Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

Case study

Animation has always played an important part in the movie industry, both artistically and economically; totaling a gross figure of $12,306,782,376 over the past 15 years. The industry growth, and the actors involved reads as much as a fairytale as the iconic movies that they made. Alongside the industry, techniques too have evolved: from 2D drawings, passing by stop-motion, all the way to special effects and 3D computer animation. In this dynamic and creative environment a new player arose to become a giant among peers and a role model for others.

Pixar animation studios is well known for its multiple box-office films like Finding Nemo, WALL-E, Toy-story, etc. Its last six movies made over 3 billion dollars in worldwide receipts, earning the Pixar team 22 Academy Awards, four Golden Globes and three Grammys before its 25th birthday. The company also consistently ranks amongst the top innovative and most admired companies in the world. It is the combination of product and process innovation that drives Pixar to create something special, or as it was put by Walt Disney:

When art and technology come together, magic happens.

This case study will hopefully provide you with an answer to the following question:

But how do they do it?

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

The evolution of Pixar

Early days Ed Catmull was an engineer active in fysics and computer science. He applied his knowledge to develop computers that could generate animated footage. He eventual produced the first 3D animated footage of a moving hand used in a movie. This got the attention of George Lucas. Lucas wanted to use Eds talent to realize projected he could not realize with regular movie equipment and techniques. In 1979 Ed was asked to create a computer division within Lucas films that was focused on developing computers that enhanced the quality for graphic animation. This was called the graphics group and was the start of the company we now know as Pixar. To test their technology they offered John Lasseter a job. John was an animator who previously worked for Disney but got fired because of a discussion with his superiors about a 3D animation he wanted to launch. After John saw the possibilities of their new technology he accepted the job offer. John started making artistically graphic animations that constantly challenged the technology. As a result the engineers improved the technology to challenge the artists. Art and technology constantly challenged each other, which eventually ended in the development of the Pixar image computer. This was the most powerful graphics computer (speed en resolution) of that time. This computer was originally used for medical imaging and satellite photo analysis. But the animation team was really dedicated to making animation movies. In 1986 Lucas created a spin off and sold it to Steve Jobs for 5 million dollar. From hardware to animation When Steve Jobs visited the graphics group he saw the potential of the technology and bought the graphics group. He changed the company name to Pixar, after the graphics computer used to make the animations. Around that time John kept making short films as tech demos for the hardware. The most known is the one with the desk lamp Luxo jr. which eventually became the companys mascot. The short films became so popular that in 1990 questions came in to make animated commercials. Furthermore Pixar established a relationship with Disney. They used Pixars CAPS software to color in their animated movies and the Renderman software was used for special effects in movies. The entire R&D cost the company more money than it was bringing in. Disney partnership In 1991 Pixar got their big brake and their dreams of making a full-length animation film were fulfilled after Disney gave them a deal for one movie. The first is known as Toy Story. Pixar wanted to do something different than the usual Disney musicals and fairytales. They wanted a movie with an edge that was appealing to both children and adults. In 1995 Toy Story opened in theaters. It was a great success that got great reviews and brought up a lot of money. This determined the future direction of the company. Pixar became a production house instead of a studio. This required money so the company went public. Because of the success of Toy Story and the success on the stock exchange Disney wanted to extend the partnership. 2

