Sitting on a curb with their three children one humid afternoon in October inside Magic Kingdom, the oldest of Walt Disney World's four Orlando theme parks, Jeff Pawlowski and his wife were in a sour mood. Long lines demanded waits of as long as two hours at some rides inside the 47-square-mile fantasy extravaganza, and the lines at the food stalls and restaurants weren't much better. "Today has been the worst," Pawlowski complained. His wife agreed: "Our neighbor came home from Disney on Friday and said there were no lines. We came here on Saturday, and it's not what we expected."
The Pawlowskis aren't alone. Throughout the amusement park industry, long lines, fidgety crowds and high ticket prices continue to rank as the top customer turnoffs. Meanwhile, Disney's theme parks have been particularly hard hit by sliding attendance figures and decreasing revenues. Bob Iger, Walt Disney Co.'s president and COO, told securities analysts on Nov. 20 that the Parks & Resorts division took in $6.4 billion in revenues in the year ended Sept.30, 1 percent less than 2002's $6.5 billion, which was already down 8 percent from 2001. Iger blamed the sluggish performance on lower hotel occupancy rates and a further decline in attendance, which had already fallen 14 percent, to 37.7 million, in 2002, from a peak of 43.2 million in 2000. Analysts say international visitors are staying away, thanks to the flat global economy, rising anti-American sentiment and a continued fear of flying since the Sept. 11, 2001 terrorist attacks.
Ticket prices aren't helping: They've risen 20 percent since 1998, and at $52 per person per day, they're already at the psychological limit of what consumers are willing to spend for the theme park experience, say some analysts. Disney has cut ticket prices by up to 42 percent in some cases this year in an effort to drum up more business. That's stemmed some of the attendance erosion, Disney executives say, but it hasn't done much to the division's operating income, which fell 18 percent in fiscal 2003, to $957 million from $1.2 billion in fiscal 2002.
At the same time, Disney's costs continue to rise: Analysts say insurance premiums have nearly doubled since the Sept. 11 terrorist attacks, and health care and pension costs for the company's 54,000 employees in Orlando alone cost the company nearly $250 million in 2003. Analysts also note that capital expenditures for the parks were down significantly in fiscal 2002. That's exactly the cost-conscious environment that prompted Roy Disney, nephew of founder Walt Disney, to refer, in his Nov. 30 letter of resignation from the company's board of directors, to "the timidity of [the company's] investments in our theme park business."
Click here for an interview with Walt Disney Co.'s CIO Roger Berry and Director of IT for Walt Disney World Andy Schwalb on CRM convergence.
Clearly, the goal for now is to do more with less. And Walt Disney Co. CIO Roger Berry is at the center of that mandate—but not for all the usual reasons. To help Disney usher in what Disney Chairman Michael Eisner has called the company's "digital decade," Berry has been helping to create a risky but cutting-edge technology strategy designed to help Walt Disney World restore the luster of its aging brand, increase efficiencies and boost attendance—as well as the bottom line. Berry's mission: to use Walt Disney World as a test bed for one of corporate America's most ambitious tryouts of the business use of IT convergence—the combination of global positioning satellites, smart sensors, wireless technology and mobile devices, including one that looks like Mickey Mouse himself—to reinvent the customer experience, influence visitor behavior and ease crowding throughout the parks. The goal: to reduce the hassle for visitors to the park by creating a more personalized environment, with IT at the core. "The role of IT is changing," says Berry. "It's not simply an organization that deploys technology, but one that now integrates technology from a lot of different angles to improve the customer experience."
Next Page: Leading by the nose.
Leading by the Nose
For now, the most visible manifestation of the new strategy is a 10 1/2-inch-tall stuffed doll called Pal Mickey. With a powerful infrared sensor in its nose, the doll acts as a virtual tour guide, providing tips on which rides have the shortest lines and information on events. How does it work? A zipper in its fur conceals a central processing unit, an internal clock, small speakers and a tiny infrared sensor. When the doll is carried into the park, the sensor receives a wireless data upload from one of the 500 infrared beacons concealed in park lampposts, rooftops and bushes, which transmit information from a Disney data center. The signals let Pal Mickey know that it's time to "tell you a secret," says Bruce Vaughn, who led the Disney R&D team that developed the doll's prototype. When the doll receives a new piece of information from a nearby beacon, it giggles and vibrates to indicate that it has something new to say. Squeeze its hand or stomach and it will tell you about an upcoming parade, a shorter line at another ride, or trivia about the area of the park you're walking through.
With more than 700 prerecorded message variations, Pal Mickey always has something to say, whether it's telling a child a corny joke or keeping kids entertained with interactive games while they wait in line. The product was designed for kids, says Michael Colglazier, vice president of operations strategy and technology at Walt Disney World, but "when we tried it out on kids in test research, they'd hear Mickey, and then they'd put him up to their mom's or dad's ear." Vaughn says Pal Mickey also tested favorably on a majority of adults "because suddenly they felt some of the pressure being lifted of having to know everything [about the parks] and make sure they weren't missing anything."
Technologists speak of Pal Mickey as an experiment in bridging the gap between static data about a customer and the customer's dynamic behavioral preferences, which depend on the customer's physical location and movements at any given time. In other words, it's all about dynamically matching data with context—a new concept and the next big development in the evolution of CRM, in the view of futurist Paul Saffo, research director of the Institute for the Future in Menlo Park, Calif., a technology think tank. C.K. Prahalad, the Harvey C. Fruehauf Professor of Business Administration at the University of Michigan Business School and coauthor of The Future of Competition (due out in January from Harvard Business School Press), agrees. "Disney is experimenting with a customer strategy that goes beyond today's CRM," he says, "using not just the data, but data in the context of individual customer behavior."
The subject of location awareness makes some consumers skittish about the potential for privacy abuse. Indeed, some skeptics warn that such persuasive technologies cross the privacy line, especially when they appear to be friendly. "Is it potentially creepy? Yes," says B.J. Fogg, director of Stanford University's Persuasive Technology Lab. "But because Mickey Mouse is the interface for customer interaction and has such credibility with people, Disney can do things with persuasive technology that probably a Microsoft or a WorldCom could not."
Disney executives acknowledge that there was some worry that Pal Mickey might be seen as a customer tracking device—more of a Big Brother than a trusted tour guide. But Disney insists that as they consider how to make Pal Mickey even more interactive, the intent is to help parkgoers customize their Disney experience for maximum value and convenience. In any event, says Berry, Pal Mickey isn't a collector of personal data. "We push data out to Pal Mickey," he says, "we don't pull anything back." Like other companies, adds Colglazier, "we have other ways of collecting [customer] data."
For now, Disney is betting customers will see Pal Mickey as a convenience. The doll's ability to surprise parkgoers with relevant information in real time—to have Pal Mickey tell you as you're walking through Adventureland, for example, that "pirates are sneaking around," and then to turn a corner and spot Captain Hook and Smee signing autographs for a group of children—has proven to be more of a delight than a cause for alarm over privacy. Already on sale is a Spanish-speaking Pal Mickey, and other languages are being considered. There's also talk of creating other "skins," such as a Pal Minnie or Buzz Lightyear.
Next Page: Data-driven dollars with Destination Disney.
