How Disney’s Philosophy on Failure Drives Growth

By Scott Kirsner | January 27, 2020

Disney is a company that has always sought growth in new places — from television to theme parks to the Internet. But on its journey from a startup (1923) to a public company with a $260 billion market cap (2020), it has failed more than a few times. And almost every failure has taught the organization something about its own capabilities, often leading to acquisitions or different strategic approaches.

Among the failures:

Go.com, an Internet portal based in Silicon Valley that was intended to compete with Yahoo, Lycos, and other early web destinations. Disney shut down Go in 2001, but kept investing in other Internet businesses, like ESPN.com.
DisneyQuest, a planned chain of indoor entertainment centers that would compete with arcade operators like Dave & Busters, GameWorks, or Chuck E. Cheese, but with games and attractions custom-designed by Disney. Two locations opened, in Orlando and Chicago. But their financial results weren’t encouraging enough to persuade Disney to open others. Both were closed.
California Adventure, the theme park that was built on Disneyland’s former parking lot. Designed to transform Disneyland into more of a multi-day destination, like the company’s Florida theme parks, California Adventure opened in 2001 to negative buzz and low ticket sales. Even Disney loyalists felt there weren’t enough unique attractions that delivered a Disney-esque “wow” experience. Six years after opening, Disney launched a $1.1 billion overhaul, the biggest investment it had ever made in a theme park after opening.
MovieBeam, a set-top box Disney created to compete with TiVo and Netflix. It delivered on-demand movies using digital broadcast signals, but the selection and picture quality weren’t enough to win over consumers. (The consumer version failed, but a version targeting hotel operators still exists.)
“Chicken Little.” Remember Disney’s first fully computer-animated film, released in 2005? No one else does, either. The New York Times called it “a hectic, uninspired pastiche of catchphrases and clichés, with very little wit, inspiration or originality…” Disney paid $7.4 billion to acquire Pixar the following year.

Disney’s California Adventure theme park opened in 2001. Years of disappointing attendance followed.

But unlike many other large companies, at Disney these kinds of failures don’t serve as signals that you shouldn’t ever swing for the fences again. The Pixar acquisition helped Disney reinvigorate its animated film franchise, phasing out hand-drawn animation while also cranking out hits like “Frozen,” “Zootopia,” and “Incredibles 2,” among the top-earning animated films of all time. Even after the MovieBeam experience, Disney has been a major investor in digital streaming services like Hulu, ESPN+, and Disney+, which launched in December 2019. It didn’t shy away from other experiments in direct-to-consumer delivery of its content.

Part of what supports Disney’s culture of risk-taking are two long-standing groups that work to identify trends and technologies that will affect Disney’s business, and find ways to test and deploy them. One is Walt Disney Imagineering, created by the company’s founder in 1952. The other is Disney Research, which works in areas like artificial intelligence, robotics, and computer animation.

But another factor is two successive CEOs who were supportive of taking big risks to drive future growth: Michael Eisner and Bob Iger.

In 2007, Eisner told an audience in London, “I have always tried to make everyone aware that failure is not a corporate death sentence. Making the same mistake twice is seriously frowned upon, of course, but an intelligent stumble is nothing to be ashamed of. To punish failure is yet another way to encourage mediocrity. Mediocrity is what fearful people will always settle for…”

“At Disney, we actually encouraged failure with something called The Gong Show,” based on the 1970s game show, Eisner continued. “We’d all sit around the table and toss out ideas for movies and TV shows. Outrageous ideas were completely acceptable. …Most of the ideas were awful. Many of them were mine… After a few hours of this, some really great concepts would emerge. The Gong Show worked because it was almost a badge of honor to get gonged. …From this sensibility sprung much of our success.” (See the video below for this complete passage.)

“Creativity isn’t a science,” current Disney CEO Bob Iger writes in his book The Ride of a Lifetime. “If you want innovation, you need to grant permission to fail. Don’t be in the business of playing it safe. Be in the business of creating possibilities for greatness.”

And in an interview on “The View” in 2019 (below), Iger cited Eisner and Apple co-founder Steve Jobs as two of his role models when it comes to taking big risks. “Look at our world today — how much disruption there is, how much change there is,” he said. “If you try to play it safe, if you try to protect the status quo, you don’t get anywhere… I think the riskiest thing you can do today is either try to protect the status quo, or not taking risks.”

Entertainment & Media Strategy & Governance

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