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Alex Stroup, Editor

10 Reasons Why DCA is a Bad Idea - Part Two

10 reasons why DCA is a bad idea
A business analysis by Dan Steinberg

In the previous chapter, we talked about some reasons why the Disneyland Resort’s soon-to-open second gate being built next door to Disneyland, Disney’s California Adventure (DCA), might not be as profitable in the short-term as Disney’s planners are expecting. Those reasons were:

1. There aren’t enough rides and attractions, and hence a poor value for consumers,

2. There are likely to be capacity problems with the new park,

3. The hotel business is more competitive in Anaheim than at Walt Disney World, and might not be able support the same high room and occupancy rates as in Florida,

4. The mall business is different from WDW as well, since visitors tend stay longer in Florida and there isn’t much else to do at night there,

5. DCA has no "Weenie" – a big attraction that captures the public’s imagination and draws them to visit the new park, and

6. Like World Showcase in EPCOT, DCA has too few attractions and too many shops and restaurants

Today, we will discuss the other side of the business equation, the long-term strategic issues surrounding the new park, mall and hotel development:

Strategy, in the business world, means exactly the same thing as it does in other areas of life: plans that are designed to give you an advantage over your adversaries. In this case of course, Disney’s adversaries are its competitors. Although if we look broadly, we could define Disney’s competitors on a corporate scale and include other movie studios and TV networks, etc., but to keep things simple, we’ll mostly stick their theme park rivals.

Realize that strategy is quite a bit more intuitive and less precise that looking at the tactical accounting of estimated profits. Still, while strategy is not something you can place an exact number on, there are some fairly standard and straightforward academic frameworks we can use to structure our analysis of the strategic issues. Let’s start with a simple one:

7. DCA is not based on Disney’s Strengths

One of the first rules of strategy is to lead with your strengths. For example, in the Gulf War a few years back, the U.S. didn’t start by sending the ground troops into Kuwait. Instead, they used their strongest assets to launch its highly successful assault – its larger air force and superior technology. Well, guess what – the same concept holds in the business world: you want to lead with your strengths as much as possible.

Okay, now bring this back to Disney. What are Disney’s strengths? Certainly the most obvious one is its characters: Mickey, Minnie, Donald, Pooh, the Princesses and all the rest. No one else in the world has such a large collection of characters that pull our collective heartstrings. There are so many in the Disney stable that even if you don’t like the major ones like Mickey and or Pooh, there’s bound to be at least one Disney character somewhere that you can identify with. No other studio or company has even close to this many characters, or ones with such an emotional link to us. This is most certainly a major strength.

On a similar vein, the Walt Disney Studio has a huge library of films and cartoons, and is constantly generating new material. And with the recent addition of ABC, that’s even more new "content" being created each and every day. All these characters, personalities, stories, events and memories can be used to sell videos, toys, games, books, greeting cards, Internet web pages and so on. And, of course, amusement park attractions and souvenirs as well. This is the famed "synergy" in action. However, unlike the characters, there are other big studios with as much "content" in their vaults. But still, this is only a small handful of companies, and I’d argue that none are as good at squeezing every opportunity out of those stored assets as Disney.

The flipside is that Disney has a lot of different places in which it can advertise and promote its creations as well. There are long and short cartoons, trailers shown before movies, the theme parks, ABC TV and Radio, ESPN, The Disney Channel, and much more. (We business-school types call these different means of distribution "channels", although not to be confused with TV channels). And then there are the different partners that will promote Disney products as well: book and magazine publishers, toy makers, department stores, even fast-food restaurants. Disney is certainly one of the best in the world at getting exposure for its products.

Disney’s fourth corporate strength is what we business school types would call "a heavy investment in Research and Development." Which is what everyone else would call the ability to be clever and to innovate and invent – and I’m not just talking about technological innovations here. Walt was the first to create all sorts of new concepts – from sound cartoons to the first full-length feature animation to (of course) the modern theme park. This has continued even after his death, with Disney creating the first computer animated feature (remember "Tron"?). And the theme parks have their firsts as well: the first steel tubular-tracked roller coaster (the Matterhorn), Audio-Animatronics, Circlevision, the Indiana Jones "EMV" vehicles, etc.. This heart of this strength is that Disney has often been able to invent new devices or ways of doing business, and then use those innovations to defeat their competition.

