The Successful Application and Commercialisation of Computer Graphics Name: Ehijiele Anthony Agenmonmen Email: eaa5g09@soton.ac.uk Tutor: Lester Gilbert Course: Management 1 MANG3055 Degree: BSc Information Technology in Organisations Word Count: 1017 Table of Contents 1 Introduction ................................................................................................................. 3 2 Origins ............................................................................................................................ 3 2.1 Existence ............................................................................................................................ 3 2.1.1 Pixar Image Computer ........................................................................................................... 3 3 Applying Computer Graphics (CG) to Animation ............................................ 4 3.1 Survival ............................................................................................................................... 4 3.1.1 RenderMan ................................................................................................................................. 4 3.2 Success Disengagement ................................................................................................ 4 4 Successful Commercialization ............................................................................... 5 4.1 Success Growth ................................................................................................................ 5 4.1.1 Management and Leadership ............................................................................................. 5 4.1.2 SWOT Analysis .......................................................................................................................... 6 4.1.3 Marketing Mix ........................................................................................................................... 7 4.2 Take Off .............................................................................................................................. 7 5 Conclusion .................................................................................................................... 7 6 References .................................................................................................................... 8 7 Appendix ..................................................................................................................... 10 2 1 Introduction Computer Animated films have become one of the most financially viable products in the computer graphics industry. The market leader and pioneer of this sector is Pixar Animation Studios. However, Pixar was a graphics computer manufacturer once. In this paper, the commercialization of computer graphics by applying it to software and animation will be examined using relevant theories and models. 2 Origins The origins of Pixar can be traced to Pixar co-­‐founder Ed Catmull joining the New York Institute of Technology to work on computer graphics research. In 1979, He and his team were recruited by George Lucas to form the Graphics Group. It specialized in the development of computers and software for computer graphics imaging. The Graphics Group was acquired Steve Jobs for $10 million in 1986 to form Pixar. The success story of Pixar will be presented using the 5 stages from a growth model suggested in a paper by Churchill and Lewis (1983, pp. 3-­‐6) and McKinsey’s Growth Pyramid Model. 2.1 Existence McKinsey’s Growth Pyramid Model suggests that a business grows based on developments of its privileged assets, special relationships, operational and growth skills. Pixar included hardware and software for computer graphics along with the 45-­‐
person team of researchers, developers and animators. According to McKinsey’s model, the technology acquired represents its operational skills and privileged assets (Tutor2U, 2011). 2.1.1 Pixar Image Computer The company’s’ initial focus was the production and sale of the Pixar Image computer due to Steve Jobs belief in its potential profitability. It was high-­‐end graphics imaging computer that was used for technical graphics but the market was limited and the device was expensive. During this period, Pixar faced bankruptcy because sales figures were low. It focused on developing its software to diversify its commercial offerings. It can be suggested that this was a development of its growth skills. 3 3 Applying Computer Graphics (CG) to Animation 3.1 Survival Pixar was surviving on funding from Steve Jobs and sales of its computers. Software research and engineering was producing positive results. 3.1.1 RenderMan In 1987, the graphic imaging software RenderMan was created. It revolutionized computer imaging by adding colour and texture (Hormby, 2007). This development encouraged John Lasseter, the head of the small animation unit to create a short film to demonstrate the capabilities of RenderMan. The short films positive reception led to Ed Catmull and John Lasseter recognizing animated motion pictures could be a viable commercial application of the technology. Sales of RenderMan licenses commenced in 1989 (Pixar, 2011). Sales of RenderMan licenses and creating animated advertisements became the business focus by 1990 after the Pixar Image Computer division was sold. RenderMan and its associated technology were the competitive advantage that the company had. At this time, the company was not profitable but revenue reached $3.4 million (Funding Universe, 2000). 3.2 Success Disengagement John Lasseter pitched the idea of creating a Christmas television special to his former employer Walt Disney Pictures. They were impressed with the short films and adverts that Pixar created and offered to co-­‐produce 3 computer-­‐
