Test or get Fired! Harrah’s casino’s amazing philosophy

Analytics needs a evangelist! Without such a person, you just don’t get the impact that Analytics actually is capable of providing! Mostly this evangelist needs to be right at the top, the CEO! I have worked with a range of industries & everywhere the degree of impact shoots up once you have a CXO who is evangelising this change.

Of course, some CMOs have led their organizations into embracing the practice, including John Costello, former exec VP-CMO of Home Depot; John Elkins, head of global brand and marketing at Visa International; and Cathy Lyons, CMO-exec VP at Hewlett-Packard.

One organization which has become a huge case study in the application of a “fact” based approach to business is Harrah’s Entertainment! Recently though it had a messy bankruptcy of its casino operating unit and reportedly faced fines of up to $20 million over money laundering allegations. The most valuable of the assets being fought over by creditors is the data collected over the last 17 years through the company’s Total Rewards loyalty program.

Back in 1998, as Harrah’s was about to embark on a wave of expansion, their CEO Philip Satre asked Gary Loveman to take a break from Harvard to become chief operating officer of Harrah’s Entertainment. The important thing was the he was not brought in as a CMO but as the COO-he had the line authority to make changes that would impact the business!!

“In terms of income, it was actually a pay cut,” Loveman says, since he had to forego the consulting that supplemented his income as a professor.

He went on to develop the gaming industry’s most successful loyalty and analytics program—Total Rewards—which boasts more than 40 million members.

In an interesting article, Karl Taro Greenfeld says this about Gary Loveman, who has since then also become the CEO: the chief executive officer of Harrah’s Entertainment Inc., the largest gaming corporation in the world, sees his customers as a set of probabilities wrapped in human flesh.

Since taking over as CEO in 2003, Loveman, 50, has relied on the numbers to build Harrah’s from a regional operator of 15 casinos to one with 39 in the U.S. and 13 more overseas.

His first big move as COO was to start a loyalty program called Total Rewards, which became such a success — growing to over 40 million members by 2010, the largest database of probabilities in the industry — that by the time Satre stepped down in 2003, Loveman had become the logical choice to succeed him.

Loveman earned a Ph.D. in economics at MIT and went on to become CEO, president, and chairman of Caesars Entertainment, owner of Harrah’s casinos and other resorts worldwide.

Loveman says there are three ways to get fired from the hotel and casino company: theft, sexual harassment, and running an experiment without a control group.

But this seems like common sense, run experiments , see what works & scale up! And yet very few companies do it.

Dan Ariely, a behavioral economics professor at Duke University and the author of Predictably Irrational, outlined some of the resistance to experimentation that he’s come up against.

“I’ve often tried to help companies do experiments, and usually I fail spectacularly,” Ariely writes. For a company struggling with getting a good bonus system in place, he suggested experiments or even just a survey. Management, he says, “didn’t want to add to the trouble by messing with people’s bonuses merely for the sake of learning. But the employees are already unhappy, I thought, and the experiments would have provided evidence for how to make them less so in the years to come.”

But Gary Loveman managed to stay incredibly committed to Testing. These tests run from the use of coupons to offers of free meals or hotel stays, all designed to get customers to spend more money during their playtime.

This is what he said when asked about the Testing culture: “We need to overcome hunch and intuition with empirical evidence. . . . We can start with a hunch or strong belief, but we act on it through experiment. We want evidence. We’ve gone from the introduction of experimentation as a technique to a culture of experimentation as a business discipline. We hire people predisposed to do this by temperament and by background. Organizationally, we’re committed—and I’m committed—to making sure we have the discipline to have the decisions we make informed by this evidence”.

So what is the future for analytics in Gambling? Over time with data being leveraged by everyone, it was only natural for analytics to also start helping the players. Big data services quickly appeared that were designed to empower gamblers, giving them more information and helping them strategize more effectively. One such site that made full use of big data is SharkScope, which collects data from millions of online poker games every day. Players can track all their statistics on the site as a way to improve and increase their chances of winning.

And lastly we must also ask ourselves, is this kind of Analytics good for society! It’s estimated that 3 to 5 percent of people who gamble develop an addiction to the activity, which can lead to an array of problems for gamblers, their families, and society at large. Keeping gamblers coming back may hurt them & cause a lot of turmoil in many lives! Does analytics not have a social responsibility!

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