The final strength is the Disney name. Yes, this is extremely valuable (and, I’ll point out, this value shows up nowhere on any financial statement). Practically everyone on the planet these days knows "Disney" – it means family-friendly entertainment that incorporates, well, many of the other Disney strengths: the characters, the stories, and the clever and inventive ways of doing things. In effect, the Disney name recognition is sort of like free advertising: when it says that it’s a "Disney" product, most people have a pretty solid expectation of what it will be like. On the other hand, a new, unknown brand (oh, like, say "Dreamworks") has to spend a lot of time, effort and money just to get people to know who they are and what you should expect get from them. Or think of it another way: which would you be more excited about just hearing the name: "Disney’s California Adventure" or "Dan Steinberg’s California Adventure"?

So before going on, let’s summarize The Walt Disney Company’s main strengths:

Tons of characters that the whole world knows,

Lots of content and stories to build upon,

Many different ways and places to promote new products,

An ability to invent and innovate, and

An extremely well-known name that strongly conveys what the products are all about

Okay, I’ve said a lot so far about Disney’s strengths. But I haven’t said anything about how this relates to DCA. The whole point of this exercise was to see if Disney is actually building upon its unique strengths when creating DCA and the rest of the new resort complex. If they are not, then there is not much to stop some other competitor from creating a very similar product, err, park. Which, strategy-wise, wouldn’t be such a good thing.

So is Disney’s California Adventure leveraging the company’s strengths? Let’s go down the list:

Use of characters. From what we’ve heard so far, DCA is supposed to be pretty much mostly a character-less park. The rumors say that the only Mickey and and a few of his friends won’t will be strolling through the streets of DCA at all. Rumors aside, characters will only be used on a few attractions: in the Animation Tour, It’s Tough to Be a Bug (the Bug’s Life’s characters), Muppetvision 4-D (although, technically, the Muppets aren’t even Disney characters) and a few ABC / Disney stars in the Superstar Limo ride. Oh, and of course in the World of Disney store in the new mall. That’s it. Not much use of characters in the new expansion. Grade: B- 

Building upon Disney’s content and stories. As with the characters, they are using very little of the stories and contents they’ve built up over the years. The exception is the Hollywood section, which is using a few of the animation characters, TV stars and ABC’s daytime soap operas. Paradise Pier, Grizzly Peak and the other areas have nothing to do with Disney, Pooh, ABC-TV or Radio or any other property. Actually, I find it rather surprising that not even the restaurants or gift shops have much of a Disney or ABC flavor to them.

Grade: B-

Marketing / Promotional strength. Considering what Disney could do to promote their new park, they really haven’t done much here at all. Sure, there have a bunch of newspaper stories on it - which, actually is a good cheap way to get exposure. But that’s been about it. TV ads or movie trailers about DCA? No. TV specials or plugs on the Wonderful World of Disney or the Disney Channel? None that I’ve seen. Books? Nope. Toys or souvenirs or stuffed animal mascots? Only a very little. Big splashy, Hollywood-style promotional events? None. How about a website? Not yet. 

The most visible promotion so far? A pretty low-key preview tent across from Disneyland’s entrance, which was recently moved into the Lincoln exit. Even when they had some prime targets for the message – arriving Disneyland guests on the 5-minute tram trip from the parking lot to the main gate – the only plug for the new park is a short mention by the tram co-pilot. If the employee remembers to mention it, that is.

Grade: C-

Invention and innovation. What’s truly new in DCA? From what I can tell so far, not much. The new innovations are few and far between: a couple of new twists in Superstar Limo, a short spinning drop on Grizzly River Run, a simulated wooden coaster, but everything else are things that we’ve seen before – perhaps with a fancier paint job. Or, to put it another way, there’s very little (other than a few WDW repeats) that a competing park couldn’t very easily build.

