Lucasfilm, and Marvel are just some of the recent examples that come to mind. In other instances, these new lines of business have infused distribution or cultural capabilities into Disney’s organization, creating significant synergies. For example, cable channels such as ABC and ESPN, have expanded Disney’s scope of offering beyond just the delivery of franchises, yet, they act as powerful mediums to distribute and advertise existing brands. In another example, when acquiring Pixar back in 2004, Disney’s Corporate Development team was guided by a deliberate choice to send a signal of creative originality, both inside and outside Disney. In each of these instances, Disney’s decision to amass new intellectual property linked back in some way or form to their original Synergy Map, and commitment to delivering a magical experience.
Charities: Even Disney’s Charitable initiatives are aligned with its overall mission. In choosing which causes to sponsor, Management is guided by a commitment to youth and community. Disney’s Dreamer and Doer foundation is just one example of Disney’s emphasis on celebrating the power of possibility and the youth who take action to improve their community, home or school.
Performance
Walt Disney’s recipe for value creation was a winner from the start. Disney’s Blockbuster hits are still in large part, central to the synergy map, acting as the distribution channel for imagination. Frozen, Inside Out, Tangled, what do these films have in common? The MAGIC itself, whether that be a heroine to believe in, a perpetuated feeling of eternal innocence, the gift of hope, or the fantasy of a fairytale ending.
Yet, even without a strong franchise center, Disney has figured out a way to capitalize by leveraging the existence of its current synergy map of entertainment platforms. For example, Pixar’s Cars was a relative box office disappointment, yet, Disney was able to turn a huge profit by selling 100mm model vehicles on the back of the film’s release, and by leveraging its theme parks where it brought imagination, in literal sense, into reality through its Cars Land attraction.
The results have been fruitful. Disney’s stock price has experienced gains of more than 25% in the last 12 months, and has almost tripled in share price since January of 2011. A central vision to deliver magic through a myriad of entertainment channels, supplemented by core management principles, and the ability to transform films and characters into global franchises combine for a winning business, and clients and investors alike have recognized.
Sources
https://cdn.thewaltdisneycompany.com/sites/default/files/reports/10k-wrap-2014_1.pdf
http://marketrealist.com/2015/07/disney-stock-performance-magical-investors/
http://maaw.info/ArticleSummaries/ArtSumCapodagliJackson99.htm
http://suitcasesopendoors.blogspot.com/2010/04/disney-companys-10-management.html
https://hbr.org/2013/05/what-makes-a-good-corporate-st
http://disneyimaginations.com
http://www.economist.com/node/11058438
http://www.nasdaq.com/article/is-now-the-right-time-to-buy-disney-stock-cm549543
What I think is interesting is that Disney’s operating model and business model has stayed relatively consistent for so long. One question I have is whether you think the operating model will have to change as children become more and more digitally savvy. In a world where three year olds are more comfortable with iPads than their parents, will Disney face increasing competition and have to invest to bring the magic to children in different ways?
Loved the post. I’ve always been impressed by the way Disney creates value, and I’m especially fascinated by their theme park operations. Once at work, I was looking at one of their competitors, and was looking into Tokyo Disneyland’s operations, but how every single detail was meticulously thought out was mind blowing. Their openness to new businesses and styles is also very impressive, and probably one of the key reasons why they never get old.
Hey Ching-Ching, I loved that you picked a company that you are this passionate about. Disney is one of the very few companies that I think managed to get success after success throughout the years. Having started in 1923, It must have been extremely challenging to ensure the best delivery to the customers, through the right operating and business model. I can imagine that the product that Disney is all about is very dependent on the people in the company; What they try to do is to come up with original and new ideas all the time to keep generations and generations of kids interested. It must be very heavily dependent on market research as well to understand the preferences of the new generations. I would personally be very curious to know what Disney does in order to create this perfect balance between the creativity that is required in this domain and the quality of standards that is required from a company like Disney.