A Missing Piece of the Puzzle

After many missteps, Disney has finally found early traction with its latest digital offering in the market, Disney+.  In the midst of the technology-first fever, did Disney lose sight of the “Walt Disney way”? I believe this is the case and let me explain further.

On October 12, Disney announced a reorganization to give priority to it’s streaming video services – a move similar to those of other entertainment giants. Disney is creating a content group for movies, general entertainment and sports, and a distribution arm that determines which channel is most suitable for the content developed.

The move makes logical and strategic sense:

  • Growth in Disney+ paid subscribers has been strong and is now nearing 60 million since its November 2019 launch;
  • The trend of cable-cord cutting continues to put pressure on the distribution channels for its Media Networks content;
  • The pressure of COVID-19 accelerates the path to digital and virtual customer interactions.

Wall Street approved as Disney shares jumped 3.2% following the announcement. Disney is looking to shift the narrative in the public markets away from the negative impact COVID-19 has had on its theme park attendance, and towards the strong moves the company is making in the streaming wars.

However, if Walt Disney was here today, he might say that Disney leadership is missing an opportunity to forge a very different  path forward – one that would allow it to cement itself as the  iconic entertainment leader of the future. A question for reflection for Disney and media companies today: What would Walt do?

The Iger Effect

Before we get to Walt Disney, let’s first start with the successful tenure of the current Chairman and former CEO, Bob Iger.

The Bob Iger approach to strategy and leadership has served the company well from 2005 to early 2020, just prior to COVID-19. The Disney Board named Iger CEO on March 13, 2005 when the stock price was about $28. He led the company to a remarkable 5X increase in enterprise value, with the stock hitting a high of about $148 on December 6, 2019.

Iger’s strategic simplicity and the unflinching execution against his strategy set the stage for this performance. He embarked on a three pillar strategy: generating the best creative content, expanding into new international markets and fostering the latest technology. Iger and Disney executed against the first two  parts of this strategy exceptionally well but took a long and winding road to its digital destination, now culminating in Disney+.

To generate the best creative content, Iger needed to anchor Disney back to its core power. He observed that Disney’s animation business was struggling. He advocated for the acquisition of Pixar for what was then viewed as a high ticket price at $7 billion. Critically, upon successful completion of the acquisition, he empowered Pixar to lead animation at Disney. Animation needed to be revitalized and be brought back to the high standards implemented by its Founder, Walt Disney. Pixar fit the bill from a strategic, content and talent perspective and Iger saw its potential well beyond the price tag.

In addition, Iger’s dogged belief that “content is king” and the boldness to execute against this theme led Disney to acquire Marvel, LucasFilm and 20th Century Fox. These iconic content franchises were acquired and then effectively integrated into Disney’s content profit multiplier platform which moves these content franchises through movies, TV/Cable, Parks and consumer products.

However, the path to digital was a much longer journey with many big falls and failures along the way. Disney’s foray into digital started well before Iger’s tenure as CEO. In 1994, Disney started Disney Interactive,  which in the following year formed Disney Online. They continued a series of experiments and acquisitions over the years, spending several billions of dollars in investment across many categories including massively multi-player role-playing online gaming (MMORPG), e-commerce, mobile virtual network operator (MVNO), interactive TV etc. After many failed investments and acquisitions including Playdom for $563 mil (2010) and Vice for $600 mil (2016) and a couple of decades struggling to find a footing in digital, Disney finally found a path that tracked. In 2017, Disney had invested $2.58 billion for a controlling stake in BamTech which led eventually to the successful development and launch of Disney+.

The Fallacy of Today’s “Digital Transformation”

Disney+ launched in November 2019 and quickly grew to almost 60 million subscribers. The timing was impeccable as Disney+ was able to benefit from a spike in consumption during the pandemic.

COVID-19 fast-tracked the need for digital transformation across many industries. Disney placed its bet on Disney+ as the path to its future and has now reorganized prioritizing around digital as many of its competitors are doing.  But would Walt agree that it’s the right focus for Disney’s future?  Will Disney+ pull Disney ahead to win the streaming wars?