Grade: C-

The Disney name and reputation. Will this be the spotless clean, unnaturally friendly, family oriented theme park that Disney has become synonymous with? , I suspect it pretty much will be– there’s no reason why it shouldn’t up to Disneyland’s level of cleanliness and employee friendliness. As for fun-for-the-whole-family attractions, they seem to have it half-ways here. One side of the park is what is generally thought of as Disney-type attractions: the animation tour, It’s Tough to Be a Bug, MuppetVision, Superstar Limo. But the other half is more like the traditional amusement parks, with rides that seem to either appeal only to more grown-up thrill riders (California Screamin’ and the Mailboomer space shot) or small children (the carousel and the easier rides). I hate to say it, but from the ride aspect, this half of DCA is more like the place that forced papa Walt to wait on the bench for his daughters to ride the carousel.

Grade: B

The average grade here: just about roughly a C+. That’s not very good. It just doesn’t make sense strategically - not using the Disney Company’s strengths for DCA is like a football team using its third-string quarterback in the season opener. The only strengths that they appear to be using are the Disney name and its location next door to Disneyland – which may be enough to turn a profit but it’s not enough to turn it into the competitive juggernaut that it could be.

8. DCA Doesn’t Enhance Disney’s Core Competencies

Okay, what is a "core competency" of a company?, you ask. It‘s a key area of knowledge that a company can use to come up with new products or business practices to overtake the competition. Or, as it has been called, "the roots of competitive advantage". This may sound a lot like the company’s strengths, but it is different: strengths are where the company is ahead of the competition now, core competencies are knowledge and expertise that are intended to be the foundation of the company’s strengths in the future.

Or, to look at it another way, do you do everything for yourself? Do grow your own food? Pump your own crude oil and refine it into gasoline? Create your electricity? Build your own house? Of course not – you can not do or be the expert at everything. Instead, you pick and choose what are the best areas to concentrate your energies on – perhaps the key skills needed for your job or perhaps your parenting skills. And the same goes for well-run businesses: they need to focus on the areas they can build the company’s success upon. Usually, you want to pick areas that are at least somewhat unique so as to distinguish yourself – or your company – for everyone else.

So what are Disney’s core competencies, at least in the theme park / resort business? There are lot of possible choices, so let’s use two very well-respected business professors’, Prahalad and Hamel’s, the three tests created by Prahalad and Hamel (two very highly-respected business professors) for identifying core competencies. A core competency must:

Provide access to a wide variety of markets (i.e., it doesn’t help much if the competency can only be used to create one or two new things). Since we’re just talking about resorts and theme parks here, we’re more concerned with a competency providing access to multiple opportunities such as multiple rides, shops, souvenirs, hotel services, etc.

Make a significant perceived contribution to the customer benefits of the end product (that is, if the customer doesn’t really care about what this competency adds to the product, why bother?)

Be something that is difficult for competitors to imitate (again, why bother if the competition waits forlets you to develop something and then steals the idea from you?)

On that account, the core competencies for Disneyland and other Disney theme parks and resorts are:

Animatronics and Show Design: Disney has been the pioneer in the field of automated show elements – not just animatronics like Abe Lincoln, but lighting, sound and music, and other show effects, coordinated into a customer-pleasing package. The competency in animatronics alone has been used in many rides and shows over the years, everything from singing Country Bears and Tiki birds to pirates and ghosts and even restaurant entertainment such as like Sonny Eclipse at WDW. Customers seem to value this corporate ability: Pirates of the Caribbean is still popular after 30 years. Plus, Disney’s competitors haven’t been able to catch up: it seems that Disney’s 20 and 30-year-old animatronic efforts are usually much better than other company’s more recent efforts (Universal’s ET ride, as a good example).

