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CASES CASE 12 PIXAR* In spite of its domination of Academy Awards for Best Ani- broke all records for opening weekend box office revenue for mated Film since the category was introduced in 2001, Pixar an animated feature film. The $180 million that the film col- has managed to win only once over the last three years. It lected over three days was spectacular even by the standards was overlooked in 2018 for Incredibles 2, although the film that have been set by Pixar over the years (see Exhibit 1). But as with Finding Dory, the sequel to Finding Nemo that was " Case prepared by Jamal Shamsie, Michigan State University, with the released a couple of years earlier, the commercial success of assistance of Professor Alan B. Eisner, Pace University. Material has been the film failed to land the firm with an Academy Award. drawn from published sources to be used for purposes of class discussion. This loss at the Academy Awards only added to the Copyright @ 2019 Jamal Shamsic and Alan B. Eisner. feelings within Pixar after the forced departure of John EXHIBIT 1 Pixar Films Worldwide All of Pixar's films released to date have ended up among the top animated films of all Rank 2018 time based on worldwide box office revenues in millions of U.S. dollars. Revenue Rank Title Year (SUS millions) 2 Incredibles 2" 2018 $1,243 4 Toy Story 3 2010 $1,065 6 Finding Dory 2016 $1.029 10 Finding Nemo 2003 $940 15 Inside Out 2015 $858 16 Coco 2017 $807 20 Monsters University 2013 $745 21 Up 2009 $735 27 The Incredibles 2005 $630 30 Ratatouille 2007 $620 34 Monsters, Inc 2002 $575 35 Cars 2 2011 $560 38 Brave 2012 $555 39 Wall-E 2009 $535 50 Toy Story 2 1999 $515 57 Cars 2006 $460 64 Cars 3 2017 $383 71 Toy Story 1995 $372 72 A Bug's Life 1998 $365 The Good Dinosaur 2015 $333 * Still playing in theatres ard nd the world (03/2019)Lasseter, who had served as the firm's creative officer since filmmaking facility in San Rafael, California, Catmull's its founding. Because of his influence on the firm, Lasseter group of aspiring animators made substantial progress in had been heralded in the news media as a latter-day Walt the art of computer animation. But the unit was not able to Disney. A self-described Peter Pan, Lasseter had long been generate any profits and Lucas was not willing to let it grow known for his jolly public persona and tendency to greet beyond using computer animation for special effects. anyone in his proximity with lengthy bear hugs. He took a In 1985 Catmull finally turned to Jobs, who had just leave in 2017 following complaints about unwanted work- been ousted from Apple. Jobs was reluctant to invest in a place hugging and then agreed to retire at the end of 2018. firm that wanted to make full-length feature films using Some women had also complained that under Lasseter. computer animation. But a year later. Jobs decided to buy Pixar had not offered much opportunity to women and Catmull's unit for just $10 million, which represented a minorities. third of Lucas's asking price. While the newly named Pixar Despite the loss of Lasseter, Pixar is confident that it will Animation Studios tried to push the boundaries of com- continue to thrive as part of the Walt Disney Company. It puter animation over the next five years, Jobs ended up hav- was acquired by Disney in 2006 for the hefty sum of ing to invest an additional $50 million-more than $7.4 billon. The deal had been finalized by the late Steve Jobs, 25 percent of his total wealth at the time. "There were times the Apple Computer chief executive who had also served as the that we all despaired, but fortunately not all at the same head of the computer animation firm. Disney CEO Bob Iger time," said Jobs.4 worked hard to acquire Pixar, whose track record has made it Still, Catmull's team did continue to make substantial one of the world's most successful animation companies. breakthroughs in the development of computer-generated Both Jobs and Iger had been aware, however, that they full-length feature films (see Exhibit 2). In 1991, Disney gave must protect Pixar's creative culture while they also try to Pixar a three-film contract that started with Toy Story. When carry some of this over to Disney's animation efforts. In the movie was finally released in 1995, its success surprised fact, Jobs had been convinced that Pixar's links with Disney everyone in the film industry. Rather than the nice little film would be mutually beneficial for both firms. In his own Disney had expected, Toy Story became the sensation of 1995. words: "Disney is the only company with animation in their It rose to the rank of the highest grossing animated film for the DNA." Lasseter, who had been overseeing all story devel- year, earning $722 million in worldwide box office revenues. opment at Pixar had also denied any negative effects from Within days, Jobs had decided