Archive | March, 2010

The house that Phil built

31 Mar

One of the most impressive elements of Gary Loveman’s rise to leadership at Harrah’s, outlined in Stanford Graduate School of Business case OB-45, is the legacy of Phil Satre.

Phil and his wife live here in Reno, in a gorgeous house designed by an architect I know, Mercedes de la Garza. I used to work with Phil’s daughter. I have friends who are friends of Phil’s wife, Jennifer. I see Phil at events around town. So this case has an element of “Wow, I sort of know these people!”

To me, this case is a testament to Phil’s leadership, which set Loveman’s story in motion. At the time Loveman joined Harrah’s in 1998, Satre had already been with Harrah’s 18 years. He grew the company from a casino giant in Reno only to a casino giant across the U.S.

Satre’s strategic insight was brilliant, such as his recognition that competing on the basis of fancy buildings means you’re always going to need significant capital upgrades. Satre also recognized the need to expand nationwide beyond Reno, Las Vegas and Atlantic City to minimize the economic vagaries of a limited number of markets.

Phil knew that his marketing program was producing less than it could, and needed to change. At the same time, he recognized that the company was sitting on a rich data mine of information. These two insights led to a fateful conversation with Sergio Zyman*, the decision to create a dual COO/marketing position and the eventaul hiring of Loveman to fill that role.

Throughout the case, it’s clear that Loveman’s early success was directly attributable to Satre. The staff trusted Satre, and therefore trusted his choice of Loveman, a decidedly unconventional choice.  In fact, Satre was apparently so revered that he hired Loveman without even consulting the board first. Because Satre had built a functional organizational culture, the leadership team seemed to understand that if Satre felt the company needed Loveman, well, the company must really need him.

Satre describes the role of CEO in an organization the size of Harrah’s as “identifying quality growth opportunities.” Loveman has more than proved he can stand on his own merits, completing significant acquisitions in the time since, including that of Caesars, and growing the company to $9 billion in revenue and 85,000 employees.

But it’s the Phil Satre story that set it in motion.

* In 1999, just after he left Coke, Sergio Zyman wrote a book called The End of Marketing as We Know It. I bought it then, but never read it. It’s been sitting on my bookshelf ever since. With the explosion of the internet as a marketing tool circa 2000, his book seemed like it might be dated, so I ignored it. After reading this impressive tale of Zyman’s prescience, I’m going to pick it up again. And one insight from his 1999 book is certainly correct:  Zyman “believes that the old-style marketing of Madison Avenue is dead, that it no longer has the ‘ability to move the masses.’ that in today’s ‘consumer democracy’ there are simply too many choices.” Well, he’s been proven right on that count.

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Lessons from Loveman

31 Mar

One aspect of reading business cases I enjoy is assessing the present tense of the company and reviewing the effects over time. What have the programs or principles reviewed achieved for these companies today?

At the time of Gary Loveman’s Harvard Business Review Best Practice article, Diamonds in the Data Mine, and the Stanford Business School case, both of which were published in 2003, Harrah’s was a $4 billion company with 43,000 employees. In the eight years since, the company has more than doubled via acquisitions. Today, Harrah’s is an almost $9 billion company with 85,000 employees. There’s a slight irony to Loveman’s opening jibes in the article at the mega casinos with the mega malls, as Harrah’s now owns Caesars.

No question Loveman is a brilliant strategist, analyst and marketer. A few nuggets I found especially wise:

  • Evaluating the customer’s worth over time. This would naturally create a huge motivation for marketing, operations, food and beverage and other departments. While the long-term value is probably not bookable from an accounting perspective, internally it could certainly be treated as such.
  • Creating a tiered reward system, and letting customers see what others are getting. This also helps mitigate any negative perceptions about wait times and service. “My check-in line may be slow, but not all service is bad at Harrah’s. Look at how fast that preferred customer line moved.”
  • Playing patterns and data driving the placement of slots on casino floor. This avoids the “tyranny of experts” – the operations guy or the architect who are convinced they “know” what slot placement works best, when really their evidence is nothing more than personal experience and preferences.

I’m a long-time marketer, with experience in advertising, direct mail and web campaigns. Loveman is absolutely correct: Many companies design the marketing strategies first, then adjust the data to suit. In fairness, however, it’s often the lack of a data mine at the outset which leads to this approach. Often, the marketing program is used to build the database — for example, buying a direct-mail list of hypothetical customers, and then tracking response to marketing efforts.

