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Disney: Making MagicThrough Digital Innovation

An Organization that has Taken Digital to Heart“Any sufficiently advanced technology isindistinguishable from magic.”- Arthur C.Clarke‘Magic’ is something that most peopleassociate with on-stage performances.But magic can also result when digitaltechnology is used in the right place andwith the right goals. Imagine, for instance,a different kind of restaurant experience.You enter the establishment, tap yourorder into a device, take any seat youwant, and soon after – as if by magic – thewaiter appears at your chosen table andaddresses you by name. Or, you want tomake an impulse purchase, and all it takesis a tap of your wrist. These experiences –while reminiscent of the fictitious wave ofa magic wand – are firm reality. They arevery real examples of what has been madepossible by a wrist-band introduced intoits world-famous theme parks by Disney,an organization that has been part of thefabric of the entertainment industry forover 90 years. Technology today comesnaturally to the entertainment giant. AsBob Iger, Chairman and CEO, Walt DisneyCompany says, “Technology is lifting thelimits of creativity and transforming thepossibilities for entertainment and leisure1.”Parks are only one area where Disney isusing digital technology to sprinkle somemagic onto the customer experience.Walt Disney Studios recently unveileda product – Movies Anywhere – thatlets consumers discover, buy andwatch films across different devices.The application allows users to digitallycurate a collection of movies that theyhave already purchased and can redeemfrom their DVD collection. It also includescontrols so that parents can safeguardthe content for their children2.Technology is liftingthe limits of creativityand transformingthe possibilities forentertainment and leisure.- Bob Iger, Chairman & CEO, Disneymix and match popular Disney and Pixarcharacters in self-constructed videogame adventures. The game cost over 100 million to develop. It ended 2013as one of the top 10 best-selling gamesin the US and sold over 3 million starterpacks globally3.These examples from different partsof the Disney organization illustrate thecompany’s overall strategy. Disney isusing digital to engage, entertain andinteract with consumers every day acrossits theme parks, studio entertainment,interactive media platforms and physicalstore.Figure 1: Disney’s Magic BandsDisney’s video game unit also launcheda game, Infinity, which allows players toSource: Company press release2This approach has required significanteffort and commitment. It is the result ofa sustained vision driven right from thetop, along with significant investments intechnology. The overall strategy has threepillars, which Bob Iger, CEO of Disney,summarizes as: “One: Invest most of thecapital in creating high-quality, brandedcontent and experiences. Two: Embracetechnology and use it aggressively toenhance the quality of Disney’s productand thus the consumer experience. Andlastly, get closer to the customer bybecoming more efficient as a company4.”Disney today isleveraging digital toengage, entertain andinteract with consumersevery day across itstheme parks, studioentertainment, interactivemedia platforms andphysical store.

Making Magic With Digital TechnologiesDisney’s technology approach was basedon four goals: transforming the customerexperience, driving operational efficiency,personalization using connected products,and enhanced interactivity across channels(see Figure 2).Analytics helped improveDisney’s accuracy inmanaging labor resourcesat its parks by 20%.Figure 2: Key Digital Levers Deployed by DisneyImprove CustomerExperienceUsing AnalyticsEnhance OperationalEfficiencyTaking a Data-DrivenApproachInteractivityUsing Digital ToolsAcross ChannelsPersonalizingUsing ConnectedProductsUsing Analytics to ImproveGuest ExperienceDisney uses data mining to understandpast behavior and preferences of individualguests. Forecasting models are used todetermine the kind of vacation packagespreferred by guests and help the companyprovide targeted hotel offers to itscustomers5. Using this model, Disney’s callcentre operators were able to offer familieslow-priced hotels available on its list, whichhas led to improved repeat business.This call centre analytics project paid foritself “10 times over” in the first year ofoperation6.Disney deploys significant real-time analyticsin its day-to-day operations in order toenhance the customer experience at itstheme parks. One example is forecastingthe waiting time for its various attractions.Disney’s Fastpass7 means guests canavoid long queues by giving them a onehour window when they can return to theirchosen attractions without having to wait ina queue. For those waiting in the regular line,Disney runs forecasting models that predictwaiting times at popular attractions, withthe output displayed for guests to see. Thismeans guests can decide whether to enterthe queue, return later or take a Fastpassticket8.Source: Capgemini Consulting AnalysisTaking a Data-Driven Approach toOperational EfficiencyThe scale of Disney’s theme-parkoperation is staggering. Each week,Disney has to pay more than 80,000cast members and schedule 240,000shifts. In the words of Juan Gorricho,Senior Manager, Merchandise BusinessIntelligence and Analytics, “we need theright cast members at the right placeat the right time, and serving the rightguest.” Following the implementation ofa rule-based, on-demand technology,Disney’s accuracy in managing laborresources improved by 20%. The projectpaid for itself in one year, just from thelabor savings alone9.sufficient garments are available for itscast members while ensuring minimuminventory levels and idle costumes on theshelf10.Disney’s call centreanalytics project paid foritself “10 times over” inthe first year of operation.Disney also applies analytics tostreamline back-house operations. Forinstance, it uses forecasting modelsto manage its garment inventory andlaundry. The forecast models ensure3

