Keep Your Crises Small

If you are blind to obvious problems, you’ll probably fail.

Companies fail when they don’t see the obvious,” Ed Catmull, co-founder of Pixar Animation Studios told his audience at Stanford Business School. He described how his company worked to identify and even celebrate problems to ensure that it didn’t meet the fate of failed firms such as Silicon Graphics or Evans & Sutherland.

Catmull asked his audience two questions: how companies can avoid failing and whether it’s more important to bring in great people or to have great ideas. In 1991, Pixar was a young company when it worked with Disney to create Toy Story. Pixar compensated its artistic and technical staff members equally, and they were honest with one another out of necessity. This allowed them to discuss and tackle problems.

Pixar’s process involved daily reviews of incomplete...