to take Pixar public. Disney's acquisition of his firm. He had insisted that, in When the shares, priced at $22, shot past $33. Jobs called fact, Pixar's films were increasingly being subjected to his best friend, Oracle CEO Lawrence J. Ellison, to tell him higher standards because of its string of successes. he had company in the billionaire's club. With Pixar's sud- Ed Catmull, president of Pixar reiterated his firm's com- den success, Jobs returned to strike a new deal with Disney. mitment to take whatever steps may be necessary in order Early in 1996, at a lunch with Walt Disney chief Michael D. to put out the best possible film. "Nobody ever remembers Eisner, Jobs made his demands: an equal share of the prof- the fact that you slipped [up in] a film but they will remem- its, equal billing on merchandise and on-screen credits, and ber a bad film" he said. Catmull's remarks indicated that guarantees that Disney would market Pixar films as they Pixar was dedicated to its lengthy process of playfully craft- did its own. ing a film to replace the standard production line approach that had been pursued by Disney. This contrast in culture is best reflected in the Oscars that the employees at Pixar Boosting the Creative Component have displayed proudly, but which have been painstaking With the success of Toy Story, Jobs realized that he had hit dressed in Barbie doll clothing. something big. He obviously had tapped into his Silicon Valley roots and turned to computers to forge a unique style Pushing for Computer-Animated Films of creative moviemaking. In each of their subsequent films. Pixar has continued to develop computer animation that The roots of Pixar stretch back to 1975 with the founding of has allowed for more lifelike backgrounds, texture, and a vocational school in Old Westbury, NY, called the New movement than ever before. For example, since real leaves York Institute of Technology. It was there that Edwin E. are translucent, Pixar's engineers developed special soft- Catmull, a straitlaced Mormon from Salt Lake City who ware algorithms that both reflect and absorb light, creating loved animation but could not draw, teamed up with the luminous scenes among jungles of clover. people who would later form the core of Pixar. "It was art- In spite of the significance of these advancements in ists and technologists from the very start." recalled Alvy computer animation, Jobs was well aware that successful Ray Smith, who worked with Catmull during those years. feature films would require a strong creative spark. He un- "It was like a fairy tale."3 derstood that it would be the marriage of technology with By 1979, Catmull and his team decided to join forces creativity that would allow Pixar to rise above most of its with famous Hollywood director, George W. Lucas, Jr. competition. To get that, Jobs fostered a campus-like envi- They were hopeful that this would allow them to pursue ronment within the newly formed outfit similar to the free- their dream of making animated films. As part of Lucas's wheeling. charged atmosphere in the early days of hisEXHIBIT 2 Milestones 1986 Steve Jobs buys Lucas's computer group and christens it Pixar. The firm completes a short film, Luxo Jr., which is nominated for an Oscar. 1988 Pixar adds computer-animated ads to its repertoire, making spots for Listerine, Lifesavers, and Tropicana. Another short, Tin Toy, wins an Oscar. 1991 Pixar signs a production agreement with Disney. Disney is to invest $26 million; Pixar is to deliver at least three full- length, computer-animated feature films. 1995 Pixar releases Toy Story, the first fully digital feature film, which becomes the top-grossing movie of the year and wins an Oscar. A week after release, the company goes public. 1997 Pixar and Disney negotiate a new agreement: a 50-50 split of the development costs and profits of five feature-length movies. Short Geri's Game wins an Oscar. 1998-99 A Bug's Life and Toy Story 2 are released, together pulling in $1.3 billion through box office and video. 2001-04 A string of hits from Pixar: Monsters Inc., Finding Nemo, and The Incredibles. 2006 Disney acquires Pixar and assigns responsibilities for its own animation unit to Pixar's creative brass. Cars is released and becomes another box office hit. 2008 Wall-E becomes the fourth film from Pixar to receive the Oscar for a feature-length animated film. 2009 Up becomes the Fifth film from Pixar to receive the Oscar for a feature-length animated film. 2011 Toy Story 3 receives five Oscar nominations and wins two, including one for Best Animated Film. 2011 Steve Jobs dies, leaving Ed Catmull in charge. 