Storytelling, Story Creation and Themed Atmospheric Attractions: This isn’t necessarily an investment in technology like animatronics, but an investment in the right people and having them learn ways to tell stories effectively. While it probably benefits the animation and film studios more than the parks, the theme parks indeed benefit from compelling stories as well. Again, Pirates of the Caribbean and Indiana Jones are examples of rides that have benefited from their stories. Space Mountain and Big Thunder are also good examples of how the visitors value the addition of highly-themed atmospheric elements – let’s face it, these rides are much more popular than their rather moderate roller coaster innards would be on their own. Again, Disney’s theme park competition hasn’t rarely been able to create theme park stories or atmospheres that have gotten so well ingrained into the collective minds of the public: when a character in the movie "Jurassic Park" had made an remark about Pirates of Caribbean, everyone knew what they were talking about. Is there any non-Disney theme park ride that so many people know about?

Efficient operation of theme parks: Here’s another area Disney pioneered. They were the inventors of the efficiently-run modern theme park, reaching (for its time) entirely new levels of cleanliness, safety and productivity while giving a uniformly high-quality entertainment experience to very large numbers of people. Every person who rides Indiana Jones gets the same great experience as any previous rider. Sure, a lot of this competency was gained through trail-and-error and just plain hard knocks over the past 45 years – but that’s exactly the point. Only a few amusement park operators have been around as long and entertained as many visitors as Disney has. Some of Disney’s innovations here can be copied (like keeping things clean), but it is hard for the competition to duplicate all that knowledge. One of the other tests is whether the customers value this. Absolutely! I can immediately think of two fairly recent Disney innovations (themed queues and the new FastPass reservation system) that address the #1 customer complaint: those boring waits in line. Finally, we need to ask whether there are many applications of this competency? Sure – every theme park, attraction and other entertainment event or location run by Disney benefits: movie openings, stage shows, even DisneyQuest arcades. This may not be as glamorous as the other core competencies, but knowing how to efficiently serve so many people so well may actually be more important to Disney’s success than any other ability.

Okay, now we have an idea what some of Disney’s core competencies are for its theme parks. Does Disney’s California Adventure make use of them? In some areas, yes, they most certainly do – particularly in running the park efficiently. On the other hand, there aren’t any pure animatronic shows (like Pirates or Abe or the Country Bears or the Tiki Room) in DCA. In fact, there won’t be very many animatronic figures in the park at all – a few in It’s Tough to Be a Bug and MuppetVision 4D, and a few limited motion ones (so says the rumor mill) in Superstar Limo. Storytelling and story rides fare a little bit better: Superstar Limo and some of the movie-based attractions will likely tell stories, but the whole Paradise Pier area is pretty much rides with little or no story to them. What kind of story or characters or atmosphere can a Wonder Wheel tell us? Not much, apparently.

The bigger problem (and the key point here) is not just that Disney isn’t leveraging its’ core competencies in the creation of the new park. It’s more than that. Even if the park is the current state-of-the-art, there is a major strategic problem here: they aren’t advancing the state-of-the-art in any of these key areas! They’re spending $1.4 billion – and any way you want to look at it that’s a lot of money, even for a huge corporation like Disney. Why not use some of that money to enhance the core competencies and advance the state-of-the-art? It might cost a little more and be a bit more risky to try new things in DCA that attempt to push the core competencies ahead, but new breakthroughs will not come without trying. Besides, not trying to move ahead gives the competition a big chance to catch up. If the core competencies are the foundation that the future successes will be built upon, that work must start in the present. Not building upon and advancing Disney’s theme park core competencies when creating DCA is, strategically speaking, a wasted $1.4 billion dollar opportunity.

9. DCA Doesn’t Increase Disney’s Competitive Advantage

In fact, I believe that DCA does the opposite – it lowers Disney closer to the level of the competition. And the last thing you want to do, strategically speaking, is hand your opponent back part of the lead you’ve accumulated.

