Walt Disney's Business Strategy and Financial Leadership

Walt Disney's Financial Beginnings

Walt Disney began his career in Kansas City, Missouri, where his family lived, and for years his business teetered on the brink of collapse. Disney learned how to manage what little funds he had and to persist through hardship from these early experiences. While still in Missouri, he incorporated a company called Laugh-O-Gram Films. With his last $500 from that venture, he began a series of cartoons based on Alice in Wonderland. When his money ran out, he headed to Hollywood, where he set up a studio in his uncle's garage and "wrote to M.J. Winkler, a film distributor, announcing that he was 'establishing a studio in Los Angeles for the purpose of producing a new and novel series of cartoons'" (Disney). Winkler purchased a set of the cartoons for $1,500 each, and Disney had his first real cash flow.

Because of his prior money troubles, Walt asked his brother Roy to come to California and help him with the business. This was probably one of his best business decisions — it left Walt free to create and draw while leaving someone else in charge of day-to-day expenses. "In 1923 they launched the Disney Brothers Studio with $200 Roy had saved, $500 borrowed from Uncle Robert, and $2,500 that Flora and Elias contributed (and for which they had to mortgage their house in Portland)" (Disney). With this money, they bought a camera, moved into a small apartment together, rented a studio in the back of a real estate office, and hired two assistants (Disney).

While Roy managed the money, Walt remained deeply involved in the business. After each setback, it was Walt who dreamed up new ideas to replace old ones — most notably creating Mickey Mouse to replace Mortimer Rabbit, who ultimately belonged to Universal Films. He also recognized that cartoons needed sound to stay current, and devised the idea of pairing cartoons with classical music in the Silly Symphonies series. These ideas were extremely popular and made Disney Studios the most admired animation house in the country. When the Silly Symphonies really took off, Walt created a separate studio with dedicated animators to work exclusively on the series — one of the many ways he managed each functional piece of the business and developed needed organizational capabilities.

Disney's business instincts were tested many times. When Snow White came along, many thought Disney was reckless to attempt a full-length feature film. Critics argued it would be too expensive and that audiences would not sit through a feature-length cartoon. "Walt was upset by the way bankers had got in the way of his vision" (Rich, 1983, p. 46).

Building Organizational Capabilities

Walt was also deeply involved in training his staff so they could render characters as he envisioned them. He sent animators to art school and trained them at the studio, and their drawing improved markedly. "Now they were beginning to explore a new art — the art of animation" (Thomas, 1966, p. 102). When Snow White became a hit and money began pouring in, Walt grew even more engaged. "With the cash that Snow White generated, Walt began building a new studio in Burbank. It was a $3 million investment, and Walt was personally involved in virtually every element of its design" (Disney, 2002).

During World War II, the cartoon market slowed and the studio ended up $4.5 million in debt. After the war, Walt and Roy argued about the studio's direction. Walt ultimately sent the studio in three distinct — and ultimately profitable — directions: "True-Life Adventures, live-action films, and a reinvigoration of cartoon features, led off by Cinderella" (Disney, 2002). It was also Walt's vision for a clean, safe amusement park where families could gather that led to the creation of Disneyland. Walt formed his own separate company — WED (Walter Elias Disney) — and to fund it, "borrowed on his life insurance, sold his vacation home in Palm Springs, borrowed money from employees, and founded Walt Disney, Incorporated (which later became WED Enterprises), to do the work" (Disney, 2002).

Throughout his career, Walt continually had to meet financial and strategic objectives, and despite frequent setbacks he always found a way to do so — even if it meant going over budget, for which he was well known. In Snow White, he felt the lead character looked too pale, so thousands of frames were repainted with pink cheeks. In Pinocchio, he felt something was missing, so Jiminy Cricket was added after the film's near-completion, at considerable extra cost. However, these details helped make the films the hits they became and ultimately added to the studio's revenues.

Strategic and Financial Objectives

Disney eventually obtained total creative control by taking charge of everything the studio produced. "Visitors to Disneyland also comment on the 'cult of Walt' which has taken the place of the earlier creative atmosphere. Everything ends up on his desk. In Ford's empire, they were afraid to call the top man Henry. In Disney's, they dare call him nothing but Walt" (Fishwick, 1954, p. 187).

After his successful Oswald the Rabbit cartoons were absorbed by Universal Pictures, Walt resolved to remain independent and swore he would never work for anyone else again. "Other film companies were also anxious to release the Mickey Mouse films — if they could induce Walt to work for them. But Walt was firm. He would work for nobody but himself" (Thomas, 1966, p. 90). Initially, this stance made it harder for the studio to survive, but in the long run it proved to be a sound decision. The company, though it weathered many difficult periods, always recovered. "By 1936, eight years later, critics and fans alike agreed that Mickey Mouse was the most recognized figure in the world. Songs were written about him. Watches had his face on them. He could be found everywhere. Disney was called 'a genius'" (Unknown, 1999).