walt-disney-business-model-design

Lessons Of Business Model Design By Walt Disney

I was reading an article about Business Model Scalability by Felix Hoffman, CEO of BMI Lab, with whom FourWeekMBA put together a list of business model patterns mostly used in business model innovation, and I stumbled upon an image from the Disney Archives that left me speechless:

walt-disney-business-model-design

1957 Walt Disney Productions Archive

This is a pure business model design in action. Back in 1957, Walt Disney had clear in mind how his business looked at a higher level.

He understood how each piece fit well together.

While Disney’s business model has changed substantially over the years, this design would remain its core business model for decades to come. 

This draw by Walt Disney was the engine of its business and – I argue – the most critical inheritance he left as a businessman.

I’ve been looking at it for hours, and there are a few key elements to notice.

At the center of the business, there were the theatrical films, where it all started. The Studios was the place where creative talent could be sourced and where original content could be created. This content would spur everything else.

From Music, TV, Publications, Merchandise, and where the success of Amusement Parks would depend on.

In this model, a flywheel made each piece fit into each other and reinforce each other. Indeed, as you can see from Walt Disney’s drawing, TV would plug movies into the studios.

At the same time, the studios would feed films through TV, which would pay them off via commercials.

At the same time, the Studios also provided an “interchange of stars” to TV, which in turn made it more valuable.

The TV side of the business would then be used to record materials and publicize music products.

The Music side would “keep films in mind when they were out of circulation.” Studios fed tunes and talents to the Music side of the business.

Other sides of the business also plugged movies into the Studios, while the Studios allowed the publications of books and comic books and allowed the publications of the Walt Disney Magazine.

Other parts, like Disneyland, which might have seemed at first sight disconnected from other parts of the business, were a crucial element in Disney’s flywheel success.

Indeed, the Studios plugged parks, rides, and creative ideas.

At the same time, Disneyland could provide ideas to the Music side of the business for new albums, source articles for the magazine, and have a tight interaction with the Merchandise Licensing business.

This holistic approach is at the core of business modeling. I believe that each business person trying to build a great business should have in mind a clear design and vision, of how the flywheel framework makes the business sustainable in the long run.

 

 

It doesn’t matter what methodology – if any – you’re using. What is your vision for your business? Do you have one? If not what is missing? How is each part fitting into each others? How do they help each other grow? Is the process scalable?

Asking those questions might allow you to find the proper answers to build a lasting and sustainable business model.

Airbnb’s business model took inspiration from Disney’s business model

airbnb-business-model
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees.
airbnb-business-model-economics
In 2021, Airbnb generated enabled $46.9 Billion in Gross Booking Value, and it generated $6 Billion in service fee revenues. In 2021, there were $300.6 Million Nights and Experiences Booked, ad an average service fee of 12.78%, at an Average Value per Booking, of $155.94.
airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

Key Highlights

  • Walt Disney’s Vision: In 1957, Walt Disney created a drawing that depicted the core business model of his company. This design remained the foundation of Disney’s business for decades.
  • Central Elements: The drawing highlighted key elements at the center of the business: theatrical films and creative talent from the Studios.
  • Interconnectedness: Disney’s business model had interconnected components, with each piece fitting together to reinforce the others. For instance, TV would plug movies into the Studios, and TV would pay for movies through commercials.
  • Flywheel Concept: The business model acted like a flywheel, where each piece fed into and strengthened the others.
  • Holistic Approach: Disney’s business model included various parts like music, TV, publications, merchandise, amusement parks, and more. Even seemingly disconnected elements like Disneyland contributed to the overall success.
  • Importance of Vision: The holistic approach to business modeling is crucial. Business leaders should have a clear design and vision of how each part fits together to create a sustainable and lasting business.
  • Inspiration for Others: Airbnb’s business model took inspiration from Disney’s approach. Airbnb created a platform business model charging guests a service fee and hosts a commission.
  • Airbnb’s Business Model: Airbnb charges guests a service fee (5% to 15% of the reservation) and hosts a commission (generally 3%) for bookings. In 2021, Airbnb generated $6 billion in service fee revenues from $46.9 billion in Gross Booking Value.
  • Airbnb’s Organizational Structure: Airbnb follows a holacracy model with a flat organizational structure. Teams are organized for projects, maintaining a lean and flexible approach.
  • Takeaways:
    • A clear vision of how components fit together is essential for business sustainability.
    • Business model components should reinforce and support each other.
    • Learning from successful models like Disney’s can inspire innovative business approaches.

Other resources: 

Case studies:

Read Next: Business Model Innovation, Business Models.

Related Innovation Frameworks

Business Engineering

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Business Model Innovation

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Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Innovation Theory

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The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.

Types of Innovation

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According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).

Continuous Innovation

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That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Disruptive Innovation

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Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Business Competition

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In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

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Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Diffusion of Innovation

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Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.

Frugal Innovation

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In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.

Constructive Disruption

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A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.

Growth Matrix

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Innovation Funnel

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An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.

Idea Generation

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Design Thinking

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Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.

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