By Andrew MacDonald and Bill Eadington
"The fox is a cunning creature, able to devise a myriad of complex strategies for sneak
attacks upon the hedgehog. Day in and day out, the fox circles around the hedgehog's den,
waiting for the perfect moment to pounce. Fast, sleek, beautiful, fleet of foot, and crafty - the
fox looks like the sure winner. The hedgehog, on the other hand, is a dowdier creature,
looking like a genetic mix-up between a porcupine and a small armadillo. He waddles along,
going about his simple day, searching for lunch and taking care of his home.
"The fox waits in cunning silence at the juncture in the trail. The hedgehog, minding his own
business, wanders right into the path of the fox. 'Aha, I've got you now!' thinks the fox. He
leaps out, bounding across the ground, lightning fast. The little hedgehog, sensing danger,
looks up and thinks, 'Here we go again. Will he ever learn?' Rolling up into a perfect little
ball, the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions. The
fox, bounding toward his prey, sees the hedgehog defense and calls off the attack. Retreating
back to the forest, the fox begins to calculate a new line of attack. Each day, some version of
this battle between the hedgehog and the fox takes place, and despite the greater cunning of
the fox, the hedgehog always wins."
From Jim Collins, GOOD TO GREAT.
"There is a line among the fragments of the Greek poet Archilochus which says: 'The
fox knows many things, but the hedgehog knows one big thing'. Scholars have
differed about the correct interpretation of these dark words, which may mean no
more than that the fox, for all his cunning, is defeated by the hedgehog's one defense.
But, taken figuratively, the words can be made to yield a sense in which they mark
one of the deepest differences which divide writers and thinkers, and, it may be,
human beings in general. For there exists a great chasm between those, on one side,
who relate everything to a single central vision, one system less or more coherent or
articulate, in terms of which they understand, think and feel – a single, universal,
organizing principle in terms of which alone all that they are and say has significance
– and, on the other side, those who pursue many ends, often unrelated and even
contradictory, connected, if at all, only in some de facto way, for some psychological
or physiological cause, related by no moral or aesthetic principle; these last lead lives,
perform acts and entertain ideas that are centrifugal rather than centripetal, their
thought is scattered or diffused, moving on many levels, seizing upon the essence of a
vast variety of experiences and objects for what they are in themselves, without
consciously or unconsciously, seeking to fit them into, or exclude them from, any one
unchanging, all-embracing, sometimes self-contradictory and incomplete, at
times fanatical, unitary inner vision. The first kind of intellectual and artistic
personality belongs to the hedgehogs, the second to the foxes..."
From Sir Isaiah Berlin (1953), THE HEDGEHOG AND THE FOX.
Jim Collins' classic business book, BUILT TO LAST (1994), was followed by his 2001
contribution, GOOD TO GREAT, where he examined the principles of companies that had
made the leap from being "merely good" to being "great." In conducting the research for his
book, Mr. Collins focused only on companies that were able to progress from a track record
of good performance to a sustainable period of "great" performance in the long-term, i.e., 15
years or more. As such, his conclusions are about principles that deal with transformation:
principles that allow a company to transform from Good to Great and stay there.
Collins borrowed from Sir Isaiah Berlin to develop his essential principle in GOOD TO
GREAT: the Hedgehog Concept. He defined this as "a single organizing idea, a basic
principle or concept that unifies and guides everything within the organization." It does not
matter how complex the world really is; a Hedgehog Concept reduces all challenges and
dilemmas to simple - indeed almost simplistic - Hedgehog ideas. Anything that does not
somehow relate to the Hedgehog Concept has no relevance.
The good-to-great companies studied by Mr. Collins and his team were found to have built
and zealously focus on strategies that were founded on three key dimensions.
1. What is it that you can do better than anyone else in the world? (And, equally
important: what can you not do the best?) This discerning standard goes far beyond
core competence. Just because you possess a core competence does not necessarily
mean you can - or ever will - be the best in the world at it. Conversely, what you can
be the best at might not even be something in which you are currently engaged.
