Q&A With Disney's Patrizio: Digital Content Is The Future

The Walt Disney Co. may be all about entertainment, but IT is a core part of its business strategy. One sign of its commitment is the recent appointment of Tony Scott, longtime chief technology officer at General Motors Corp., as Disney's CIO and senior VP.

As a distributor of entertainment in many forms, Disney puts a lot of focus on its supply chain. On April 1, InformationWeek associate editor Laurie Sullivan caught up with Bill Patrizio, senior VP of strategic sourcing and procurement for Disney. Patrizio talked about the dangers of enterprisewide standardization, Disney's new CIO, preparing for the growth of digital content, and how consumer demands will change the supply chain.

InformationWeek: What changes are under way at Disney in the areas of sourcing, procurement, and supply chain?

Patrizio: About five or six years ago, Disney established the Strategic Sourcing and Procurement organization, with the role to connect corporate and all of Disney's businesses. At the direction of Tom Staggs, our senior executive VP and CFO, the division was to work with the businesses in pursuit of operational effectiveness through the smart application of supply-chain management. This includes sourcing, procurement, inventory management, warehousing, transportation and logistics, customer fulfillment, and call-center management.

During the last several years, there has been a bevy of initiatives across the enterprise that complement and support the strategies for each business. The impetuous has been executive management's recognition that world-class companies at all levels adopt this culture of operating effectiveness and efficiencies.

InformationWeek: Is Disney standardizing processes across all businesses?

Patrizio: Given our diversity, we are not a homogeneous company. We are in broadcasting, cable, theme parks, Internet, and the cell-phone business. To strive for standardization across the enterprise is not a wise endeavor, because it doesn't acknowledge the unique individual business strategies and processes within the groups.

That said, we leverage functions across the businesses. An example is call-center management. During the last several years we've been working to converge our call-center assets, activities, and business processes to better integrate the information from customer contacts and drive lower costs and efficiencies.

If a consumer is calling Disney because they want to buy a Pooh plush toy or for a reservation at Walt Disney World, they don't care if it's a common call center leveraging common processes and systems. They only care that the customer service is great and the agent on the other end of the telephone has all the information about the Pooh plush toy or vacation packages. It's a delicate balance to give our guests a positive experience [while] leveraging supply-chain assets, processes, and systems to drive enhanced experiences, costs out, and efficiencies up.

We are pursing standardization where it makes sense, and, given the nature of our business portfolio, to do it at an enterprise level would be counter to our business strategy.

InformationWeek: What is an example of a major supply-chain business process that has changed or will change?

Patrizio: I will give you two. The first is an example of something we've done during the last couple of years in Europe for our studio-entertainment and home-entertainment business.

The business imperative was customer service, fulfillment, and getting product into retail stores as quickly and efficiently at the lowest possible cost. Historically, in Europe we had operated through a country-specific manufacturing and distribution model. The United Kingdom, Germany, France, Italy, and Spain all had their own four-walled supply chain from manufacturing through distribution to fulfillment and retail. There were inefficiencies associated with the model, specifically in duplication and overlap and inventory levels.

We now have a Pan-European approach. We have a single supply-chain partner that provides manufacturing, warehousing, distribution, and services across the continent. We've migrated our internal systems to a single supply-chain system, as opposed to every country having its own.

The second example is a supply-chain business process that will change based on a new technology that's emerging. As the technology and the economics of that technology change, it will have a dramatic impact on our supply chain.

I'm referring to digital cinema. In today's world you go to a theater to view a piece of 35-millimeter film that uses an intense light source behind it to project onto a big screen. The notion of shipping, warehousing, reclaiming, restoring, and destroying reels of film will one day, potentially sometime in our lifetime, become obsolete.

This will happen in favor of a digital system where everything from the way the camera captures the image, through the method the content is edited and cut into a final product, to the manufacturing process for distribution, which will most likely occur on DVDs, distributed through satellite or another form of terrestrial distribution. [It's] all to be determined. It will have a dramatic impact on supplier relationships and infrastructure supporting all that supply chain.

InformationWeek: How does Disney's transformation fit in with Tony Scott's mission to review all the IT systems across all businesses?

Patrizio: They complement one another. I wouldn't want to speak for Tony, but he joins us at a very interesting time in our evolution, as technology is significantly impacting so many aspects of our company. Tony will play a very important role to architect how we take advantage, leverage, and utilize technology to generate future forms of competitive advantage for Disney.

InformationWeek: What types of systems has Disney invested in?

Patrizio: In the supply chain, sourcing and procurement areas specifically, we have leveraged a companywide investment in SAP as the enterprise-resource-planning platform for financials, and it has a number of supply-chain implications. We use the electronic catalogs with suppliers and electronic invoices and purchase orders, as opposed to traditional methods.

InformationWeek: What has been your biggest supply-chain challenge in sourcing and procurement across the business units?

Patrizio: The biggest challenge we've been confronted with, preparing for, and have every expectation we'll be successful in is how technology will dramatically change the way consumers worldwide will enjoy entertainment content. Consumer expectation and demand for entertainment on how, where, and when they get it is changing dramatically. There are direct implications to the supply chain as a result of new devices and expectations [for] immediacy the technology is creating in the mind of the consumer.

Many of the traditional supply chains we've known will become subject to future reinvention. Being prepared and making certain we're in the best position to maintain Disney as a leading entertainment company is probably the largest and most macro challenge as a supply-chain professional this company is confronted with.