What can Newspapers Learn from Casinos?
September 9th, 2008Apparently more than just the lines in the sports book, …at least so says the CEO of MGM Mirage (see Casino CEO Encourages Newspapers to Change).
You see, according to Terry Lanni, the CEO of MGM Mirage Casinos, newspapers stand to learn a fair amount about change from Las Vegas.
The chief executive of the world’s second-largest casino company told newspaper editors Monday that he wished them the best in embracing change in the journalism industry, and said Las Vegas casinos have required reinvention to remain profitable.
MGM Mirage Inc. chief executive Terry Lanni…offer[ed] insights on responding to change and connect[ed] journalism’s current challenges with the transformation of Las Vegas — from a gambling-only town to a resort destination with many other amenities.
That’s what happens when an innovation (in this case, the internet) poses a fundamental challenge to your entire business model. Your options are to stick to your knitting and risk going the way of the dodo, or to change, and maybe still meet the same fate.
The problem with change in the face of such a crisis is that it is extremely costly for management to undertake, and even if they do, there’s no guarantee of success. Changing to a new business model or diversifying into new businesses is not only costly, but often stretches the firm beyond its capabilities. It’s really a double-edged sword.
But this dilemma is not unique to the casino industry or the newspaper industry. It is universal, part of a normal pattern of industry evolution. Every so often, industries experience upheaval. This is referred to as a punctuated equilibrium model of innovation (industry evolution) in the management literature. Industries experience long periods in which technologies do not change all that much, and competition is relatively stable. Then some radical innovation appears (either coming from within the industry itself, or from a complementary industry – such as the internet in this case) that upsets the apple cart.
In the aggregate, this is generally a good thing for economies. It is called progress. But at the micro level, for individual firms, industry upheavals of this sort can cause a lot of pain.
Lanni recognizes that and expressed it eloquently in his comments:
“Suffering through the turmoil of change is never easy. But as (then) U.S. Army chief of staff Gen. Eric Shinseki said, ‘If you don’t like change, you’re going to like irrelevance even less,’”
Now it might have been a bit of a stretch for Lanni to compare the type of change currently being experienced by the newspaper industry to that experienced by casinos in Vegas (in my opinion the latter experienced a much less radical challenge to its business model/value proposition). But I have to admit, it was nice of Terry to let what happened in Vegas get out of Vegas for once.
Sphere: Related Content
