How Bob Iger Remade the House That Walt Built


Few people appreciate that when Walt Disney died in 1966, he left a company that was very different from the one he started in 1923. Even Mickey Mouse had changed numerous times over the years. Today, Bob Iger presides over The Walt Disney Company, only the sixth CEO in its history, a very different company from the one Walt knew; but in important ways, it is very much the same. The technology and delivery may be different; but at its core, Disney remains an entertainment company that’s all about memorable characters and storytelling.

When he became CEO in October 2005, Iger faced a time of extended turmoil. The preceding five years had been marked by a hostile takeover attempt, a shareholder revolt, a board in conflict and years when performance fizzled. The once leading animation department hadn’t had a hit in years. The brand had become somewhat tarnished and employees no longer believed in Disney’s greatness. One of Iger’s first tasks was to make peace with dissident shareholders Roy Disney and Stanley Gold and to convince them to drop their lawsuit challenging the choice of Eisner’s successor.

Once this undertaking was behind him, Iger set about transforming Disney, surprising friend and foe alike, since transformative change was not expected from an insider. Having earned a degree in Television and Radio at Ithaca College, the Long Island native began his career as a weatherman in Ithaca, New York and moved up the ranks of network TV to become chairman at ABC. After Disney bought the network in 1996, he became Eisner’s heir apparent. As he outlines in the following interview at Disney’s Burbank studios, Iger quietly started to implement a different vision.

What Disney lacked, Iger sought to acquire. In 2006, the company bought Pixar Animation Studios in a $7.4 billion deal he personally negotiated with Steve Jobs. In 2009, he negotiated a similar deal for Marvel Entertainment for $4 billion. In 2012, he hit the jackpot by convincing George Lucas to have Disney take over Lucasfilm and the rights to Star Wars. (Star Wars VII is now in production.) In each case, Iger’s hands-off policy has allowed the individual units to continue being creative. Certainly, the recent blockbuster Frozen, based on a Hans Christian Andersen tale, which topped $1 billion at the box office worldwide, suggest that Disney is on a tear.


The $45 billion company with 175,000 employees has grown too large to be run from the top down. It now comprises four divisions and five key brands, Disney, ESPN, ABC, Marvel and Pixar. It also consists of cruises and theme parks around the world. The most ambitious is Shanghai Disney, now under construction and due to open in 2015. Observers reckon it will be Iger’s capstone achievement. (His current contract expires in June 2016.)
The payoff has been dramatic. During Iger’s tenure through the end of the 2013 fiscal year, Walt Disney’s total shareholder return was 202 percent. In other words, if you invested $100 at the beginning of his tenure, your investment would have been worth $302 at the end of 2013. In addition, the company’s share price recently hit an all-time closing high of $79.23 in February. The stock was just $23.81 when Iger became CEO. What’s more, the company’s market cap reached $130 billion for the first time ever.

Other recent milestones from last year include:

  • Revenues and profits reached new highs for three years running.
  • Film releases generated the best box office results in Disney history.
  • Record attendance at company theme parks in California, Florida, Tokyo and Hong Kong.
  • Consumer products divisions posted its first $1 billion profit year—without fully benefiting from the Star Wars bonanza following the acquisition of Lucasfilm.
  • In addition to Disney’s animation app for iPad, six of the 10 most popular downloads on Amazon Kindle were Disney apps. ESPN’s user traffic on mobile devices exceeded that on desktops.

Always admired, Disney topped last year’s ranking by the Reputation Institute, a private firm that measure’s consumer’s perceptions. In 2012, it ranked 17. It ranks ninth overall in Fortune’s list of the most admired and second on Barron’s 100 most respected companies.

With the possibility of Iger’s stepping down less than two years off, the contest over who will replace him looms. The departure of Disney Media Networks co-chairman Anne Sweeney, one of the company’s two top television executives—along with ESPN head John Skipper—focuses the spotlight more intensely on two candidates: resorts chairman Thomas Staggs and CFO Jay Rasulo. In 2010, Iger had the two switch jobs, a move that gave Staggs his first operational experience and Rasulo involvement in financial decision-making.


Some industry observers expect Iger to appoint a second-in-command before he departs. Iger declines to comment apart from saying that his successor, “needs to be someone who can adapt and not necessarily take the old playbook, the old rules, the old habits or the old culture. He may need to shift focus, culture or whatever to continue to maintain success and that great brand position that we’ve got in the world.”

