ULENCE, with Gary Loveman of Harrah's
Darn, no dancing girls. But lots of interesting information about the casino business... Harrah's didn't need more people to gamble more. Needed more people to gamble with them, a switching strategy. Had the customer promiscuity problem. Gary became the poster child for customer monogamy. Adopted a strategy of brand (no meaningful brand in the industry when they started out), service (an unusual business where most of your customers come in and lose...the losers build the buildings...so Harrah's set about to become great at service...[DMH aside: these precepts are again sounding a chord in the legal field; Gary told an anecdote about asking a customer how he was doing and getting the response, "Shitty!" Not an entirely unheard of reaction from those retaining legal services...]) and financial rewards/recognition, coupled with rigorous data management. Brand development: people come to casinos to take (safe) risks. Come for the feeling of anticipation about whether the risk will pay off. In '89 the US Supreme Court permitted the inside of a casino to be seen on TV for the first time. Harrah's was the first to show gamblers in a casino on TV. Service: great levels of service build loyalty. The enormously detailed information Harrah's collects from its best customers about their gambling/spending habits with its "loyalty program" enables it to directly track how changes in service affect those habits. Harrah's has paid every employee of every property some $15 million in bonuses if their property experiences 3% or better growth in revenues. Database management, mining: the patented methods Gary Loveman is explaining for collecting and using customer data are comprehensive, somewhat terrifying, and highly related to issues of digital identity.
BOTTOM LINE TECHNOLOGY: THE STRATEGY THAT WORKS
with: Larry Downes, Unleashing the Killer App: Digital Strategies for Market Dominance and The Strategy Machine: Building Your Business One Idea at a Time, Jeff Cohen, CIO, JetBlue, Tony Scott, CTO, General Motors, George Rimnac, W.W. Grainger Opening remarks from Larry Downes. IT as a competitive weapon for companies. Foolish to eliminate IT spending, but companies should try to zero out the IT budget by combining it with R&D. No reason to treat these distinctly, since there are too many interrelations. Concluding with three things to carry forward: open standards; object oriented architectures and techniques; and absolute separation of process, data and interface. George: our customer is a facilities maintenance management person, focus is closing the last five feet, concerning the products and services they need to solve maintenance problems. "Carry-on luggage" sized product catalog and specs made available for them in digital form. Jeff: customer surveys revealed the most important thing to the flying public -- over price and everything else -- was live TV. They took this to heart. They are the only airline with a fully paperless cockpit, the pilots all have laptops. Tony: importance of automating tasks you perform in the car, not to plug OnStar, but let's talk about it. Much to talk about regarding technology in cars. George: Grainger Auction was an interesting experience; it worked too well, conflicted with their brand image and the overall aims of the company. Tony: GM also tried auctioning inventory on the Web, mushroomed out of control so fast they had to rebuild it a couple of times as it scaled up. This was a case where something took off like crazy. GM was excited about cost savings, but it also revealed and filled a need for the dealers to have the right inventory of the lots when needed. Jeff: re.NET and our development process, we do much development internally. JetBlue does 65% of its business from its Web site. Its frequent flyer program was developed with.NET. They're careful about bringing Web apps to market because a user's first experience is a memorable one, and they want it to be the right one. George: If it would appear natural to a customer that you should be able to do it in a particular channel (Web, telephone), you'd better be able to do it in that channel. Q&A: Question for Tony re customization. Most of the major things tend to have cross-brand recognition. OnStar, XM Radio. The value is greater than what would appear in any one brand. Question for panel re notion of zeroing out the IT budget, is it really R&D. Tony says for GM it's tough to tell what is IT and knowledge infrastructure and what is product. Separation becomes harder and more arbitrary. GM is focused on taking cost out of their IT environment, but not at the expense of new development. They see the fruits of this every day. George says they're actually doing this already. Development and experimentation budgets not impacted, driving dollars out of operations and into development is helpful for them. Jeff has 27% of his budget devoted to R&D, and seven heads in charge of new development. It wouldn't matter to him to combine the IT and R&D budgets, makes sense. Question about whether these Cos will purchase technology from startups. GM is so massive. Who are you partnered with? They use a risk management approach: what's the worst thing that will happen if this fails? Some divisions have very low absorbtion for new tech -- "they just pull out the guns and shoot you." Others are way out ahead. JetBlue has much more flexibility to work with startups. [Couple questions I missed; saving up for a promised entertaining closing session with Gary Loveman of Harrah's...].
ACCOUNTABILITY: THE NEXUS OF STRATEGY AND ETHICS
With Clay Christensen, Andy Grove and Walter Kiechel. Where is Intel on its voyage today? Andy Grove: We are in the midst of a structural transformation in the computer industry. The Internet is redefining software, communication, interaction. People, including ourselves, made some horrible miscalculations. Computing is going to be subordinated to the communication task. Intellectual property created and stored in digital form is also an important shift. Computing subservient to the connection role, product lines need to be refined to reflect. Can no longer rely in a business model on the fact that content will be analog. Publishing, newspapers -- the whole ecosystem is affected. Turning to accountability: how do you respond to current concerns? Andy Grove is waiting for someone to come out with the new book, The Management Secrets of Tony Soprano. Tony's nemesis is Junior, his Uncle. Tony is constantly beset by management challenges. Their product is a little different than ours. Junior's advice to Tony is to take your bumps, make your mistakes. None of us has a real understanding of where we are heading. Investment, personal decisions don't wait for the picture to be clarified. Take your shot, clean up the bad ones later, bump of the managers you need to bump off, try not to get too depressed in the process. Try to keep your spirits up. How do you achieve that management of emotional response? Part of that is self-deception, and deception becomes reality. After a while if you act confident, you become more confident. Act on your temporary conviction, and when you realize you were wrong, address it. [Grove quips in response to a Clay Christensen question that he admires the sleight of hand of an accomplishe academic: when given a complex question he nods his head and puts another question back.] Christensen asks a follow up on the confidence issue. Comes in part from the confidence placed in you by your own staff, their assurance that your interest is the interest of the corporation. Secondarily, if you have founded a business, you understand it implicitly, it's in your skin. If you're an outside manager, knowledge of the business didn't get you where you are, so you have to derive your confidence elsewhere. Christensen: consider multidivisional companies like HP, Johnson & Johnson. Christensen is increasingly uncomfortable with their teaching model for MBA students. We exalt the virtues of data driven decision making; if a student posits something unsupported by the data, the instructor tears them to shreds. Maybe you can't teach intuition, but maybe you can. Grove: [I'm missing alot here; Grove's mic situation is less than great.] The leader needs understanding and confidence in his convictions. A degree from Harvard, whether you learn anything or not, is invaluable to your income stream. Christensen: present wave of corporate accounting scandals, consider in light of idea of principal-agent relationships "widely embraced by attorneys." Grove: The unstated supposition in your question is that stock options are the means to solve the agency problem, line up the interests of management and agents. People who own 20% of the company don't need to overcome any more hurdles before they confront the agency problem. When you look at the use of stock options, you get different pictures depending on how many options are given to whom. This is the variable that distinguishes how they work. Bit by bit, boards are moving in the right direction. Began acting as consultants, advisory bodies. Corporate governance principles are exactly the other way around. The pro forma statement of corporate governance and the real life version are diametrically opposite. There's a movement from the advisory body model to the corporate governance model is happening. Hard to say how fast, how far. In general, Chairman and CEO are the same (85% or so of time). Christensen: The data is always down in the company. Managers have to have intuition to find it, they know only what people choose to disclose. How to expect them to govern under those circumstances is a very big problem. Grove: There's