By David Espindola
The current business environment is changing at unprecedented speeds driven by exponential technology platforms that are converging and disrupting existing business models. A pressing question that challenges business leaders today is: Do we risk our current still-profitable but declining business in order to build a promising but yet-unproven business model that could lead to exponential growth?
That is exactly the question Bob Iger, current Chairman, and then CEO of Disney had to contend with about 12 years ago. In his book, The Ride of a Lifetime, he describes the predicament he was facing:
“Could we find the technology we needed to accomplish that [create Disney’s own streaming platform] and be at the forefront of change rather than simply being undone by it? Did we have the stomach to start cannibalizing our own still-profitable businesses in order to begin building a new model? Could we disrupt ourselves, and would Wall Street tolerate the losses that we would inevitably incur as we tried to truly modernize and transform the company?”
Iger realized that it was no longer sufficient for Disney to produce great content. If he wanted Disney to capture its true potential, he would have to embrace technology-driven changes that would help Disney own their customers and serve them directly without intermediaries. But he also realized the short-term pain that this decision would cause by foregoing revenues from then-current third-party platforms.
Iger went to the board and obtained approval to move forward. This was an extremely difficult decision to make – one that required courage, foresight, and leadership – but in hindsight, it proved to be the right decision. He understood that there were only two choices available to Disney: innovate or die. He knew what needed to be done and articulated the problem skillfully when addressing the board. “I know why companies fail to innovate. It’s tradition. Tradition generates so much friction, every step of the way,” he said.
Iger convinced the board that in order for Disney to survive and grow it would have to embrace the unknown future and let go of traditional ways of doing business. The decision resulted in the creation of Disney +, the company’s own streaming platform. Here is how he described the outcome of the decision:
“We were now fully committed to also becoming a distributor of our own content, straight to consumers, without intermediaries. In essence, we were now hastening the disruption of our own businesses, and the short-term losses were going to be significant. (As one example, pulling all of our TV shows and movies — including Pixar and Marvel and Star Wars — from Netflix’s platform and consolidating them all under our own subscription service would mean sacrificing hundreds of millions of dollars in licensing fees.)”
Today, Disney+ has more than 116 million subscribers, increasingly approaching Netflix’s 209 million subscriber business. Consequently, Disney’s market cap has experienced a 10X growth in the 12 years since that decision was made.
The question Bob Iger faced in 2009 is what Harvard professor Clayton Christensen coined The Innovator’s Dilemma in the 1997 book by the same title. Almost a quarter of a century later, the same dilemma continues to challenge business leaders today, but in an accelerated fashion. The decades-long disruptions that threatened businesses then can now happen in just a few years, or even months.
As we describe in our book The Exponential Era, organizations that want to not only survive but thrive in this environment must be ambidextrous, exploring future opportunities while exploiting current business leadership, traversing from one S-curve to the next. However, leaders must realize that sometimes they must forego short-term profitability in order to achieve long-term growth. This requires a tremendous amount of courage and foresight, key traits of successful leaders in this business setting that is unforgiving of slow-moving, timid, or improvident organizations.
About the Author
David Espindola is a technologist, strategist, futurist, and advisor to business and academia. As Chief Information Officer and consultant to world-renowned organizations, he has developed a keen understanding of technology trends and their impact on business and society. You can contact him on LinkedIn or on his website David.Espindola.com.