The marketing lesson I’ve adopted from Loveman, along with Pfeffer and Sutton’s Evidence-Based Management:

  • Hypothesize based on your marketing strategy and available data
  • Develop a rule
  • Test data
  • State conclusion
  • Implement program and test again, or adjust hypothesis and test again

Loveman’s data mine is larger now by orders of magnitude. Wonder what diamonds he is discovering now?

Evidence-based management: My No.-1 top hit

29 Mar

Evidence-Based Management, a Harvard Business Review article by the legendary Jeffrey Pfeffer and Bob Sutton, should be enshrined in the B-School Pantheon, if there is such a place. Out of the articles and cases we’ve examined so far, this one tops my “most influential” list.

The business world is full of bluff and bluster. Everywhere from books to blogs, authors, consultants and charlatans are proposing this essential business principle or that. And the average beleaguered manager gamely goes along, seldom questioning whether there is really evidence to support this latest and greatest, and whether the “evidence” presented holds up to scrutiny or is even applicable to his company.

An example from my own experience: Back in 2000, AOL executives wanted to meet with my company’s CEO to pitch an internet advertising package. Normally, no media pitchperson ever met with the CEO – they were immediately routed to the experts in our department. We evaluated the merits of these sorts of pitches day in and day out. But AOL was about to buy Time Warner and was the hottest thing in business at that moment, the Google of its day. The AOL salespeople used this leverage to get a meeting with the CEO, and we ended up buying an expensive package which also happened to be ineffective. This purchase wasn’t made based on the evidence we usually applied to assess proposals, but on two of Pfeffer and Sutton’s six substitutes for evidence: mindless mimicry and hype.

Evidence-based management requires a change of thinking, a critical eye. To become an evidence-based manager, Pfeffer and Sutton suggest four habits:

  • Demand evidence – develop data and metrics to support your decisions
  • Examine logic – “What would have to be true if this idea were going to be effective?”
  • Treat the organization as an unfinished prototype – run trials, tests and experiments
  • Embrace the attitude of wisdom – appreciate how much you don’t know

To illustrate, here’s a great hypothesis about lack of evidence for social media building closer relationships, as posted on HBR last week. Quite honestly, I find Pfeffer and Sutton’s article so rich that even after three readings I am having a hard time cogently parsing it in one meager blog post. I’ll pore over it for years to come.

How learning occurs

29 Mar

The stars have aligned. So have the planets. And it is good.

I’m currently taking two MBA courses, Statistics for Decision Making and Management and Organizational Science. And there is nothing more joyous when there is randomly occurring synergy between the two. Or perhaps it’s not random?

This week, we began hypothesis testing in Statistics. We are formulating our hypotheses, then testing to see if we should accept or reject the null. And what are we reading in Management this week? Good to Great, or Just Good?, an article by Bruce Niendorf and Kristine Beck. Their article uses this very same statistical methodology to examine if there is any evidence that the five management principles identified by Jim Collins in the mega-bestselling business book Good to Great actually produced stellar results.

According to Niendorf and Beck, Collins’ “evidence” doesn’t hold up on multiple levels. First, he used data mining incorrectly. Collins found patterns in the data, but he failed to test his patterns once he found them. Second, he identified an association between the “great” firms and his five principles, but he failed to establish causation. When debunking medical myths on his radio show, the great Dr. Dean Edell explains causation to laypeople as follows: People eat carrots, and people get in car accidents, but that doesn’t mean carrots cause car accidents.

Collins developed the five traits AFTER he examined the companies, rather than developing the traits first and exploring if the companies matched. From that perspective, couldn’t he write the traits any way he wanted to make them “work” for his selected companies?

Niendorf and Beck used the same methodology I used to solve six Statistics homework problems last night: They identified a theory, set up hypotheses, and then sampled, tested and drew conclusions. Learning in action!

Better late than never: Nevada Interactive Media Summit mini-cap

25 Mar

I attended the Nevada Interactive Media Summit for the first time oh, almost three weeks ago, and I’m just now getting around to posting something. I picked up lots of new sites/applications to try, although I realize that may not be everyone’s cup of tea for learning from an all-day event. (In fact, another attendee made a complaint to that effect.) I’ll be interested to see how this event morphs going forward to meet the needs of its audience. It was great to meet Eric and Ashley Jennings of Loopshot, since I had just admired their custom CMS work for the Nevada Museum of Art via a Brad Bartlett presentation at an AIGA Reno Tahoe meeting. Love how the NMA site’s entire color scheme changes as a function of the temperature gauge in the upper-left-hand corner!
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One of the richest app-heavy presentations at NIM was from Colin Loretz and Annie Vranizan. I’m always looking for a better to-do list — due to my switch to Android, I still mourn the loss of my Palm Date Book Plus calendar with floating events. I’m eager to try TeuxDeux (OK, the cutesy name got me) and Ta-Da List, among others. RescueTime is amusing — it tracks what software and web sites you’re using and how much so you can cut out the time sucks. Uh-oh!