2. What drives your economic engine? All the good-to-great companies analyzed by
Mr. Collins attained piercing insight into how they could most effectively generate
sustained and robust cash flow and profitability by indentifying and focusing on a
single common metric, i.e. profit per x that had significant impact on their economic
3. What are you deeply passionate about? The good-to-great companies focus on
those activities that ignite their passion. The idea that needs to be carried forward is
not to stimulate passion but to discover what makes a company passionate.
The intersection of these three dimensions becomes the core defining Hedgehog Concept for
the organization. Such a concept should not be a blindingly complex statement of strategic
objectives, but rather it should follow Occam's razor by offering the simplest and best
possible solution for a variety of challenges.
When we apply these ideas to gaming companies, can we find some that have made the leap
from Good to Great by following a defining Hedgehog Concept? We begin by looking at a
couple of gaming organizations that may have taken that leap and arguably can be
characterized as having achieved greatness.
Wynn Resorts is a relatively new company founded by Steve Wynn which went public in
October 2002. Wynn is often given credit for having been the visionary and driving force
who redirected Las Vegas and helped transform it from what it was into a world-class
destination - arguably the world's most popular tourist destination - from the end of the
1980s to the present. Indeed, he is sometimes referred to as the Walt Disney of the gaming
In 1989, when Wynn and his then-company Golden Nugget (later to become Mirage Resorts)
built and opened The Mirage on the Las Vegas Strip, Las Vegas carried a somewhat mixed
reputation among potential visitors. Its casinos could be divided between "carpet joints" and
"sawdust joints," and the popular casino design of the day could unkindly be characterized as
"modern bordello." The business philosophy of many casinos was that every part of the
operation had to serve as a loss leader, with a purpose of funneling customers into the casino,
which would serve as the only real profit center and "cash cow" for the entire operation.
The image of Las Vegas up to that era had more than a few rough edges. Las Vegas was
considered by many - though not all - as being "cheesy," "tawdry," "mob infested," "cheap,"
and "nasty." All-you-can-eat buffets were a cornerstone of the destination's marketing image.
Cheap rooms, cheap food, escort services, and a reputation tarnished by years of mob
influence and political scandal had left many cold to the idea of visiting Vegas. As a result,
Las Vegas was tapping into only a moderate portion of its potential market.
But Steve Wynn saw something different – a vision of a Las Vegas reborn – that would cater
to affluent Americans and foreigners who were prepared to spend more for quality, and who
would willingly extend their leisure and after-hours lifestyles to the places they visited on
holidays. Wynn's vision was that resorts in Las Vegas could be attractive to those who
enjoyed the finer things in life and were prepared to pay for them, and were also attracted to
the excitement of the casino floor and the accompanying resort ambience.
Casino resorts possess a unique structure that allows two options for payment of the services
they offer: they can be paid for directly and at full retail price by customers who so choose,
or payment can be made as part of a bargain between the casino and a playing customer who
will be rewarded by discounted or free services - "comps" - in exchange for "action" at the
table games and gaming devices. This added dimension of making the cost of the visit itself
a gamble provides a little more excitement and adrenaline to the Las Vegas adventure.
Wynn's casino resorts mastered this fine balance between explicit and implicit pricing.
The Mirage was one of a number of major casino developments in Las Vegas by Steve Wynn
that set the foundations for the new Las Vegas. His Nevada ventures began with
refurbishment of the Golden Nugget in Downtown Las Vegas in the 1970s, and these were
followed by the building and opening of The Mirage (1989), Treasure Island (1993), Bellagio
(1998), and Wynn Las Vegas (2005.) The Mirage, Bellagio, and Treasure Island are now
owned and operated by MGM Mirage, which bought out Wynn's original company in 2000.