2013 Brave becomes the seventh film from Pixar to receive an Oscar for Best Animated Film. 2015 Inside Out becomes the eighth film from Pixar to receive an Oscar for Best Animated Film. 2016 Piper received a nomination for an Oscar for Best Animated Short Film. 2017 Coco wins two Oscars in categories for Best Animated Film and Best Original Song-Pixar's ninth film to receive an Oscar for Best Animated Film. 2018 Incredibles 2 sets the record for best debut for an animated film of all time, eventually grossing over $1.2 billion dollars worldwide. The film has also received a nomination for the Best Animated Feature. 2018-19 Lasseter steps down after accusations of sexual harassment toward employees; Ed Catmull and Lee Unkrich announce their retirements; Pete Docter and Jennifer Lee become new chief creative officers of Disney's animation divisions. Source: Pixar. beloved Apple, where he also returned as acting CEO. "It's This creative group of employees, which includes directors, not simply the technology that makes Pixar." said Dick meets on a regular basis to assess each movie that the firm Cook, former President of Walt Disney studios. is developing and offer their ideas for improvement. It is Even though Jobs did play a crucial supportive role, it is such an emphasis on creativity that has kept Pixar on the Catmull that has been mainly responsible for insuring that cutting edge. Each of their films has been innovative in many the firm's technological achievements help to pump up the respects and has made the best possible use of computer ani- firm's creative efforts. He has been the keeper of the com- mation. "They're absolute geniuses," gushed Jules Roman, pany's unique innovative culture, which has blended Silicon co-founder and CEO of rival Tippett Studio. "They're the Valley techies, Hollywood production honchos, and artsy people who created computer animation really." animation experts. In the pursuit of Catmull's vision, this Catmull has also been working hard to build upon this eclectic group has transformed their office cubicles into tiki pursuit of creative innovation by creating programs to de- huts, circus tents, and cardboard castles with bookshelves velop the employees. Employees are encouraged to devote that are stuffed with toys and desks that are adorned with up to four hours a week, every week, to further their educa- colorful iMac computers. tion at Pixar University. The in-house training program of- One of Catmull's biggest achievements has been the cre- fers 110 different courses that cover subjects such as live ation of what is called the Pixar Braintrust (see Exhibit 3). improvisation, creative writing, painting, drawing, sculpting.Ed Catmull' President, producer EXHIBIT 3 Sample of Roles Pete Docter Chief creative officer, producer, director, writer Jim Morris Business manager Brad Bird Director, writer Harley Jessup Production designer Bill Cone Production designer Ricky Nierva Production designer, art director, character designer Ralph Eggleston Art director Randy Barrett Character designer, set designer, matte painter Tia Kratter Shading art director, digital painter Bob Pauley Character designer, sketch artist Jay Shuster Character and environment designer *Retired 07/2019 Source: Pixar. and cinematography. For many years, the school's dean was characters to the developing plot. "No amount of great ani- Randall E. Nelson, a former juggler who has been known to mation is going to save a bad story." he said. "That's why we perform his act using chainsaws so students in animation go so far to make it right.* classes have something compelling to draw. Only after the basic story had been set would Lasseter begin to think about what was needed from Pixar's technol- Becoming Accomplished Storytellers ogists. And it was always more than the computer anima- tors expected. Lasseter, for example, demanded that the A considerable part of the creative energy goes into story development. Jobs had understood that a film works only if crowds of ants in A Bug's Life not be a single mass of looka- like faces. To solve the problem, computer expert William its story can move the hearts and minds of families around the world. His goal was to develop Pixar into an animated T. Reeves developed software that randomly applied physi- cal and emotional characteristics to each ant. In another movie studio that becomes known for the quality of its story- instance, writers brought a model of a butterfly named telling above everything else. "We want to create some great Gypsy to researchers, asking them to write code so that stories and characters that endure with each generation," Jobs had stated." when she rubs her antennas, you can see the hairs press For story development, Pixar relied heavily on John down and pop back up. Lasseter, who went by the title of vice-president of the crea- At any stage during the process, Lasseter would revisit tive. Known for his collection of 358 Hawaiian shirts and potential problems that he might see with the story. In A his irrepressible playfulness with toys, Lasseter had been Bug's Life, for example, the story was totally revamped after the key to the appeal of all of Pixar's films. Lasseter would more than a year of work had been completed. Originally, it was about a troupe of circus bugs run by P.T. Flea that tries get very passionate about developing great stories and then harnessing computers to tell these stories. Most of Pixar's to rescue a colony of ants from marauding grasshoppers. employees believed that it was this passion that allowed the But because of a flaw in the story-why would the circus bugs risk their lives to save stranger ants?