“[We needed] to invest much more aggressively in global growth because we had become too U.S.-centric.”

When you became CEO in 2005, you seemed to face a triple challenge of trying to put the brand right and build revenue—but also to fix the culture—all in the face of having to follow a well-established leader. What did you set as your priority?
While I had very specific and ultimately well-articulated strategic priorities for the company, my rallying cry to the troops was that I wanted Walt Disney to be among the most admired and respected [companies] in the world. First, I wanted Disney to be admired and respected by the employees, “cast members,” as we call them fondly; because if we ultimately were going to be admired and respected by our shareholders and by our customers, it had to start at home. This also tied in with what I wanted to do around cultural change, which I’ll come back to.

After our employees, our investors and our consumers were also important. I created three primary strategic priorities for the company. One: Invest most of our capital in creating high-quality, branded content and experiences. Two: Embrace technology and use it aggressively to enhance the quality of our product and thus the consumer experience. To enhance what I’ll call “distribution” and thus access to our product. And lastly, to get closer to our customer by becoming more efficient as a company. Technology had to become a significant middle name for the company.

In addition, the third strategic priority was to invest much more aggressively in global growth because we had become too U.S.-centric. Interestingly enough, I came from a meeting with a group of folks at our company who are working on the agenda and presentations for an upcoming Disney board of directors retreat, which we do every June. The aim is to analyze and present to the board a strategic growth initiative through 2025. We’re beginning with the strategic priorities of the company, which are the same as what I created in 2005.

To what degree were you bothered by the fact that your predecessor had made comments that you were not up to the job, combined with press at the time that you were a “well-scripted CEO” but probably not a big, strategic thinker?
I prefer not to comment on or dwell on what any specific person said about me or believed about me when I got the job. I will say that even though I was the only internal candidate, and I knew the company and the board extremely well, there was a desire by many to bring great change to the company, because we had been through what had been a pretty difficult period. There was a feeling that any inside candidate would essentially perpetuate the status quo. This [attitude] motivated me because not only did I feel that I had a lot to prove, but I felt that I had a real opportunity to be an internal change agent. Besides, I was fairly thick-skinned at that point because I had been through a lot of that.

“There was a feeling that any inside candidate would essentially perpetuate the status quo. This [attitude] motivated me. … I felt that I had a real opportunity to be an internal change agent.”

In hindsight, what was the most difficult challenge?
Clearly, it was shifting the culture from a company that did not believe in itself as much as it needed to [do], to a company that believed in itself and its future, was optimistic about its future and respectful of its product and its leadership.

What did you have to do to make that happen?
There were a lot of things. One of them was to redirect or disband, as the company had known it, its strategic planning arm. I thought the individual businesses needed to own more of their strategy, as opposed to being owned by the corporate entity. It was important for each business to take more responsibility and accountability for its own strategy.

The company had grown very large, particularly after the acquisition of Capital Cities/ABC. And it was operating in many changing and dynamic businesses.

While it had made sense to create overall strategy at the center, we had grown so large and were operating in such dynamic businesses that I thought that actually slowed decision-making down, lessened accountability and created at some level—more inadvertent than purposeful—of mistrust, where business units didn’t feel as trusted as they needed to be by the corporation. What had served us well in the past was no longer optimal.

So how do you manage the company differently today?
While we still have strategic planning, it’s reconstituted with a different mission. For one thing, the business units create their own strategies. I want them to fit into a framework of the company, and they need to be consistent with the company’s strategic priorities. But a different strategy for each business had to emanate from the businesses and be implemented by the businesses.

“The business units had to feel not only a sense of empowerment but a sense of ownership over their own destinies—and thus a sense that they were trusted.”

In addition, most key business decisions that were being made needed to be made by the individual businesses, with either the approval, knowledge or even involvement in an advise-and-consent sense of the corporation. The business units had to feel not only a sense of empowerment but a sense of ownership over their own destinies—and thus a sense that they were trusted. If they could not be trusted, then instead of taking away the freedom and responsibility from them, we had to get new people.