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

Second product syndrome Pixar now suffered from the second product syndrome. Their first product was very successful but they didnt realize why. They now had to make a second product that had to meat up to the expectations. The second film became A Bugs Life. They managed to overcome the second product syndrome by innovating at several levels. For example they managed to animate a crowd of 400 ants. At that time crowd animations was limited to 50 entities. A Bugs Life was a great success and John decided to take a long break. In the mean while work on Toy Story 2 continued. This lead the company into a creative crisis. They couldnt get the movie at the level they wanted. John came back and noticed the crisis. Since they only had 9 months to the release date Disney said it was good enough. John however insisted on redoing the movie. In the end Toy Story 2 turned out to be a great success. The crisis illustrated that there was too much work to finish qualitatively. The company had to expand. Expansion They wanted to grow the studio so that they could release one film every year. This meant overlapping projects and required new directors. Pete doctor and Andres Stanton created Mosters Inc and Finding Nemo respectively. After four hits in a row the company wanted to come with something new in order to stay fresh. This difficult task was left to Brad Bird who was the first external director. He created The Incredibles which also turned out to be a great success. By this time Pixar had already revolutionized the animation business. 3D animation films were perceived as good films and 2D animation films as bad. Pixar as Disney subsidiary The Disney deal came to an end. Pixar and Disney argued over a new deal but Disney refused because Pixar was demanding a more equitable deal. Disney only did the management and distribution of the movies but did owe all the rights to the movies and their characters. Disney even wanted to make sequels without Pixars involvement. Jobs looked for new partners and the employees feared that Pixar would lose its creative culture if another company bought them. Pixar wanted to stay an independent company! Due to a change in management at Disney negotiations resumed between Jobs and Disney. The new board of Disney realized the importance of Pixar and saw the company as an essential part in Disneys future vision. In 2006 Disney bought Pixar for 7.4 billion dollars. Disney recognized the creative talent at Pixar and saw its unique culture as a success of the company. Pixar stayed an independent company under the Disney group.

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

The Pixar organization

Pixar is well known for its strong organizational culture, which has become a benchmark for other companies in the film industry and beyond. In fact Pixars organizational successes even attracted the attention of the US navy. It is their apparent lack of structure, which makes them so interesting. Nowadays the internal structure is divided into three parallel yet highly interactive divisions. The creative team is largely made up of artist, animators, actors and writers. They come up with the stories, the characters and also do a lot of the animation. John Lasseter, as Chief Creative Officer, remains at the head of this department. The technology department provides the animators with the computer-graphics tools and other solutions to the technical challenges that the company is faced with. This department is mostly made up of technically skilled employees, like engineers, IT-ers, programmers, physicists, etc. The filmmaking process is coordinated by the production department. These departments work on equal footing, none is judged to be more important to the success of the company than the other. According to Catmull (previously head of technology, now CEO), what makes it all work is that groups constantly talk to one another, with-out having to go through different hierarchical structures. This is the so called open-door approach and it means that for instance a producer of a scene can deal directly with an animator or a technologist simply by walking over there. This concept is further enhanced by the lay-out of the building and the many different side-activities on offer at the company. R&D within Pixar? The company does not operate an R&D department in the strict sense of it. However R&D, or innovation in general, is stimulated in every part of the organization, and is stimulated with every single employee. There are 4 specific innovative fields: the product, technology, production/process and the organizational level. The products, simply put, are the different movies, shorts and in the early days commercials as well. New technology however can be new hardware developed in-house, but most notable new software, since this touches at the core of the activities. These mostly result from the technological department where a flotilla of propeller-heads continually invent better technology to enhance the look of images. It is said that Catmull is the brain behind most of Pixars technical achievements, and his name is on many of the patents. However these innovations are not solely the brain product of the technological department since it is always a result of interaction with the different departments. Lasseter says about this balance: There's a wonderful yin-yang at the foundation of Pixar. The art challenges the technology, and the technology inspires the art. It's a drug. I mean, it just powers you on. Some examples of the most important examples are RenderMan an animation software packet-, and Procedural Animation -interactive animation of water, hair and fur, fabrics, crowds, etc New production methods are also key to the creation process. These facilitate the production process, rather than the graphic animation. Examples are: ODE an open-source physical simulator- and the CAPS system, which is the basis of 3D animation, sort of the engine that drives everything.

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

Another kind of innovation is the new organizational methods developed at Pixar. They organize production in new and efficient ways, for instance by including actors in the animation team, or by actively training all employees in the fields of acting animation, computer programming etc. They also pioneered the idea of screening unfinished work daily, to overcome personal embarrassment and spot mistakes and opportunities early on.

Although these techniques are protected by IPRs, Pixar has a long-standing tradition of sharing its advances within the broader CG community. Employees regularly submit scientific papers, or speak at industry events, other than that, also technological partnerships are common. A clear example of this is the publically available RenderMan product.

