Risk management

business article For Disney

 

RISK MANAGEMENT


Seldom does a business make its mark by standing still. Whether a start-up wants to raise its profile and stand out from the pack or an existing business is ready to forge a new path or launch a new product, when properly managed, risk can propel an individual or organization. Since 1928, Disney has honed its ability to gauge risk vs. rewards to write one of the greatest success stories in business history. Karl Holz, President of Disney Cruise Line and New Vacation Opportunities, offers historical reference to the risks taken in the evolution of what became one of Disney’s most popular vacation products.

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In the beginning, only three things stood between Disney and its goal of operating one of the world’s most successful cruise lines.


One: We had no experience. Two: We had no ships. Three: There were risks. Plenty of risks.


Other than that, we were ready to go.


A LIGHT BULB GOES OFF


Most people – and most businesses – realize that making progress means taking chances. Taking risks. Analyzing risk is a science as you research, analyze, and understand the details needed to fulfill the vision. After that, it becomes an art as you position each detail into an order that leads to success. The process can be long and challenging, but without risk you’ll likely find little reward.


Because risk defines itself (i.e.: it is a risk) what produces results is how you handle the outcome. I appreciate Thomas Edison’s observations when, after experimenting with more than 1,200 prototypes of the light bulb, he said he didn’t consider fourteen months of research wasted since each ‘failure’ put him one step closer to discovering what would work.


Like Edison, Walt Disney moved his company forward by constantly testing new ideas. Many worked, many didn’t. Ultimately, however, adding sound to cartoons, creating full-length animated features, building his own movie studio, maximizing the potential of television, and creating a new concept in entertainment called theme parks, proved to be well worth the risk.


During the evolution of Disney Cruise Line we had setbacks and chased dead ends. Yet it was how we analyzed our opportunities and handled each outcome that demonstrates the magic of taking risks. By learning from our early challenges, DCL has earned one of the highest guest satisfaction ratings of any Disney vacation product.


You may never launch your own cruise line, but knowing how to measure risks against rewards can help you achieve more than you can imagine.


FINDING A NICHE


Incredibly, the origins of Disney Cruise Line can be traced to The Love Boat, the 1970s sitcom that celebrated the pleasure of cruising. By the early 1980s Disney considered the risks of a cruise product and began testing the waters. When our initial research revealed that existing cruise lines were overlooking the family market, we had a hunch there was a place for us.


Of course a hunch is different from a fact.


We conducted additional research to confirm we could fill a niche, but with zero experience in the cruise industry we knew introducing a Disney cruise product was far too risky. After much discussion, in 1985 we decided the safest path was embarking on a joint venture with Premier Cruise Line. Smooth sailing? Not quite. Although we believed passengers sailing on Premier’s Big Red Boat would enjoy the company of Disney characters, one thing was missing.


Disney.


Since neither the crew nor shipboard operations were employed or managed by Disney, quality standards weren’t up to our standards and passengers began losing trust in our brand. By 1992 our first foray into cruising had hit the rocks. The partnership ended, we next turned to Carnival and Royal Caribbean but after more than a year and a half of disappointing progress, we still had no partner.


But we soon discovered that, like Edison’s experiments, what we had perceived as missed opportunities had actually moved us much closer to discovering what would work. By now additional research told us a Disney cruise product would benefit our parks, resorts, and the entire cruise industry and we weren’t going to miss the boat. So in 1995 when Disney’s CEO Michael Eisner approved the plan to build two ships, we then faced the biggest risk of all.


Doing it.


FINE TUNING RISK MANAGEMENT


Although there was considerable anxiety, we trusted our research and felt creating our own cruise line would allow us to maintain control of our product and establish quality standards that would be exclusively and unequivocally Disney’s. Then we faced a new slate of risks when we decided to re-define the cruise experience by developing a uniquely Disney experience at sea. From introducing the classic design of the Disney Magic and Wonder to the color schemes we chose, from the schedule of dining to the style of entertainment… Even selecting the color of our lifeboats presented an element of risk as we balanced the rules of maritime safety with an eye on Disney aesthetics.


But taking a risk often requires doing something new, and clearly our toughest decision was to apply the ‘Disney Difference’ and sail without casinos. A major source of revenue for other cruise lines, we felt they conflicted with our position as the ‘official cruise line of the family vacation’. A tough call at the time, it proved to be the right choice that helped protect our brand and appeal to our target audience.


Often the process went smoothly. When it came to staffing the ships, we simply looked to our Disney veterans and seasoned maritime professionals that could bring our legendary service delivery systems to each ship.


End of story? Not quite.


Sometimes our decisions fell short. After deciding we could operate without a hotel director or a cruise director, we soon understood why these positions are standard within the industry. Recognizing our error, we quickly made adjustments.


SMOOTH SAILING


Even though we designed ships that looked like none other, opted out of casinos in favor of families, and fruitlessly pursued partnerships, we had positioned ourselves for success. By applying the ‘Disney Difference’ and controlling the product to ensure that quality standards were met, since embarking on our first voyage DCL has earned the company some of the highest marks among cruise passengers.


In light of our accomplishments, our initial anxieties seem quaint. In just over a decade we’ve added to our three- and four-day Bahama cruises with a variety of seven-night cruises throughout the Caribbean and into the Mexican Riviera, Mediterranean, Baltic, and Alaska. Not only can our Guests explore the world, our global reach now means Disney can explore new markets. For Disney Cruise Line, it’s full speed ahead as we launch the Disney Dream in 2011 and the Disney Fantasy a year later.


Since 1928, the Disney Corporation has studied risks and enjoyed the rewards. With that as our heritage, I can assure you that the biggest risk of all…


Is not taking one.