Let’s first start by looking at what Disney’s competitive advantage has been. Disneyland started out as first clean modern theme park with clean friendly workers. This, plus the extra level of investment that Walt put into making higher quality rides and scenery, was the initial advantage that Disneyland had over any other American amusement park. Remember, on Opening Day the most sophisticated and innovative ride was the Jungle Cruise! But Walt Disney couldn’t rest on this lead, as other parks could and did copy the cleanliness / friendliness thing (often by hiring ex-Disneyland employees). Fortunately, Walt and Company built upon their initial lead by using the lessons of what worked and what didn’t and what made things even more efficient and effective. They also continued to increase the lead with new technologies (animatronics) and new types of rides (steel coasters, fully automated shows, "story" rides like Pirates of the Caribbean, and themed roller coasters like the Matterhorn and Space Mountain). Eventually, with rides like Pirates, Haunted Mansion, Small World, Submarine Voyage, etc., no competitor was even close – and for years it seemed that they really weren’t even trying to catch up.

Now, fast-forward to today. In past decade or two, Disney has been much slower in developing Disneyland: for example, there have only been two major new attractions (Indy and Rocket Rods) since the opening of Toontown in 1993. This relative lull has given the local competition a chance to catch up, and they certainly have: both Universal Studios and Knott’s Berry Farm have put a lot of time and effort and a ton of cash into transforming themselves from small quiet attractions to large full-service theme parks. With their recent additions (Jurassic Park and CityWalk for Universal and GhostRider and Soak City for Knott’s), these challengers are much closer to Disneyland than ever before.

No doubt that Disney is keenly aware of this, and feeling the proverbial hot breath on the back of their corporate neck. With DCA, I suppose Disney’s planners believe they are taking back some of their lost advantage by including (or, shall I say "co-opting") the competitions’ strong points: a "wooden" coaster, a space shot, a rapids ride, a Hollywood-based section, an IMAX film with a motion base, even an upscale mall. And if Disney’s California Adventure succeeds in putting the Disneyland resort one step ahead of the competition, what they’ve done in the past – even the recent past, like Indy and Fantasmic! – were several leaps ahead.

Instead, what I see happening here is that Disney is instead sinking to the level of its competition. Instead of attempting to get so far ahead that there is no competition (like Disneyland did in the past), DCA’s goal seems to be to compete head-to-head against Knott’s and Universal. Sure, Disney has the advantage of location – right next door to Disneyland and its 15 million visitors every year. And while Knott’s and Universal Hollywood are still hard-pressed to build a ride close to the level of Disneyland’s premier attractions, they will find it very much easier to top the current set of DCA attractions. Like the fable The Tortoise and The Hare, Disneyland (the hare) jumped ahead of its tortoise-like competition to an early lead but has now seemingly started to take it easy. With Disney’s California Adventure, Disney is giving the tortoise and his friends have a chance to make some real gains.

10. In the Long-Term: No Innovation = No Advantage

I’ve gone on at length about competitive advantage, so now let’s see what an expert on subject says about it. If you’ve studied business strategy in the last 20 years, then you’ve surely heard of Michael Porter, the Harvard Business School professor who has written some of the preeminent works on strategy and competition – his "Five Forces" framework is one of the standard tools of for analyzing industries. What does he say about competitive advantage? "Companies achieve competitive advantage through acts of innovation", he wrote in the Harvard Business Review. His definition of innovation: "both new technologies and new ways of doing things."

And here lies my biggest problem with Disney’s California Adventure: there’s very little that's innovative in the new resort expansion, with one exception that I’ll discuss in a moment. The park design, the mall, the attractions, the technology used in the rides, and the way in which the park operates are all pretty much state-of-the-art but nothing more. The rides and shows are, without exception, either known WDW attractions, movies, standard rides purchased from other manufacturers, or are based on ideas already in use elsewhere. Even one of the most innovative touches isn’t particularly new: , in the California Soarin’ IMAX movie, where the film is projected at a higher frame rate than usual to look more realistic., This is a technology that’s been around for several years now.