Wynn had also opened the Golden Nugget in Atlantic City in 1981, the Beau Rivage in
Biloxi, Mississippi in 1999, and the Wynn Macau in 2006, and had partnered with Circus
Circus to open Monte Carlo on the Strip in 1997. It was clear early on that the creation of
extravagant casinos was Steve Wynn's true passion. It was also clear that attention to detail
and to execution of the resort experience were something that Steve Wynn put ahead of all
This proclivity to build outstanding and dramatic casino resorts is obviously a part of Steve
Wynn's overall Hedgehog Concept. Whether he would identify it as such would be a
question that only Mr. Wynn himself could definitively answer. However, we can examine
the three key dimensions in order to identify what are perhaps the defining elements of the
Question: What are Steve Wynn and the management leadership at Wynn
Resorts deeply passionate about?
Answer: Creating and designing incredible, high-end integrated casino
resorts with matchless attention to detail, along with simple but unmistakable
elegance that caters to the needs and desires of discerning gaming customers.
Under Steve Wynn's leadership, Wynn Resorts - and before that company, Mirage
Resorts - time and again built the most impressive casinos in their respective
marketplaces. Costs were often not an important consideration; rather, getting it right and
then executing the delivery of the product to the customer was paramount. As a result,
everything at a Wynn resort was well executed, even from the opening day. (The
contrasting histories of other Las Vegas casino openings, in terms of problems that
quickly became apparent, serve an interesting illustration for the ability of Wynn's
companies to execute. Wynn's main Las Vegas Strip properties - The Mirage, Bellagio,
and Wynn Las Vegas, opened without missing a beat; in contrast, there were far rougher
openings at the MGM, the Luxor, and the Venetian, among others. Wynn clearly infused
his passion to get it right the first time into his organizations.) The only time Steve Wynn
missed his market on a casino opening was in Biloxi, where his company was criticized
for providing far more quality and elegance at the Beau Rivage than the market really
In summary, Steve Wynn and his companies have been highly committed to developing
outstanding physical facilities, and then supplying them with activities, amenities, and
attractions that would exceed expectations, accompanied by delivery of high quality
service to pampered and high-expectation guests through a corporate culture built around
the principles of employing, developing and retaining the best staff in the industry.
Question: What is it that Wynn Resorts can do better than anyone else in the
Answers: Accessing capital markets to fund the development of the most
expensive resort projects in the world. Positioning resorts to be the most
desirable high-end properties in their respective markets. Accumulating a large
number of the world's most exclusive high-end brands and providing a showcase
for these in an opulent environment under one roof.
From his earliest dealings in Las Vegas shortly after he arrived in the early 1970s, Steve
Wynn truly mastered the "Art of the Deal." Under the tutelage of Nevada banker E. Parry
Thomas, he cleverly parlayed his initial stake in Las Vegas to build up his financial
resources, which soon allowed him to gain control of the Golden Nugget, after which he
built one spectacular casino resort property after another, often using cutting edge and
occasionally controversial financial vehicles and strategies.
The name Wynn has become synonymous with "top of the market" in every market
where they operate. Where other companies were cost conscious, Wynn's companies
would do whatever it took to get it right, and the ultimate judge on "what is right" was
Steve Wynn himself. There was a sense that, whatever the cost, the quality of product
would be able to generate the revenues and cash flow to justify the investment and reward
the shareholders. Time, and the financial experience of Steve Wynn's companies, have
demonstrated the workability of this thesis, but it is not one that is easily mimicked by
Wynn Resorts - and Wynn's predecessor companies - reinforced their "high quality, high
expectation" mystique by creating unsurpassed elegance in shopping options, dining
experiences, and entertainment extravaganzas in their various properties by attracting and
contracting with the most prestigious retailers, world renowned chefs, exclusive auto
dealerships, exotic animal trainers, and unbelievable acting troupes. Wynn Resorts and
Steve Wynn personally also have accumulated a priceless art collection that has become
part of the signature for exclusivity and style at the later properties.