Shortly after becoming CEO, you struck a deal with Steve Jobs and Apple to put a Disney app on the then new video iPod and iTunes. Why was it considered controversial at the time?
That was a huge step—or a very loud signal to the company that technology could be viewed as friend, not foe, or as opportunity, not threat. It affirmed that we were willing to take risks and were willing to challenge the status quo of our own businesses, willing to enter partnerships with technology companies and willing to embrace technology as a path to a much brighter future. This was probably the loudest message I could have sent to this company about change.

Let me pause here so I can show you one of my prized possessions. [Holds up framed photograph of him shaking Steve Jobs’ hand on stage at an Apple event.] On October 1, 2005, I officially become CEO of The Walt Disney Company. Three weeks later, I showed up on stage with this guy who, to the world, was our mortal enemy, because he controlled Pixar. In the court of public opinion, Steve Jobs was right and Disney was wrong. He wasn’t necessarily right about his opinions of Disney—but he was winning the perception battle. I showed up on stage at an Apple event, when he’s announcing the video iPod, and this picture commemorates our deal.

Going back to your question, these moves were not only designed to set us up in terms of future growth but to start shifting a culture and becoming a company that believed in itself again. I say this not to be critical of what happened before. But times had changed, and the needs of the company were very different. I took advantage of being a new CEO to make these moves. And they led to tangible, cultural change within the company.

Was there an instructive failure in your own career that helped form who you are today as a leader?
My parents, my father in particular, instilled in me a great work ethic and a level of ambition. A lot of it came from a desire to prove that I was up to challenges. I still feel that in me, by the way. I seek new challenges so I can prove that I’m worthy of more. That’s driven me in many ways.

Early on, I learned that if you owned your own failure, or embraced whatever disappointment, it was probably the best way to process and overcome the failure and disappointment. I remember early in my ABC Sports days a relatively trivial mistake had been made on a weekend sporting event on Wide World of Sports, where we simply missed a story that we should have had. In a Monday-morning session that the former head of ABC Sports, Roone Arledge, had, which was typically a postmortem of what went on during the weekend, whatever we had missed came up. There was silence around the room as Roone questioned what happened. At the time, I was young and low-titled and said, “It was my mistake. I missed that.” There was complete silence in the room. Everyone looked around. Here, I had admitted in front of the brass of then ABC Sports, including the head of it, that I had made a mistake.

It was the most empowering thing I could ever have done. We moved on. But what was interesting to me about this was it was a lesson. It was probably the first time I ever owned up to something like that in such a way. Looking back, it was relatively trivial, but it was unbelievably empowering. And the respect that people had for me for doing that actually put me in such a stronger, better position with everybody.

It taught me that if you failed, you have an ability to not just accept the failure and attempt to understand it but to be accountable for it. [Owning up to failure] offers the best chance to recover from it. It’s a lesson I’ve taken with me throughout [my career]. If something fails as a direct result of your decision and you take responsibility for it, you’re much more likely to endure than if you do the opposite.

Shanghai Disney is one of the biggest investments that you’ve made on your watch, perhaps one of the biggest in the company’s history. How does it fit into your priority of expanding global growth?

Setting aside the investment Walt made in central Florida to create Disney World, the biggest investment we made in our history was buying Capital Cities/ABC—a $19.5 billion gutsy investment by Michael [Eisner]. Pixar was the second-largest at $7.3 billion. Shanghai Disneyland is the third. In terms of non-acquisition, organic investment, it is the biggest. No question. In terms of the company’s future, it is the most exciting. You’re looking at the most populous city in the most populous country in the world. [It’s] a market that Disney is known in but one in which we haven’t really penetrated deeply [until now] for a variety of reasons.

It has the potential to ground our brand or build a foundation for our brand in China that could pay off for generations to come. In terms of global growth, it’s just huge.

We’re already bringing our movies to China, and China is now the No. 2 movie market in the world, but [it’s] growing, and will become the No. 1 movie market by the end of this decade or the very beginning of the next decade.

The movies that we make—Marvel, Pixar, Disney, Star Wars—are not only valuable brands in China, but these franchises will all have a presence eventually in this park. It certainly sets up our movie business better in what will be the No. 1 movie market in the world. Clearly, there will be consumer products opportunities that grow from this. But more than anything, it’s people having a connection to Disney, an affinity for Disney, and an experience with Disney that will serve the brand and its businesses well for a long time.