-co-director Andrew studio to ensure that each of its films has been a commer- cial hit. In fact, Lasseter had been widely regarded as the Stanton recast the story to be about Flik, the heroic ant Walt Disney for the 21st century. who recruits Flea's troupe to fight the grasshoppers. "You When it was time to start a project, Lasseter would iso- have to rework and rework it," explained Lasseter. "It is not late a group of eight or so writers and direct them to forget rare for a scene to be rewritten as much as 30 times." about the constraints of technology. The group would bounce ideas off each other, taking collective responsibility Pumping Out the Hits for developing a story. While many studios try to rush from In spite of its formidable string of hits, Pixar has had diffi- script to production, Lasseter took up to two years just to culty in stepping up its pace of production. Although they work out all the details. Once the script had been devel- may cost 30 percent less, computer-generated animated films oped, artists created storyboards that connected the various do still take considerable time to develop. Furthermore, CASE 12 = PIXAR C73because of the emphasis on every single detail. Pixar used To Infinity and Beyond? to complete most of the work on a film before moving on to the next one. Catmull and Lasseter then decided to work on As Pixar moves forward, it will do so without the guidance of several projects simultaneously, but the firm has not been John Lasseter. However, everyone at Pixar understands that a able to release more than one movie in a year. large part of their success can be attributed to the talent the In order to push for an increase in production, Pixar has firm is able to recruit and train to work together. This leads built up its workforce to well over 1,000 employees. It is to a continuous exchange of ideas and fosters a collective also turning to a stable of directors to oversee its movies. sense of responsibility on all their projects. "We created the Lasseter, who directed Pixar's first three films, supervised studio we want to work in," Lasseter had remarked. "We have other directors who are taking helm of various films that an environment that's wacky. It's a creative brain trust: It's the studio chooses to develop. Monsters Inc., Finding Nemo. not a place where I make my movies-it's a place where a The Incredibles, Ratatouille, and Brave were directed by group of people make movies."4 some of this new talent. But there are concerns about the Lasseter has been replaced by Pete Docter, a 28-year number of directors that Pixar can rely upon to turn out Pixar veteran who directed three of its most successful high-quality animated films. Michael Savner of Banc of films-Up. Inside Out, and Monsters, Inc.-and helped write America Securities commented: "You can't simply double the screenplays for Toy Story and Wall-E. Docter expressed production. There is a finite amount of talent. "10 confidence in the future of Pixar, stating: "Together, we will To meet the faster production pace, Catmull has also keep pushing animation in new directions."IS He will work added new divisions including one to help with the develop- alongside relative newcomer Jennifer Lee, who will take ment of new movies and one to oversee movie development charge of the revered Walt Disney Animated Studios. shot by shot. The eight-person development team has Under Docter's leadership, Pixar released Toy Story 4. helped to generate more ideas for new films. "Once more one of its most anticipated films in the summer of 2019. It ideas are percolating, we have more options to choose from allowed the firm to show its stellar storytelling and dedica- so no one artist is feeling the weight of the world on their tion toward their work. The fourth installment of the shoulders," said Sarah McArthur, who served as Pixar's world's first computer-animated feature film arrived after vice president of production." nearly a nine-year gap since Toy Story 3 and more than two Finally, Catmull has been overseeing the development of decades after the original. Its release was delayed by prob- new animation software, called Luxo. Luxo has allowed him lems with its development, leading to changes among the to use fewer people to address various challenges that must individuals who were involved with its story and screenplay. be faced. During the production of Brave, for example, the Nevertheless, it received both critical acclaim and success animators had to make the curly hair of the main character at the box office, pulling in over $1 billion worldwide. 