Here is an Op/Ed piece from today's USA Today

http://story.news.yahoo.com/news?tmpl=story2&cid=679&ncid=742&e=10&u=/usatoday/20020905/cm_usatoday/4419969



Disney CEO Michael Eisner is hanging on by a thread and could go the way of other highly touted top corporate executives who recently have found themselves out of jobs. Let's take a roll call: Jean-Marie Messier of Vivendi Universal. Robert Pittman of AOL Time Warner. Thomas Middelhoff of Bertelsmann.

These men aren't among the crooks who've absconded with their shareholders' investments, only to be caught, fired or sent to jail. No, it's not crimes they've committed, but sins. The sin of arrogance -- and, in pure business terms, the sin of bad strategy. These men are all victims of the same flawed business notion that bigger is better.



Here is the main three points of the article....

* Synergy clashes with business reality.

* Bigger isn't better -- except maybe for the guy at the top.

* The truth is, most mergers and acquisitions fail miserably.

Very interesting anaylist of why Disney is having problems........

I tend to like what Alan Webber has to say--Fast Company is one of the most relevant business publications these days. But in this case I think he's oversimplified things to make his point (a common failing of USA Today).

He conveniently ignores cases where acquisitions and mergers have resulted in true synergy, and fails to mention to big companies that are leaders in terms of innovation (GE and Cisco come to mind).

I also think that Disney is in a different position than AOL Time Warner and Vivendi. Disney has always been an entertainment company. Acquiring assets like ABC fits into the overall corporate strategy, and I think has been a success. But when a waste disposal firm expands into movie production of course there are going to be problems. AOL and Time Warner also had hugely different corporate cultures, objectives, and products.

In short, the article makes some good if oversimplified points, but they aren't especially relevant to Disney's current problems.

Actually, the article really doesn't seem to have much to do with Disney. The lead paragraph mentions the recent reports about Eisner's possibly tenuous position, but the rest of the article strictly uses examples from other companies to illustrate its points.

I think the points that were made by the article are very good ones, but the issues that were described really don't seem to fit Disney overly well. Taking each key header:

Synergy clashes with business reality.

This is the one area that would seem to be very applicable to Disney, but the actual analysis given doesn't really apply. Instead, he talks primarily about the clashes in corporate culture that result from merging of two very different types of companies. Most of his focus is on the AOL/Time-Warner merger.

Some of the same type of thing probably did happen with Disney's ill-fated internet acquisitions, but that isn't particularly relevant to today's issues within the company. The Disney/ABC merger was between generally similar companies and I haven't heard too many reports of it generating the types of clashes that have happened with AOL and Time-Warner.

The author really doesn't relate all this to the usual concept of corporate synergy, though, something which actually >does< typically work quite well at Disney. Few companies have been as successful as Disney at cross-promoting properties across their various divisions. If any company is an example of how synergy >can< work, it is Disney.

Bigger isn't better -- except maybe for the guy at the top.

I think you can make a very valid argument that Disney has grown to be larger than it probably should be. It does have some divisions (such as the sports teams) that have probably deviated too far from the company's core competencies.

The discussion in the article, again, had little to do with Disney's situation, though. It talked about companies like Worldcom that have achieved very rapid and dramatic growth through acquisitions, many of which seemed to be more about getting bigger than intelligently expanding the business.

Disney has never really been particularly aggressive about acquisitions, instead achieving the largest percentage of its growth from within. When Disney has made acquisitions, they typically have been strategic purchases of companies that will help to expand existing businesses instead of moving off in other directions. Even the ABC merger was largely about expanding Disney's existing TV business by securing a very solid distribution channel.

The truth is, most mergers and acquisitions fail miserably.

Once again, the writer's focus is really on mergers and acquisitions where companies attempt to shift into new markets or industries. He could probably have used Disney's internet business as an example here, but again that just isn't as dramatic as examples from other companies.

Outside of the failed internet experiment (and probably the sports teams), Disney's acquisitions have generally expanded their existing businesses. There have certainly been some bumps (particularly recent ones with the main ABC network), but outside of the internet acquisitions they would hardly be viewed as "miserable failures".


As I said, it is an interesting article about some of the problems in today's corporations, but Disney actually comes out looking pretty good in these areas.

-Jeff