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Gary Loveman, the CEO of Caesars Entertainment, 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.

Loveman, who has a PhD in economics from MIT and was a professor at Harvard Business School, has impressed the importance of data analysis on his employees, who are expected to quickly scale small tests into company-wide initiatives. For example, they might test which is likelier to get customers to spend more: a free meal or a free night in a hotel.

Michael Schrage, a research fellow at the MIT Sloan School Center for Digital Business, recently discussed the company’s policy with Loveman for Technology Review.

TR: What’s the most important thing about Caesars’ culture of experimentation?

Loveman: We need to overcome hunch and intuition with empirical evidence. We’ve set up a process and a discipline for evaluating our intuitions and improving our understanding of what our customers prefer. 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. 

What’s been the biggest source of resistance to this?

Impatience and risk aversion. Let’s say that one of our properties had lower revenues than they’d like, and they think they know the reason why. Instead of running an experiment to test that reason, they don’t use a control group and pollute the entire process. This impatience and hubris breaks the discipline I want us to have. A well-designed experiment is the better way of testing that reason and learning what matters.

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Credit: MIT News March/April 2010 edition

Tagged: Business, Business Impact, Innovation Strategy, IT, IT-productivity

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