The Pixar environment

Community environment At the Technical Academy Awards 2010 in Hollywood, Catmull received an award for his lifetime of work in computer animations.i Though it is not so much his contributions to the actual computers animations that was most significant but Catmulls and his collaborators major improvements of corporate cultures. At Pixar, the corporate culture is defined by a community environment. Catmull describes it as suchi: *Pixar has+ an environment that nurtures trusting and respectful relationships and unleashes everyones creativitythe result is a vibrant community where talented people are loyal to one another and their collective work, everyone feels that they are part of something extraordinary, and their passion and accomplishments make the community a magnet for talented people Pixars culture is characterized by following five qualities: Inclusiveness reflects the relationship between senior management and Pixar employees. At Pixar, everyones work matters and everyone can make a difference. Engaged employees put more effort in their work, are more trusted and more cooperative. This all leads to productivity, quality and innovation.i The new office design by Steve Jobs (1999) stimulates interaction within and between management and employees. In the center of the building he created a big atrium area, with mailboxes, meetings rooms, cafeteria and bathrooms. This made it impossible not to run into the rest of the company.ii Furthermore, Pixar puts high emphasis on keeping team members involved by continuous communication. It is highly important to keep team members involved trough multiple meetings. Bird encourages employees to discuss work-in-progress among each other. Everyone should get humiliated and encouraged together. () The communication structure should be different than the organizational structure.ii

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

At last, constant development of Pixar employees is ensured by the Pixar University. Pixar University is an internal program of workshops, events lectures and seminars with which Pixar provides an opportunity for every employee---even accountants or security guards---to be trained with art and other creative skills.

Accordingly to John Lasseter, shorts are an excellent way to discover and incubate new talent as well as a testing ground for new techniques and ideas. A recent approach is that in April 2010, Pixar opened a new studio of roughly 2000 square meters in the downtown area of Vancouver, British Columbia, Canada. Producing shorts and TV-specials based on characters from Pixars feature films will be the primary missions of this new studio. Leaders its more than just what leaders do that matters, just as important is who leaders areii Innovation cannot happen without top managers commitment to innovation. Pixar is lucky to have one of the most successful senior team. With no doubt, John Lasseter has been making a huge contribution to Pixars corporate culture. The reason why Disney lost him in 1984 is the solution later the team tried to make breakthrough with. Ed Catmull, with more than 3 decades of devotion in
Lucasfilm(Pixar), is suck a geek that he came up with the idea of making computer-animated feature films earlier than any other one on earth. And with the special relationship with Apple, Jobs made diversifying in innovation of back-stage procedures easier to happen. In Pixar, they try to create an environment where

employees feel inspired to speak up, while at the same time, they are fully aware of the importance of innovation that they insist on adopting new techniques in making every new movie. the Disney environment Some analyst say that the Disney-Pixar acquisition was much more important to Disney than it is to Pixar. Disneys animation studio struggled to produce critical and financially acclaimed movies. With Disney films like Brother Bear (2003), Home on the Range (2004) and Chicken Little (2005) not doing as well as the box-office hits that were being produced by Pixar. Disney at this time was declining, they were still producing movies but were uninspired. Walt Disney was gone and the mentality at the Disney Studio was changing. As Brad Bird (a former Disney employee, now with Pixar) sums up in an interview with The McKinsey Quarterly: The companys thought process wasnt: We have all this amazing machinery. How do we use it to make exciting things? We could go to Mars in this rocket ship! But rather: We dont understand Walt Disney at all. We dont understand what he did. Lets not screw it up. Lets just preserve this rocket ship; going somewhere new might damage it. Walt Disneys motto for making movies has always been, We dont make movies to make money. We make money to make movies. This is a good quote to illustrate the difference between Disney at its high point and Disney when it was lost. For imagination-based companies to succeed in the long run, money cant be the focus.