A technology led digital transformation sets legacy companies like Disney for likely failure by pushing them to compete in categories that are cannibalistic to its core businesses and into new business capabilities where technology leaders hold much greater power. Although this path is necessary for legacy companies like Disney to slow the decline of core businesses disrupted by new technologies, it is the exceptional and lucky business leader that succeeds. The internal warfare that persists as the attempted transformation takes place, as well as the insurmountable lead technology-first companies have gained on capabilities and talent acquisition, writes the destiny for legacy companies like Disney to meet their death by a thousand cuts.

Here’s a more probable outcome to the streaming wars: Netflix will prevail as the streaming leader, leveraging its core business capabilities custom built at its roots for this new media model, refined over years with tenacious singular focus, and continually innovating ways the future media value chain will operate. Although I agree that this streaming war is not a “winner take all” game, other media companies such as Disney will likely stay in line as followers as Netflix paves the way to be a leader in this new media model. Content is still king and the customer is still at the center; however, the experience around these two very important parts of the equation is where Netflix holds the keys to lead through its core capabilities of innovating media for new platforms.

Is Disney’s aspiration to be a follower rather than a leader in the future? That’s not what Walt Disney envisioned for his namesake company, or even what Bob Iger would have settled for.

Awakening the Walt Disney Within

Iconic innovators and transformational leaders like Walt Disney look beyond the status quo for a path forward, and often choose a path that is seemingly invisible amongst  the apparent trends of the marketplace and current technology.

Walt Disney was a dreamer, an out-of-the -box thinker and a walking example of “think different” long before Steve Jobs coined the term. The great transformational leaders carried with them this mindset and way of thinking and pushed their respective companies into wholly new directions, not those imagined or architected by their most fierce competitors.

In 1953, at a time when Disney was primarily an animation and content company, Walt Disney dared to imagine outside the boundaries of his company and industry and opened Disneyland. This path into a seemingly unrelated, wholly new direction for Disney changed the media and entertainment industry landscape forever and broadened it into a wider ecosystem. At the center of this was the Disney guests and the experiences Walt yearned to create for them. The technical and technology were only enablers and did not lead this process.

There were three key attributes to Walt Disney’s process into imagining wholly new directions:

  • “Think Big, Think Different.”: Walt Disney did not take an incrementalist approach to innovation.  He was constantly improving animation with the latest technology, but it was never a singular strategy for future growth. It was instead thinking differently to create wholly new directions forward that set Disney apart from the rest of the pack. Walt envisioned an amusement park where his cartoon characters could come to life and interact with the visitors and provide entertainment for the whole family. It was a bold new path fusing the company’s core powers – its animated characters – into new directions.
  • “Stick To Your Knitting and Expand”: Walt Disney intuitively understood how to leverage the powers that made Disney great and moved beyond the movie screen as its platform for storytelling. Disney extended the company’s base business capabilities in storytelling and entertainment and reimagined how it could be applied to an amusement park. To the outsider, this might look like going too far outside one’s core, but it actually reflects a deep understanding of the company’s real strengths.
  • “Start Small and Make Big Moves Forward.” Walt Disney would vision the ultimate destination, but he would  start smaller.  He first opened “The Mickey Mouse Park” on an eight acre plot in Riverside, CA. Only a small squad of designers, engineers and artists made up the team at the start. Once they proved successful, he was bold from there on out – forming what would eventually become  Disneyland on 85 acres in Anaheim.

If today’s Disney could move past the tunnel vision of ‘technology-led digital transformation’ as the holy grail forward, it could awaken to the possibilities of moving into invisible wholly new directions- and once again change its competitive landscape as we know it.

The secret to Disney’s future lies in going back to the Walt Disney blueprint: Imagining a future direction based on Disney’s core powers, outside the apparent trends of the day and that builds whole new ecosystems ‘invisible’ to the competition.

About the author:

Sodan Ray Selva is the Founder of Movementmaker.io, author of “When Followers Become Leaders” and  Managing Partner at Chia Ventures, Inc., based in Silicon Valley, which was founded in 2014 with the mission to crack the code on how established companies could successfully transform and recently partnered with the Draper Venture Network. Sodan grew as an executive and operator in the pursuit of innovation and transformation at public (Disney), private equity (Blackstone) and venture capital funded (USA, Europe) companies for over 25+ years. He works with business leaders at Fortune 500 and Fortune 1000 companies globally.