16 appear to be natural. Claudia Chung, who worked on the However, Pixar now faces another transition since Ed film, talked about their reaction to various methods they Catmull, who spearheaded the firm's development, stepped kept trying: "We'd kind of roll our eyes and say, "I guess we down as president in July 2019. Catmull minimized the im- can do that,' but inside we were all excited, because it's one pact of his departure: "I have mixed emotions that come more stretch we can do."12 with the sadness that comes with stepping away from a At the same time, Catmull also understands that the high group of people I love, but also with the utmost pride and standards of the firm cannot be compromised for the sake of pleasure that we now have at both Pixar and Disney the a steady flow of films. This was evident in their decision to most dedicated and imaginative leaders that I have worked with.*17 delay the launch of The Good Dinosaur a few years ago be- cause they wanted to rethink the film in order to ensure it Think about how off-putting a movie about rats preparing food would work well. Everyone at Pixar remains committed to the could be, or how risky it must've seemed to start a movie about philosophy of Jobs that every one of Pixar's films should grow robots with 39 dialogue-free minutes. We dare to attempt these out of the best efforts of the firm's animators, storytellers, and technologists. "Quality is more important than quantity," he stories, but we don't get them right on the first pass. This is as it emphasized. "One home run is better than two doubles." should be. In order to preserve its high standards, Catmull has been working hard to retain Pixar's commitment to quality -Ed Catmull from his book, Creativity, Inc, published in 2014 even as it grows. He has been using Pixar University to en- courage collaboration among all employees so that they can develop and retain the key values that are tied to their suc- ENDNOTES cess. And he has helped devise ways to avoid collective 1. Soloman, C. 2006. Pixar creative chief to seek to restore the Disney burnout. A masseuse and a doctor now come by Pixar's magic. New York Times, January 25. p. C6. 2. Miller, D. 2013. Pixar film delay leads to layoffs. Los Angeles Times. campus each week, and animators must get permission November 23, p. B3. from their supervisors if they want to work more than 3. Burrows, P. and R. Grover. 1998. Steve Jobs: movie mogul. 50 hours a week. Business Week, November 23, p. 150.Leadership Value Chain Balanced Teams Analysis Scorecard Operations Business Perspective 1 & 6 Human Resource Management Operational Perspective Core/distinctive competencies Marketing and Sales 2 & 5 Human Resource Management Business Perspective Core/distinctive competencies Customer Perspective Technology Development Business Perspective 3 & 4 General Administrative Innovation and Learning Core/distinctive competencies Perspective 1. Review the guidance provided for each framework on page 2. 2. Use the forms on pp. 3 and 4 to document your analysis. 3. After completing the exercise, upload your files. 4. Be prepared to present/discuss your analysis in class.Pixar Case Exercise - Part 1 Use the forms on the following pages to document your analysis. The Value Chain: For each assigned category, identify two to three activities (not facts or results/products) that are competencies/strengths and/or weaknesses (which can include activities that are missing). Indicate which of the activities identified as strengths are core or distinctive competencies by using bold type. Are there any core or distinctive competencies? Discuss your rationale. The Balanced Scorecard . Develop one objectives in each assigned area of the scorecard to effectively monitor and manage the business. Make sure to include the goal, the measure, and SMART objective. [Note that it would be helpful to review (at a high-level) the Kaplan & Norton article.] . Remember that to be SMART, an objective must be specific, measureable, achievable, realistic, and time-bound.Pixar Case Exercise - Part 1 The Value Chain Value Chain Activities Activities that are Strengths Activities that are Weaknesses (or Missing) Inbound Logistics N/A for the Pixar Case Operations Outbound Logistics N/A for the Pixar Case Marketing and Sales Service N/A for the Pixar Case General Administration Human Resource Management Technology Development Procurement N/A for the Pixar Case Core/distinctive competencies (if any) - and rationale:Pixar Case Exercise - Part 1 Business Perspective Customer Perspective Goal Measure SMART Objective Goal Measure SMART Objective Operational Perspective Innovation and Learning Perspective Goal Measure SMART Objective Goal Measure SMART Objective