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

With Disney gaining all the creative talent and culture behind Pixars success, Disney would gain the necessary push in creativity it had lacked in the recent years. Disney would benefit from adopting the Pixar culture. So a steering comity was set up, consisting of Catmull, Lasseter, Jobs, Iger (Disney CEO), Tom Staggs (Disney CFO) and Cook to maintain and spread the Pixars culture within Disney. Until now, the merger of the two organizations seems to be going well as shown by their continued success in producing hit movies including, Ratatouille (2007), WALL-E (2008), UP (2009) and Toy Story 3 (2010). It seems that the Disney-PIXAR merger is bringing the spark back into the Disney corporate kingdom and not the other way around.

Questions
Q1: You are a Disney executive, who was asked to independently scrutinize Pixar. The Disney board wants to find out what the Pixar organizational history looks like. Describe the evolution, from start-up to take-over and after. And add your advice on how Pixar should be allowed to evolve within the company, and will the involvement with Disney lead to red tape crisis? (separation integration, organization structure, product-process development,) Q2: What are the specifics about this company culture? Is it different from Disney, and how did they influence each other? Who are the different Pixar leaders, what do you think was their management style?

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

Exhibit 1: Top grossing animation movies 1977-2011 RANK

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

MOVIE
Shrek 2 Finding Nemo Toy Story 3 Toy Story 2 Shrek Shrek the Third Monsters, Inc. Toy Story The Incredibles Up Cars A Bug's Life Despicable Me WALL-E Ice Age Shrek Forever After Madagascar Happy Feet Ratatouille Kung Fu Panda Ice Age: The Meltdown The Polar Express How to Train Your Dragon The Simpsons Movie Monsters vs. Aliens

STUDIO
Dreamworks SKG Walt Disney Pictures Walt Disney Pictures Walt Disney Pictures Dreamworks SKG Paramount Pictures Walt Disney Pictures Walt Disney Pictures Walt Disney Pictures Walt Disney Pictures Walt Disney Pictures Walt Disney Pictures Universal Walt Disney Pictures 20th Century Fox Paramount Pictures Dreamworks SKG Warner Bros. Walt Disney Pictures Paramount Pictures 20th Century Fox Warner Bros. Paramount Pictures 20th Century Fox Paramount Pictures

RELEASE DATE
5/19/2004 5/30/2003 6/18/2010 11/19/1999 5/18/2001 5/18/2007 11/2/2001 11/22/1995 11/5/2004 5/29/2009 6/9/2006 11/20/1998 7/9/2010 6/27/2008 3/15/2002 5/21/2010 5/27/2005 11/17/2006 6/29/2007 6/6/2008 3/31/2006 11/10/2004 3/26/2010 7/27/2007 3/27/2009

TOTAL GROSS
$441,226,247 $339,714,978 $415,004,880 $245,852,179 $267,655,011 $322,719,944 $255,870,172 $191,796,233 $261,441,092 $293,004,164 $244,082,982 $162,798,565 $251,513,985 $223,808,164 $176,387,405 $238,736,787 $193,595,521 $198,000,317 $206,445,654 $215,434,591 $195,330,621 $181,993,393 $217,581,231 $183,135,014 $198,351,526

*Pixar-movies in partnership with Disney. Exhibit 2: Pixar within Disney

The Walt Disney Company

Cosnumer Products

Parks & Resorts

Studio Entertainment

Disney-ABC Television Group

ESPN, Inc.

Disney Interactive Media Group

The Walt Disney Studios

Buena Vista International

Walt Disney Studio Home Enterntainment

Disney Music Group

Disney Theatrical Productions

Walt Disney Motion Pictures Group

Walt Disney Pictures

Touchstone Pictures

Hollywood Pictures

Disneynature

Marvel Studios

Animation

Walt Disney Animation Studios

Pixar

Disney Toon Studios

Skellington Productions

CEO: Edd Catmull

Case study Pixar

Wout Bogaerts, Anneleen Vanhoudt, Mengchen Liu, Yoeri Artemieff, Aditya Nur

Exhibit 3: Pixar production pipeline

i ii

http://www.michaelleestallard.com Rao H., Sutton R. and Webb A. P. (2008) Innovation lessions from Pixar: An interview with Oscar-

winning director Brad Bird. The McKinseyQuartely