So if you've read my book, you know I'm a bit of a Disney buff. If I ever find myself with some extra time in LA, I try to swing down to Anaheim and at least wander through the giant "World of Disney" store at Downtown Disney. Finding myself in Orlando for a week, of course, provided ample reason to visit Disney property, and I again found myself strolling through the "mother of all Disney stores" at Downtown Disney Orlando.
Walking through one of these mega-stores packed with shoppers nearly non-stop every day from 10am to 11pm (11:30pm on weekends!), one is overwhelmed by the depth and breadth of product produced under the Disney name. Ten years ago, as I was trying to build my own Disney, my reaction was often "I want one of these!" I thought it all looked like tremendous fun, the sort of fun I had been seeking when I started Big Idea in the first place. The highest goal was cultural impact, of course, but I was also driven by thoughts like… "Wouldn't it be fun if I had a theme park like Disney's?" "Wouldn't it be fun if I had a giant store filled with cool stuff like Disney's?" "Wouldn't it be fun if we could buy an old movie house and restore it and turn it into our headquarters?" (If you've read my book, you know how that one turned out.)
So… 10 years later, I'm a little older, and, perhaps, a little wiser. So I'm wandering through the giant Disney store, looking at thousands (literally) of Disney products gloriously displayed for the happy Disneyphiles and their young offspring, and do you know what I'm thinking?
"This looks like a lot of work."
"Someone is losing sleep right now hoping that this new line will sell."
"If they're wrong, there are going to be layoffs."
Looking at all that stuff, all I could think about was the level of stress on the team behind it all. Stress that maybe they hadn't developed just the right new merchandise, stress that it wouldn't sell as well as expected, stress that one bad season might cost them their jobs.
You see, at a public company like Disney (or Viacom, or McDonald's, or GE), there is but one rule: No matter how much you managed to sell this year – no matter how well you did, next year you must sell MORE.
That's what makes the stock price go up. Growth. That is the ultimate goal of every public company. In fact, that is the premise upon which they go public. "We pledge to you, public, that we will grow. Forever. Amen." And so they go public, and, believing their promise, folks like you and me buy their shares. And the shares increase in value. And everyone is happy.
Until they stop growing.
Once sales stop growing, or even appear to stop growing, folks like you and me get frustrated and sell our shares. And the stock price goes down. And the board of directors, doing what they are paid to do on behalf of the shareholders, demands improvement. Change. So the company executives affix blame to whomever appears closest to the problem. Heads roll. A new team will get their chance to turn things around. Rinse. Repeat.
This dynamic just happened at Entertainment Rights, the latest owner of VeggieTales. After selling the board of directors on the notion that Entertainment Rights plus Classic Media and Big Idea would be worth much more than Entertainment Rights on its own, the founder of Entertainment Rights watched as his stock price fell from 32 British pounds per share to less than 8 in the year following the purchase. This sort of thing, in financial circles, is frowned upon. Stock prices are to always go up. Never go down. And going down 75% in one year means that something is horribly wrong.
So wrong that the board was required to take action on behalf of the shareholders, throwing the founder of Entertainment Rights out the window last March and replacing him with a new executive they believe will be able to "turn things around." (Since the replacement of the founder in March, the stock price has fallen from around 8 to as low as 4.75. Hmm.)
This is the dance of the public company, and this is the dance that the executives in charge of all that product at the Disney store know all too well. So every year, regardless of how well they did the year before, they must do even better. More. Bigger. Faster.
So this year they launched the "Bippity Boppity Boutique" inside the big Disney store – a reservation-only mini-boutique where 6-10 year-old girls can get high-priced Princess makeovers… just like mom. (I kinda wondered what would happen if you signed up your 10 year-old boy for a "princess makeover." Would they refuse him? And if so, could you sue them for "gender discrimination?")
So let's say the new boutique is a big hit. Sales grow 10%. Everyone smiles and slaps you on the back. Guess what? Next year you have to grow sales by another 10%. Somehow. And the year after that, and the year after that. Because that's how it works.
Sound stressful? Picturing George Jetson on that treadmill, yelling, "Jane – stop this crazy thing?"
That's exactly what I was picturing in my head as I strolled through aisle after aisle of shiny merchandise.
"This is insane!" I thought. "I actually WANTED this?"
Walking through this store a decade ago all I saw were the fun, shiny products. Walking through last week, I saw the stressed designers and executives behind each one.
I'm not saying there is no healthy way to do fun merchandise that kids will enjoy. I'm simply saying that it won't look anything like the giant Disney store. And it must be done in an environment that doesn't measure success in terms of infinite growth.
There is a correct size for a business. A size where that business can accomplish its mission without burning out its employees. There is a size where a company is "big enough." But not if the company is driven primarily by a profit motive and backed by either public investors or, for the most part, private equity. For a profit-driven company, the right size is always "bigger than last year." Forever. And ever. Until the company fails, or until the board concludes that the best financial use of the company's assets is to sell them off to an even bigger company. (As was the case with Classic Media last year.)
Why is all this relevant? Because I'm building a new company. And there is a treadmill over in the corner, just begging me to climb back on.
So now we must sing the "What We Have Learned Song," and stay off the treadmill. We can have wonderful fun creating great product that can impact kids lives. But there is a way to do this without burning people up – without stressing them out. Without hinging our existence on the annual race for "more."
I'm not sure exactly how we're going to pull this off, but I've got a much better idea than I did 10 years ago. Stay tuned and we'll see how it goes, okay?