Serving the Consumer: The Secret to Walt Disney's Success
December 5 is Walt Disney’s birthday, and more than fifty years after his death, Disney’s reputation is well-deserved. After all, he was the creator of Mickey Mouse and a score of lovable animated characters; was a pioneer in adding sound and color to movies; created the game-changing full-length animated feature; invented the concept of children’s programming for television with The Mickey Mouse Club; and built the world’s first theme park with the creation of Disneyland.
But he never lost sight of the importance of serving the consumers.
Ludwig von Mises illustrated how even if entrepreneurs steer the ship of the economy, they are bound to serving consumers. Mises wrote in Human Action:
The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship. A superficial observer would believe that they are supreme. But they are not. They are bound to obey unconditionally the captain’s orders. The captain is the consumer. Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt, and is thus removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.
Consumers never cease wanting better products at lower prices to address their desires and wants. In a world of competition and insatiable consumer demand for value satisfiers and value fulfillment, no organization can stand still for very long. No matter how brilliant or small an innovation, other entrepreneurs stand ready to copy and improve upon it to win consumers and profits, thereby diluting the market value of previous innovations.
Speaking metaphorically, the marketplace rewards with wealth the innovations it approves. Buyers are willing and eager to trade something they have for something they perceive to be of greater value. Sellers are willing and eager to do the same. The result is voluntary value exchange, with both parties of the immediate transaction benefiting, as well as all parties in the long trail of economic production and work that was required to enable the final consumer purchase.
Walt Disney’s career growth was similar in kind to most entrepreneurs, beginning with very modest means and creating something new that others find valuable, and are willing to pay for. When demand is high and the product can be delivered profitably, entrepreneurs can become wealthy very quickly. Walt and the studio struggled for years to be financially successful, from his early start in Kansas City, Missouri, in the early 1920s, through the creation of the characters of Oswald the Lucky Rabbit and Mickey Mouse. He was always struggling to innovate in one way or another with new ideas and production techniques to create a more highly valued quality product to entertain audiences and to take away the pressure of meeting payroll from week to week. With each new innovation new ways of creating and doing things replaced the old in a process of continuous improvements and creative destruction.
Each stage of Walt’s success was the result of creating and delivering something new that was valued highly, not only by Walt and his team, but most importantly by movie houses and movie-going consumers. At first it was black-and-white silent Laugh-O-gram fairy tale cartoons that he produced in Kansas City, followed by the Alice Comedies, then by Oswald the Lucky Rabbit. This led to the huge success and phenomenon of Mickey Mouse, and later other characters, particularly Donald Duck.
Unlike many others in the cartoon business who flogged the same old products in multiple variations to an increasingly disinterested consumer, Disney continued to innovate in quality, sound, and color, as new technologies became available and public tastes evolved. Doing so allowed him to charge premium prices, bringing in more money to invest in further innovation and quality improvements.
It wasn’t until Disney created, and the public accepted, the brilliance of something brand new — an emotionally and visually engaging full-length animated feature film — that Walt Disney Productions received a drastic increase in the inflow of money from ticket purchases. Though Walt started the Disney Brothers Studio with his older brother Roy in their Uncle Robert’s Los Angeles garage in 1923, it wasn’t until 1938 with the public’s acceptance of Snow White and the Seven Dwarfs that Walt and Roy could finally put their money worries behind them (at least for a little while).
By buying tickets to see Snow White, consumers inadvertently made the creators of that product wealthy; inadvertently because movie-goers neither think about nor care who they are making rich or poor when they make consumer choices. They could just as easily have decided to avoid an animated film, as most studios and experts in the industry predicted and expected. Had that been the case, after having spent years developing and animating the film, Snow White would have bankrupted the Disney studio. Instead, Walt Disney was richly rewarded for his risk-taking. His employees, suppliers, investors, and distribution channel partners were also rewarded by Walt’s vision, courage, and entrepreneurial risk-taking.
In this one example, one can see how a harmony of interests exists in the voluntary pursuit of values both within organizations and across society. Entrepreneurs and capitalists invest in production infrastructure and pay wages to those who contribute as employees, each in pursuit of their own economic and personal interests and values.
George Reisman identifies the essential elements of such prime movers and business titans as providers of “guiding and directing intelligence at the highest level in the productive process” to achieve the goal of producing a product, creating customers, and achieving profits.”
[This article was adapted from The Business of Walt Disney and the Nine Principles of His Success.]