Acquiring ESPN along with ABC didn’t seem very important, but it became a Cinderella, contributing around 45 percent of Disney revenues. Where do you take them from here?
Technology has the potential to be ESPN’s biggest friend in terms of growth. Because ESPN’s mantra or guiding principle is to serve the sports fan anywhere, anytime, technology can give the fan even more access to what the fans are most passionate about. A primary example is smart mobile devices. Such devices enable you to watch your favorite sport, your favorite athlete, your favorite team, wherever and whenever you want. And that gives ESPN a tremendous opportunity to serve their fans in even more impactful ways.

Not only will technology enable ESPN to cover sports better, cover more sports and give the fan an even better experience, but it will provide much more accessibility than ever before. That should power ESPN’s growth rather significantly over the next decade. Mobile technology is the most exciting thing—by the way, not just for ESPN—but for our other businesses, Disney, Marvel, Pixar, ABC and all of our critical brands.

Having been on the board of Apple since late 2011, what takeaways have you been able to incorporate into Disney and what influences has Disney had on Apple?
Apple today is what Steve Jobs created—high quality, relentless pursuit of perfection when it comes to their products and unbelievable attention to design and aesthetics. Everything they do adheres to those values and attributes of the brand. I observed from Steve and adopted some of his priorities as our own. Seeing him do it gave me even more impetus or drive to do similar things—or to do what I had wanted to do anyway.

There are similarities in what I brought to Apple. For example, we’re both big believers in the power of brands and the need to continue to feed brands with innovation. I bring a little bit more experience as a CEO of a global company perhaps. I like to think that I can offer some advice and perspective to Tim Cook, who I respect tremendously, as a relatively newer CEO. Obviously my media experience is valuable, as I am the only board member with that experience. I’m now more of an elder statesman.

Is it true that Steve Jobs once called you up after seeing a Disney film and said, “Bob, that movie sucks.”
That’s true. He did. Steve and I used to talk a lot; and frequently, he called me on weekends because it was a great time for us to not only catch up but to muse about all sorts of things. One afternoon, he called to say, “Hey, Bob, my son and I just went to one of your movies, and it sucked.” And I said, “Well, you may think it sucked, but it did $100 million in box office this weekend, so there are a lot of other people [who] thought otherwise. And while I think that there were some things about the film that could have been better, I respectfully disagree.”

I liked being challenged by him in that regard because even if I disagreed with him, there was always a kernel of truth to what he had to say. There was always something; it wasn’t completely wrong. It drove me to want to demand even more perfection and excellence. He had that impact on me. In fact, I talked about this at our management retreat last fall—the relentless pursuit of perfection. While it can easily be a turnoff, something that you’d want to run from because who needs that kind of criticism, I always took it as being constructive.

Steve Jobs may have been Disney’s largest shareholder, but if I ever said to Steve on a call, “You are a member of the board,” or “You are our largest shareholder,” he’d say, “Stop. I do not want to be called either. I want to be thought of by you as a trusted advisor and a friend.” Anytime I mentioned board member or shareholder, he reminded me of that. Finally, I decided to accept him as a trusted advisor and a friend, and he proved to me over time that that’s exactly what he was to me.

If Walt were alive today, what do you reckon he might say about you?
Funny you would ask. I spoke with Diane Disney, one of his daughters, about that before she died. I actually wrote her a note: “If Walt were to see those gorgeous cruise ships plying the oceans, or even Walt Disney World, or imagine Shanghai, what would he think?” Interestingly enough, for a guy from the Midwest, he had a real curiosity about the world. He would be blown away to know that China would be the home to a product that was so much a part of who he was and what he stood for—Disneyland.

But if he also saw Pixar, or Star Wars or Marvel—think of the storytelling and the characters and the places that these stories exist. [Take] ESPN, for that matter. I think he would be unbelievably proud. This is a bit presumptuous of me, but what the heck, maybe I’ve earned the right to be and also to see, on any list about brand respect and admiration that exists in the world today. [This is] a company that he founded; the brand that he created is still at or near the top of those lists. I mean, what could be a better affirmation for the principles that he embedded in the company that he created?

" J.P. Donlon : J.P. Donlon is Editor Emeritus of Chief Executive magazine.."