animated films. A full-­‐length animated film had never been created however this was potential market and the technology was mature. It was a major strategic move towards growth by diversifying the business and entering a new market. The deal formed a special relationship which allowed Pixar to have dedicated client and financier that could distribute their product to the widest audience due to Disney’s economies of scale thus eliminating a barrier to market entry (Porter, 1987). Furthermore, it can be suggested that in accordance with Ansoff Product/ Market matrix (Tutor2U, 2010). Figure 1: Ansoff Product/ Market Matrix (Wikipedia, 2006) This was a risky diversification attempt undertaken by both Disney and Pixar because they were going outside their areas of expertise. 4 Figure 2: Porters 5 Forces Analysis for Pixar circa 1991 According to Porters Five forces Analysis, the market was not intensely competitive this made it attractive. Furthermore, collaborating with the market leader eliminated a potentially aggressive competitor (Grundy, 2006). 4 Successful Commercialization The success of the collaboration will be analysed using leadership style theories, SWOT analysis and a description of the possible marketing mix of their first product. 4.1 Success Growth By 1995 Pixar had sold 100,000 RenderMan licensees and the company was profitable for the first time. In the same year, its first animated film Toy Story was successfully released with earnings of over $350 million in cinemas. Steve Jobs, the owner took the title of president when the company began growing. This can be related to the suggestion by Churchill and Lewis (1983, pp. 4-­‐5) that during this stage the owner is more engaged with the business. 4.1.1 Management and Leadership Steve Jobs was a laissez-­‐faire leader before this stage due to his focus on his profitable company Next Computer. In the long run, it allowed Ed Catmull and John Lasseter to pursue new opportunities (Elkund, 2008). One of the major factors in the successful commercialization of this technology was the organization culture and leadership (Rao et al, 2008). The owner, Steve Jobs funded the company but Edwin Catmull ran Pixar. He was a democratic leader throughout the previous stages. He constantly solicited employees’ input to improve the company (Montgomery, 2008). This allowed the animation unit 5 led by John Lasseter to emerge as the smallest unit of the business but the most profitable and commercially viable. It can be suggested this leadership style created a culture of “the fear of complacency” (Sims, 2010) .The company encouraged free communication of ideas, innovation and research (Catmull, 2008). 4.1.2 SWOT Analysis The partnership allowed Pixar to use Disney’s strengths for growth whereas it allowed Disney to gain access to emerging technology that could be beneficial but a threat to its animation division. Furthermore, the production Toy Story (1995) was more efficient than most hand-­‐drawn animated films. It cost $30 million whereas Pocahontas (1995) was produced for $55 million. Table 1: SWOT Analysis for Pixar and Disney circa 1991
6 4.1.3 Marketing Mix Successful commercialization can also be attributed to getting the marketing mix right. This was achievable due to the economies of scale that the Disney Company possessed. (The Chartered Institute of Marketing, 2009) Table 2: Marketing Mix for Toy Story (1995) 4.2 Take Off An Initial Public Offering of Pixar shares was made a week after the release of Toy Story. The partnership with Disney was extended to five films and a greater share of the films profits. RenderMan became an industrial standard and it is still developed and licensed. RenderMan sales increased after Toy Story’s release. . After initial deal was concluded, Disney acquired Pixar for $7.4 billion. 5 Conclusion This paper has presented an example of the successful commercialization of a software engineering product with an emphasis on growth strategies, management and leadership styles and organizational character analysis. Pixar achieved success by embracing emerging opportunities, evolution of its business focus and forming strategic partnerships through effective management and strategy development. Other factors that lead to success of this application of the C.G. technology were organizational culture and constant research and development. 7 6 References Catmull, E., 2008. How Pixar fosters collective creativity, Harvard Business Review, [online] Available at: <http://hbr.org/2008/09/how-­‐pixar-­‐fosters-­‐
collective-­‐creativity/ar/1>[Accessed 18 November 2011]. Churchill, N.C. and Lewis V.L., 1983. The Five Stages of Small Business Growth, Harvard Business Review, [online] Available at:<http://hbr.org/1983/05/the-­‐
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back-­‐into-­‐strategy/ar/1> [Accessed 18 November 2011]. Sims, Peter, 2010. What Google Could Learn From Pixar. Harvard Business Review Blog Network, [blog] 6 August 2010. Available at: < http://blogs.hbr.org/cs/2010/08/what_google_could_learn_from_p.html> [Accessed 20 November 2011]. Funding Universe, 2000. Pixar Animation Studios. [online] Available at: <http://www.fundinguniverse.com/company-­‐histories/Pixar-­‐Animation-­‐
Studios-­‐company-­‐History.html> [Accessed 15 November 2011]. Hormby, Tom, 2007. The Pixar Story: Dick Shoup, Alex Schure, George Lucas, Steve Jobs, and Disney. Tom Hormby’s Orchard, [blog] 22 January 2007. Available at: <http://lowendmac.com/orchard/06/pixar-­‐story-­‐lucas-­‐disney.html> [Accessed 18 November 2011]. Tutor2U, 2011. McKinsey Growth Pyramid. [online] Available at: <http://tutor2u.net/business/strategy/mckinsey_pyramid.htm> [Accessed 19 November 2010]. Tutor2U, 2010. Ansoff Product/ Market Matrix. [online] Available at: <http://tutor2u.net/business/strategy/ansoff_matrix.htm> [Accessed 19 November 2011]. Porter, M.,1987. From Competitive Advantage to Corporate Strategy" Harvard Business Review, May-­‐June (3), pp. 43–59. The Chartered Institute of Marketing, 2009. Marketing and the 7Ps [pdf] Available at<http://www.cim.co.uk/filestore/resources/10minguides/7ps.pdf>[Accessed 18 November 2011]. 8 Rao, N., Sutton, R. and Webb, A.P., 2008. Innovation lessons from Pixar: An Interview with Oscar-­‐winning director Brad Bird, The McKinsey Quarterly, [online] Available at: <https://www.mckinseyquarterly.com/Innovation_lessons_from_Pixar_An_inter
view_with_Oscar-­‐winning_director_Brad_Bird_2127#>[Accessed 19 November 2011] Pixar, 2011. Company info [online]. Available at: <http://www.pixar.com/companyinfo/history/89.html> [Accessed 18 November 2011]. Wikipedia, 2006. Diversification (marketing strategy). [online]Available at: < http://en.wikipedia.org/wiki/Diversification_(marketing_strategy) > [Accessed 18 November 2011]. 9 7 Appendix Figure 3: Business Opportunities suggested by McKinsey's Growth Pyramid Figure 4: Churchill and Lewis Growth Stages Model 3 10