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  • Synergistic Strengths--Disney Example
  • Successful companies do not all have the same business model. Very different business models can all be highly profitable, despite their differences. Granted, there are underlying patterns with clear success potential, and there are other patterns that are destined for failure. Nonetheless, a variety of different business models can thrive. It’s not one size fits all.

    Yet, the popularity of various approaches to business changes as time moves on. As a result, company after company often adopts whatever happens to be popular. In some situations, this is right for the company. But, not always. Sometimes, it is merely pursuit of the popular, not necessarily what’s best for the business. An example of this, that had become somewhat trendy not that long ago, is the spinning off of businesses, an approach that became quite popular with many companies.

    So, it is not unusual to see business recommendations based on generalities about what is right. These generalities do not pay enough attention to a company’s individual characteristics. A company’s individual strengths greatly impact what approach will succeed. Even so, we see companies being encouraged to follow generalities that may not be appropriate for their particular business.

    Disney is a recent example. Disney has been facing challenges due, in part, to pandemic related difficulties as well as to the company’s own strategy. Consequently, media coverage of Disney’s challenges may include discussion of what the company should do to improve its situation.

    This is illustrated by a recent letter to the editor in the November 16, 2023 Wall Street Journal. It was titled “Disney, a Content Provider That Owns Its Customers“. It warns against competing with your customers. In most cases, this is good advice and is consistent with the patterns of business success, which are patterns I have been researching for more than 25 years. However, what the letter goes on to say does not necessarily adhere to business success patterns.

    The letter says, “Content providers shouldn’t own some of their potential distribution channels.” It also says, “A business with intellectual property it can licensee shouldn’t own a few of its potential customers in parks and cruise lines. Disney needs to choose between going for content dominance and entertainment-distribution-channel dominance.” As I see it, however, this advice ignores the fact that the drivers of business success are not one size fits all. A company’s individual strengths should be considered when evaluating whether or not its content production and distribution should be separate businesses.

    There are examples of successful companies with business models that combine both production and distribution of what the company offers. Just because so many businesses are only producers or only distributers, that hardly means companies cannot thrive pursuing both. Success depends on how well businesses develop and build on their strengths. Some companies can develop strengths that encompass both the production and the distribution aspects of their business. And sometimes, there can be synergies when a business pursues both the production and distribution of what the company offers.

    With strengths in both its production and its distribution, Disney is in a position to benefit from possible synergies between the two functions. Furthermore, theme parks and cruises are a means of distribution for Disney, but theme parks and cruises are not a major component of Disney’s customers, although there is a little bit of licensing of Disney content/products by competing theme parks. So, even though Disney’s business entails distribution, Disney’s situation is very different from companies that did compete extensively with their customers, such as PepsiCo did before it divested its previously owned restaurant brands like Taco Bell, Pizza Hut and KFC. PepsiCo owned these while it was also selling its soft drinks to other restaurants. Granted, there, may be little bits of Disney competing with customers, for example, since Disney owns ABC, while Disney may offer its shows to other networks. However, Disney does not compete extensively with its customers like PepsiCo once did.

    So, there are not compelling reasons for Disney to focus only on production or only on distribution. Instead Disney should continue allowing itself to benefit from the synergistic strengths it may have by both producing and distributing its offerings.

    Lastly, we shouldn’t forget that business models are not one size fits all. For success, businesses need to build on their strengths. And, they should reap the benefits of synergistic strengths, such as Disney can with its theme parks and its content. Granted, Disney might possibly identify pieces of its business that are less of a fit. But, companies like Disney shouldn’t split up its businesses that fit together well.

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