Personalizing through ConnectedProductsCrunching visitor data to improve thecustomer experience is only one part ofthe Disney approach. Disney’s MyMagic initiative is a billion-dollar investmentthat is a combination of a website, amobile application and a wristband thatcollectively allow visitors to customizetheir experience at a Disney park(see Exhibit 1). The initiative has involvedtraining 70,000 employees on newtechnology, equipping 28,000 hotel roomdoors with radio frequency readers, andinstalling scanners at its parks, hotels,shops, and other attractions.The MyMagic initiative helped Disneyaccommodate 3,000additional daily visitors.The ‘magic’ starts with the bookingprocess for Disney’s entertainment parks,where visitors can book tickets throughthe website or mobile applications thatare available across platforms. Oncethe reservations are made, visitorsreceive a MagicBand – a wristbandthat is embedded with radio frequencyidentification (RFID) chips.4This band acts as an admission ticket,the key to the hotel room, a means ofmaking purchases at many stores, and asa FastPass. The MagicBand – in tandemwith mobile apps – give visitors a seamlessexperience. Using the MagicBand, guestscan pre-arrange their visit for a numberof attractions, including rides and eventssuch as character meetings, parades andfireworks shows. To customize the guestexperience, employees playing charactersat the park can use hidden sensors withinthe bands to personally greet a child on hisor her birthday11.These bands are part of a new “vacationmanagement system” that can trackguests as they move through the parkand analyze their purchasing habits.Unlocking these trends in preferencesand habits is of great value to Disney. Forinstance, knowing where guests haveshopped – and what items they havebought – means Disney can offer guestsdeals that are tailored to their specificinterests.Disney’s MyMagic is now rolled out toall resort guests staying at the company’s35,000 hotel and vacation club rooms.The company has committed to spendover 1 billion on the initiative (seeExhibit 1 for more details). The earlyresults are promising indeed. Disney wasable to accommodate 3,000 additionaldaily visitors during the 2013 Christmasholiday season12 by effectively managingadvance reservations for rides that arein high demand. Over 90% of visitorsrated the band as excellent or verygood13. In 2013, theme parks made up athird of Disney’s 45 billion overall revenueand over 20% of its operating profit.Disney attracted over 132 million guestsin 201314.Disney has invested overa billion dollars in itsMyMagic technologyinitiative.

Using Digital to Create NewInteractive Consumer ExperiencesAcross ChannelsThe commitment to deliver a superiorcustomer experience extends beyondtheme parks. Disney has strived to findnew ways for its customers to digitallyinteract with different parts of the Disneyfamily.As part of that approach, Disneygave its traditional bricks-and-mortarstores a high-tech makeover. Forexample, the store concept includesan in-store application for guests tocustomize their shopping experience(see Figure 3). Using an interactive kioskwith a touch screen, users have the abilityto navigate a 3-D view of all Disney Storeand DisneyStore.com products anddiscover the latest Disney Store newsvia video clips, articles, and social mediafeeds15. The store revamps have helpedboost profit margins by 20%, with over90% of Disney Store guests in NorthAmerica and Europe saying that the newstore design has brought them closer tothe Disney brand16. In the UK, the resultshave been more dramatic. In the fouryears since the overhaul, stores havemade 761.6 million in revenue, whichpeaked at 200.4 million in 201217.Disney’s store redesigns,including usage of digitalkiosks, helped it boostsales and profit marginsby 20%.Figure 3: Redesigned Disney StoreSource: Disney Store Facebook Page5

Exhibit 1: MyMagic - A Multi-Channel, Multi-Platform DigitalExperience InitiativeDisney’s MyMagic InitiativeFastPass My Disney ExperienceEnables advancereservation in ridesA mobile app for managingthe visit experienceMagic BandsRFID bands that unlock hotel roomsand enable personalized experiencesSource: Company websiteDisney’s MyMagic is a combination of a website, a mobile application and a wristband that collectively allow visitorsto customize their experience at a Disney park. Visitors make reservations using MyDisneyExperience.com, wherethey can choose a place to stay, make dining reservations and schedule visit timings through FastPass (a systemthat allows guests a one hour window to return to their desired attractions without having to wait in a queue). TheMagicBand has an embedded Radio Frequency Identification (RFID) chip and there are several long-range RFIDreaders across the park. The band can be used for a variety of use cases such as entering the park, or rides, or hotelroom, or making purchases, among others. As Tom Staggs, Walt Disney Parks and Resort says, “It takes our castmembers out of transactional mode with our guests and into an interaction mode”.The bands are uniquely colored and monogrammed with each family member’s name so they do not get switched.Visitors can link up pictures taken at the park with their MagicBand and access them after their visit. In the future,more such revenue opportunities can be linked to the band. Disney has committed to spend over 1 billion onMyMagic .Source: Bloomberg Businessweek, “Disney Bets 1 Billion on Technology to Track Theme-Park Visitors”, March 2014;Los Angeles Times, “Disney Parks chairman shows off Disney MagicBand”, May 20136