Bob Iger on the Importance of Risk-Taking in Business

For Bob Iger, chairman and CEO of The Walt Disney Company, the fusion of curiosity, creativity, and candor with an acceptance of risk and an ability to learn from mistakes—will carry you up the exponential growth curve to extraordinary business success.

“Anything that is new and different is risky but necessary.”

You’ve likely heard that great white sharks die if they stop swimming. This is especially the case in the mediasphere, where the constant threat of disruption means that even empires like Disney must, in the words of everyone’s favorite blue tang fish, “just keep swimming.”

If you’re running a business that refuses to change with the times—maybe that means forgoing an electronic Point of Sale system in your restaurant, or maybe it means turning a blind eye when your overhead costs get too high—you’ll find yourself fast-tracked to extinction. Stasis equals death. You have to know how to evolve.

To do that, you must be comfortable embracing risk, and with it, failure. Yes, failure is inevitable — and that’s okay.

“I think the worst thing that can happen to anyone who’s managing a creative process is to either withdraw or to get conservative after you've had a failure.”

In the wake of failure, it’s easy to see the allure of regressing to something tried-and-true, but at some point, even your safeguards are bound to fail; someone else is going to come up with a fresh idea and leave you in the dust. Bold business leadership requires a tolerance for risk and the fear of failure and, perhaps most importantly, a capacity to forge ahead in the wake of defeat.

• Get the lay of the land. Before you put your business (or your bank account) on the line, do your homework, and make sure you’re proceeding with caution. Take calculated risks. Assess them carefully. As Bob emphasizes, thoughtfulness is as important to leadership as courage is. Careful study and calculated decision-making are what reduce the likelihood that your risks will blow up in your face. You have to do the cost-benefit math.
• Know thyself (and thy brand.) Healthy risk-taking is about coming to the table as educated and informed as possible—eliminating as much of the risk from risk-taking as you can. It’s a balancing act. You have to know the core values and identity of your brand in order to assess how a bold move could bolster or damage its perception with consumers. Embrace risk, yes, but successful entrepreneurs become an expert in the realm of their area of risk-taking first.

Making motion pictures is a business of ups and downs. It’s nearly impossible to predict what will be a hit with audiences and what will flop. The goal, of course, is to keep profit margins (essentially, sales revenue minus costs) as high and steady as possible. “Throughout most of modern history, movie studios have considered it a good year when their profit margins exceed 10 percent,” writes Ben Fritz in the book The Big Picture: The Fight for the Future of Movies. Even now, few studios excel beyond that, with one exception: Disney.

• Cast as wide a net as possible. Disney’s initial approach to this problem meant making a broad slate of many types of films at various budgets in hopes that a few of them would be breakout hits.
• Tighten the focus. Bob’s solution was to narrow the studio’s focus to recognizably branded movies and nothing else. It took a few years and a few misfires, but by dramatically reducing Disney’s number of releases, Bob honed the studio’s focus, and allowed it to delivered products calibrated to align with the specific brand identities of Disney’s various assets. In short, he found a way to nearly eliminate risk in one of the most unpredictable businesses out there.

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