On the other hand, almost every other Disney theme park had some major innovations in their opening day designs. Disneyland, of course, was the first park to take the theming to such a high level, to use movie set design concepts in both the rides and scenery, to have such strict standards for grooming and appearance, and to require new recruits to undergo such intensive training. Disney World opened with the unique "Utilidoor" tunnels underneath the park, the pre-fabricated Contemporary Hotel, and clever methods of doing everything from generating electricity and hot water to disposing of garbage. EPCOT was a unique attempt to make bring many different nations and cultures together in a visitor-friendly manner. Yet I see nothing at anywhere near this level of innovation at DCA.

However, as I pointed out before, there is one major attempt at innovation with this new park – if we stretch Porter’s "new ways of doing things" definition of innovation, that is. What is The Walt Disney Company trying to do differently? From what I can tell, one of the main design goals of Disney’s California Adventure is to try to create a Disney theme park for less money. A noble idea, certainly – trying to find a cheaper way to build a product is always a good idea, as long as the customer is still happy with the end result. But the manner in which Disney has lowered the price tag – by copying Disney World attractions and taking standard so-called "off-the-shelf" amusement park rides and adding just a smattering of imagineering and theming – ends up compromising the attempt. What you end up with is not a cost-reduced Disneyland, but instead a slightly nicer Marriott’s Great America.

I carefully choose the original Great America parks as the comparison because, when they were built 25 years ago they were basically what DCA is trying to be – a cross between Disneyland and a standard amusement park with nicer theming. Although Disney is doing a better job on DCA’s look and feel than Great America did, the point is that while this may be a new approach for Disney in designing a theme park, it is hardly a new, radical or innovative practice for the theme park industry.

And yet I can almost understand why they chose to go the way they did with Disney’s California Adventure: trying something new is both more expensive and more risky. By going with the tried-and-true in both ride design and operation of the park, it should be a smaller and safer investment for the company – two areas that Michael Eisner mentioned several times in his autobiography as his his main responsibilities responsibility to the shareholders. This is a fine approach for the short-term, making it easier for the company recoup its investment and also making it less likely that there will be to have any big unpleasant surprises from the new park. But from a long-term strategic viewpoint, this is a mistake.

As Professor Porter states, "Competitors will eventually and inevitably overtake any company that stops improving and innovating." DCA’s lack of true innovation will certainly not eliminate the fun for its visitors, but it will cost Disney $1.4 billion without building any long-term competitive advantage for the company. This may be a cheaper way to build a Disney theme park, but it’s an awful lot of money to spend without getting much of a strategic gain.


Even though construction of the long-awaited "second gate" at Disneyland is nearly complete, its next chapter is just beginning. This park will probably be fun to visit – after all, most of the rides are favorites from WDW and other amusement parks. However, The Walt Disney Company will measure the success of the new park, hotel and mall not just by how much the visitors enjoy it, but also by whether it meets or exceeds the goals they have set out for the project. As we have just seen, there are at least 10 significant reasons that question whether Disney’s California Adventure can meet the company’s expectations, both strategically and for short-term profitability.

Of course, despite these reasons it is still quite possible that Disney’s California Adventure may be acceptably profitable or reach the corporation’s other goals. But for me, this seems like they may be winning the battle (profitability) but losing the war – the strategic war for the hearts and minds of the customers as well as the war against its corporate rivals. Indeed, if the park and resort expansion is a profitable success by the company’s standards, don’t expect to see another Disneyland or EPCOT-like theme park built – the lower-cost DCA will become the model for Disney’s corporate future.

Of course, Walt Disney had his share of skeptics when he built Disneyland, and I may be as far off base as those critics were. 

But then, as DCA’s planners have often pointed out, this new park is not Disneyland.

NEXT: Disney's third quarter financial results.


Part One

(Before you continue, if you’re not familiar with Disney’s California Adventure (DCA) - the new theme park, hotel and shopping complex that is being built where Disneyland’s original parking lot used to be - I suggest you check out the D-I-G’s Preview of DCA by clicking here.)


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