Disney Studios Strategy: Streaming Wars and Competitive Edge

Leadership as Disney's Core Competitive Asset

Disney was at its best when it was not just Eisner alone, but rather the triumvirate of Eisner, Wells, and Katzenberg. The three complemented one another well, but individually and on their own none of them could recreate the same magic. Strategy formulation and implementation must therefore begin with the question of who is calling the shots and making the decisions at Disney — who is bringing the vision, and what is that vision? This must be clearly defined and directional. Once the direction is defined, the parenting strategy must be established: this is the "manner in which management coordinates activities, transfers resources, and cultivates capabilities among product lines and business units" (Wheelen, Hunger, Hoffman & Bamford, 2010, p. 5). The strategy must focus on what the company is doing with its human capital. Intangible assets are human capital — that is, knowledge, know-how, motivation, and the ability to deliver products and services at a high quality level.

At Disney, the best way for the firm to create a competitive advantage is to develop leaders based on the model put forward by Walt Disney and exemplified by the triumvirate of Eisner, Wells, and Katzenberg. Together, these approaches to leadership revealed specific qualities and characteristics that the company needs in order to differentiate itself from its competitors going forward. Otherwise, Disney becomes just one more production company attempting to create entertaining products and services that are no different from what competitors are putting out. What made Disney great during the Walt Disney era was that it produced great works that no other company was producing — and this is essentially what made it great during the triumvirate years as well.

The key to getting back to being the dominant player in the marketplace is identifying the leaders in the firm who can utilize skills that drive success. Wells was a numbers man who could balance Eisner's expansive visioning with practical data and financial discipline. Katzenberg was a creative talent leader who could recognize great scripts that could be produced at a reasonable budget. This recipe of leadership created an environment for success. It is precisely this recipe that is missing at Disney today, and the company needs to conduct an internal assessment to better understand what human capital it has available to develop and leverage.

Human Capital, Training, and Intangible Assets

Intangible assets are incomparably valuable to an organization because they cannot be replaced easily — they require time, training, investment, searching for the right talent, developing that talent, and attracting new talent, none of which can be accomplished overnight. As a result, intangible assets are often more valuable than tangible assets when a company's leaders understand their worth. An organization that fails to adequately value its intangible assets is asking for trouble down the road. This is the risk that Disney is currently running by not restoring the triumvirate — at least in spirit — that allowed the company to flourish in the late 1980s and early 1990s.

Intangible assets relate to training and development in the sense that training and development are required for human capital to reach its fullest potential, while at the same time human capital is required for training and development to be most effective. To some extent the issue resembles the classic question of the chicken and the egg: does an organization first need substantial human, intellectual, and social capital before it can build the right training and development team? On one hand, yes; on the other, no — because training and development is precisely what allows intangible assets to reach their fullest potential. What matters most is having great leaders who can project the vision and ideals needed for the organization to achieve its objectives.

Human capital also influences the changing role of training — shifting it from simple skill and knowledge acquisition toward creating and sharing knowledge. This happens by enabling workers to instruct one another and to benefit from the diverse experience each person brings. Rather than relying exclusively on formal training room courses, workers can interact with mentors who bring their experience and insight to the workplace, effectively serving as living encyclopedias of knowledge for younger colleagues while also offering social and emotional support. This helps to boost workers' confidence and guide them toward becoming self-actualized, high-performing contributors. The more an organization can invest in human capital and facilitate interaction between experienced and inexperienced workers, the less it needs to rely on formal skills training alone. In order for Disney to have a successful strategy and a successful implementation of that strategy, it must first invest in the right human capital — which means finding replacements for Wells and Katzenberg who bring comparable strengths.

International Expansion and Globalization

Expanding into international markets requires a deep understanding of what those markets are about. It demands cultural literacy — knowing who the people are and what they want. In France, for instance, Disney Park visitors expected wine to be available, and the company eventually compromised to satisfy local preferences. That kind of adaptive approach is necessary, but it must be paired with the recognition that not every Disney product will appeal to every culture. This was demonstrated by Mattel when it attempted to sell Barbie in China — a clear cultural mismatch. If Disney wants to expand into international markets, it must do so in a way that makes sense both for the local culture and for the company's core identity.

Expansion should be organic — that is, it should conform with the company's existing activities and competencies. It would not make strategic sense for Disney to expand into areas entirely outside its core business. Yet, with the dissolution of the triumvirate, Disney pursued an inorganic expansion strategy through the purchase of ABC, and this has led to ongoing challenges and cultural conflicts throughout the company.

Disney should manage its expansion strategy by examining its own value chain. Value chain analysis is a systematic approach to examining the company's functional activities and assessing how well each contributes to the creation of customer value. For years, Disney excelled at exactly this. It revitalized its film business by developing great scripts into films audiences wanted to see, thereby generating genuine customer value in the form of entertainment. However, the company moved to expand too aggressively and too quickly in a direction that should have been pursued more cautiously. At the international level, Disney needs to assess how it can create customer value for consumers in diverse markets around the world. Because each culture is different, no broad generalizations will suffice. At the same time, the company cannot justify large investments in expansion projects unless it is confident in a suitable return. With a target ROI of 20% for investors, any international investment must be grounded in rigorous internal analysis covering inbound resource management, operations, distribution, marketing, customer service, and more.

Globalization is another factor Disney must consider, particularly in light of disruptions such as the COVID-19 pandemic, which exposed the fragility of global supply chains. Building supply chains locally wherever Disney seeks to do business may be the most prudent approach in the near term. Globalization will continue to shape everything from supply chains and market access to talent recruitment and marketing strategies. Three critical factors for succeeding in a globalized environment are: (1) the ability to embrace change and adapt, (2) the ability to be creative and innovative, and (3) the ability to operate at a world-class level, which requires egalitarian principles and a strong consumer focus. By emphasizing these factors, Disney can guide its international expansion in a way that maximizes its strengths while limiting the impact of internal weaknesses and constraints.

References

Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2010). Strategic management and business policy. Upper Saddle River, NJ: Prentice Hall.