More from Colin and Annie:  50 Apps to Fuel Your Online Business

Bryan Landaburu was also heavy on app recommendations. Amazing — there are now low-end options for heat maps, such as Crazy Egg and AttentionWizard. See his subheads on Testing and Analytics for more: Modern Marketing, Simplified from Nevada Interactive Media Conference 2010

The dangers of insularity and the perils of group think

24 Mar

One of the dangers of insularity: It’s always easier to spot it after the fact, or for outsiders to spot it. The people directly afflicted never seem to see it.

A Canadian news media analysis, INDEPTH: IRAQ United States Senate Select Committee on Intelligence: report on pre-Iraq war intelligence, calls up the dangers of insularity.

According to the article, the  U.S. intelligence community suffered from “collective group think” leading up to the Iraq war, causing it to interpret ambiguous evidence as conclusive proof of WMD programs. While making a decision based on sketchy evidence might be acceptable in business from time to time – for example, public relations practitioners sometimes have to respond with little evidence, and physicians often rely heavily on their prior diagnostic experience – it has no place in high-level diplomacy and military strategy.

The Senate Select Committee on Intelligence developed more than 100 conclusions in its report on intelligence failures in Iraq, eight of which are singled out in this news report. Conclusion 5 blames analytic and collection failures on intelligence community managers who did not adequately supervise the work of their analysts and collectors. Geez! If managers won’t challenge the assumptions of employees, who will? This conclusion dovetails nicely with the article we just read on product-development teams: You need skeptics and questioners on your team.

The events behind this article are the basis for the new Matt Damon vehicle Green Zone, which depicts the immediate aftermath of this intelligence failure, when WMDs were nowhere to be found in Iraq. (Sadly, Green Zone is not a great flick, although Damon’s always good. Should we be concerned that the top Google results for Green Zone are for the movie?)

This article reminds me why I want to read Rajiv Chandrasekaran’s Imperial Life in the Emerald City soon, which provides an inside view of life in Baghdad’s Green Zone. I hope we never fail this colossally again.

Fake it ‘til you make it

22 Mar

Too often in life, the knowing-doing gap – as defined by Stanford Business School Professors Jeffrey Pfeffer and Bob Sutton – can be traced to “a basic human propensity: the willingness to let talk substitute for action.”

Then imagine a dysfunctional project team, debating a concept or a product to death. If you lead a team, embrace action instead. Welcome change. If you don’t know exactly what you’re doing, develop a hypothesis, attempt the work, then analyze the outcome. Fake it ‘til you make it.

Strategies of Effective New Product Team Leaders, an article published in the California Management Review by Avan R. Jassawalla and Hemant C. Sashittal, embraces just this approach. While the title seems to indicate narrow applicability to just one group, this article has implications and scope beyond new product development teams. It’s a useful approach to building a variety of cross-functional teams, including those to improve sales revenue, such as in a service organization, or improving patient care, or developing new processes. Heck, it’s even valuable if one ignores the cross-functional premise and applies it to managing a department-level team.

According to Jassawalla and Sashittal, effective new product team leaders formulate five objectives and strategies:

  1. Ensure commitment
  2. Build information-intensive environments
  3. Play facilitator
  4. Focus on human interaction
  5. Focus on learning

The effective team leader can then best apply these strategies in a culture which encourages change and innovation with the full support of senior management. Mistakes must be welcomed in interest of furthering learning – to stretch the notion of what’s possible.

One aspect of teams not mentioned in the article: What is the optimum team size? No data or reference is included. Presumably, a too-large team might be unwieldy, and there would be a less secure bond among members. Too small a team might become insular, or suffer from a lack of diversity in opinions and options.

A second aspect not mentioned: What is the optimum time from team formation to maximum effectiveness? According to article, effective leaders focus on increasing members’ personal and emotional commitment to the team. This dynamic is a function of trust level, which is built over time.

As this article implies, the work of a team leader is extensive, and requires a significant commitment beyond day-to-day operational activities. An effective leader develops project plans, schedules meetings and puts out fires, among other things, and does it quietly, without any undue attention or fanfare. It’s team facilitator as servant leader.