What is happening to Animation industry in India?
Indian Animation Industry to Reach $1 billion by 2010! - Indiastreet.com,Feb 2008 -- A recent study conducted by Andersen Consulting states that the Indian animation industry is expected to reach $15 billion by 2008.- Financial Express July 2004 --India's animation industry seen at $1 bln by 2012 - International Business times, Aug 2009
Five years ago,If you turn any business newspaper, the above were common headlines. But today in 2010, do the industry folks feel that way or the market is seeing any kind of euphoria like it did in 2002...the answer is a clear and big "NO"...So what is happening, why there is a slow down and what is going to happen in the future..I would like to walk everyone in the animation industry to understand what is happening there and I hope this blog answers a few questions, clears some confusions and helps in some fresh thinking..
Let us take the case of Crest Animation, the company that I worked for and one of the few companies that was able to weather every possible storm..
Crest was a company of 18 - 20 employees when I joined in 2002..Crest was making pilots and trying to get an animation project from US..They had a VFX division handling Ads and movie VFX, an editing studio that catered to the TV medium and also, the same teams were working on an animation pilot..They managed to get Jakers! and soon started hiring people..The team size started growing from 20 - 100 in less than 1 year and it paid off decent dividends for Crest. They had some starting trouble in terms of developing a production pipeline for the TV series but after a few months they were delivering 4 episodes a month..The resources were motivated because they were the first to do some exciting work in the Indian market but the processes were very raw..The processes include the touch points between different teams, talent management, linking incentives to performance, skills audit, training, production planning, resource allocation etc...They were doing some ads, editing work, VFX just to manage the cashflow troubles in the initial stages but once the cashflows became stable, the management took a very important decision of Shutting down VFX and Editing divisions and they went to the extent of rechristening the company as "Crest Animation Studios"..
It is one of the best decisions the company made but at the same time, the decision takes the company into a serious commitment of walking in a very focused path which is right but you cannot walk back..It is only one way..From a model where they will make money from ads, editing, VFX and every possible industry, they moved into a new business model which is
Target Customers : Production houses in US catering to TV
Value Proposition : TV quality animation at a low cost
Profit proposition : Quick turn around employing low cost manpower and playing the volume game. More manpower, More Volume and in effect less time, acceptable quality, low cost.
Crest went on to deliver Pet Alien, a project that I led, Bratz and many such TV, DVD works..Their move from a doing everything to animation was very good but now their move from TV series production to movies is not good at all..As organizations mature, its capabilities migrate from Resources, to Processes to Values – With each migration step,organizations become more focused, aligned, efficient and simultaneously less capable of moving in new or different directions.
During their move from a small team doing everything to TV series production, the company used these other income sources to support the cash flow to fund the TV series production team and since most of the employees are from other companies, these external guys brought the much needed capability to fill the gaps. But now, they have a 400 member team and they are trying to migrate to the movies. They need some cash flow which comes through the TV series. so far so good..where lies the problem?
The problem lies in the processes and the values. We all understand what I mean by processes but Values are shaped by what gets prioritized and how decisions are made to support the high level strategy. From VFX/ads to TV series, they setup new processes and there wasn't much change in values required since both of them require them to prioritize delivery over quality. For example, even if a shot has a noticeable flaw that is caught in the editing table, it will still be sent because of the delivery commitments. The decision to send the tape on time wins over the decision to wait, correct the flaw and send it next day. This is what I call values and these are shaped by the high level strategy. But now the switch to movies involves moving a certain team to think differently, prioritize differently and take decisions to support the new strategy. You cannot prioritize the tape delivery over quality. Unfortunately, the company doesn't have mature processes and their values are still aligned to their low cost, high throughput strategy.
If Crest had cracked the code in designing effective processes that will help them to execute these high throughput, low cost projects with very low levels of uncertainty, then they would have prepared themselves for this new strategy. But as always, they are becoming victims of circumstances. What results is confusion for themselves and high uncertainty for clients.
I am surprised by how every new company that enters the animation space claim that they have 3 divisions : animation, gaming, IP. When each of them require different skill sets, different pipelines, different values, different prioritization, I am surprised that companies are still treading the same wrong path. Companies need to think how they can align their resources in support of these 3 different businesses and be honest in their approach. All these companies have to identify how they are going to make money and how they are going to make money on a sustained basis.
The industry has plenty of talent but it is limping because the management is thinking tactically and not strategically. They need to balance between urgent/unimportant decisions and not so urgent/important decisions. The urgent/unimportant things will help them to generate the cash flow whereas the not so urgent/ important things will help them to sustain in this business. R&D, production pipelines, processes, organizational design are the things that companies need to think of in order to identify new money making models and developing the strategic flexibility as the dynamics of the industry changes. They have to strengthen themselves at this level through superior processes, effective pipelines, continuous R&D and it is better to move up after setting a solid foundation. Otherwise, they will be lost in the day to day issues and loose the big picture..Achieving strategic flexibility between low cost strategy and high quality strategy takes lot of commitment and time.
I am planning to do a very detailed industry analysis and would appreciate if you can post your valuable comments that will help me come up with a much more refined analysis.
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