This strategy creates an aura of anticipated experience for preferred guests at Wynn's
opulent resorts. Whether it is at the green baize of the baccarat table in the casino, the
front row seat in the showroom, relaxing in the suite, or enjoying the premier table in the
restaurant, the experiences generated are undoubtedly highly memorable, if not
Other casino and hotel developers have imitated the Wynn formula, including Sol
Kerzner with the Atlantis development in the Bahamas and Lloyd Williams with Crown
Resort in Melbourne, Australia (now owned and operated by James Packer's PBL
Corporation). However, no one has gotten the entire package "right" in the same way
that Steve Wynn has done, by linking construction and design with opulence and service,
to create a high level of customer expectations and then consistently deliver on those
Question: What drives the Wynn Resorts economic engine?
Answer: Total yield management of customer spend across all gaming and nongaming
segments producing total revenue per available room (REVPAR) that
generates significant returns on invested capital. This is a result of the
principles espoused above.
Steve Wynn contributed substantially to the resurgence of the "new" Las Vegas with his
casino developments in that market. Now, in a similar manner, he is repeating that role in the
recent emergence of the "new" Macau. Wynn Macau, which opened in September 2006, has
helped to redefine consumer expectations in that long-standing but previously unattractive
gambling center. Similar to the earlier Las Vegas and its relationship to its prime customers,
the Macau market had long been rejected by affluent Hong Kong (and other urban Asian)
residents who considered Macau to be too infested with prostitutes, triads, and sleazy and
smoky gaming rooms. Wynn Macau is a facility that "speaks" well to the affluent and wellheeled
Hong Kong and broader Asian market – people who have long been exposed to some
of the world's leading brands, and some of the best hotel and service standards in the world.
Wynn created a casino resort for affluent Chinese from Hong Kong and further abroad and, in
doing so, has outperformed his competitors on many key metrics.
We suggest that Wynn's Hedgehog Concept is: The design and development of the most
costly, large-scale, opulent and elegant (and therefore most sought-after) casino resort
environments with a wide range of high-end amenities that target affluent gaming
customers and provide exceptional service through high quality, well-trained staff.
It could be argued that Steve Wynn deviated from this concept with projects like Treasure
Island and the Monte Carlo on the Las Vegas Strip in the mid-1990s. However, he appears
to have returned to his Hedgehog Concept with Wynn Las Vegas, Wynn Macau, and the yetto-
open Encore in Las Vegas. While there has been some criticism of Wynn Macau as being
too much of a replica of Wynn Las Vegas, that is a bit like criticizing Picasso for painting just
another "Picasso." Wynn has created and defined a style of casino resort architecture,
interior design and service execution that others now can only copy or attempt to emulate.
Harrah's Entertainment is another company that over the years - initially under the
founding guidance of Bill Harrah, and then with significant refinements from the company's
modern leaders, former CEO Phil Satre and current CEO and Chairman of the Board Gary
Loveman - has made the leap from Good to Great, and has done so on very well-defined
principles first enumerated by Bill Harrah. We can once again pose the Hedgehog Concept
questions for Harrah's.
Question: What have the leadership at Harrah's over the years been deeply
Answers: Consistently delivering a high quality gaming product with excellent
customer service. Applying and executing fundamental marketing principles and
research-based knowledge. Customer relationship management – focusing on
the avid, experienced gaming customer. Developing analytical systems based on
hard data, facts, and knowledge rather than conjecture, and using that
knowledge and analysis to confront challenges and develop company strategy.
When the rest of the gaming world - including Steve Wynn, the MGM, Caesars, Circus
Circus and Las Vegas Sands - were building lavish casino properties, especially along the
Las Vegas Strip, Harrah's was focusing its primary efforts on developing an extensive player
data base, closely linked to its slot loyalty program now known as Total Rewards. The
genesis of this approach can be traced back to Bill Harrah who introduced the first player
loyalty program with "premium points," introduced at his Reno and Lake Tahoe casinos in
the 1960s, and his appreciation of the slot customer, who was typically given backseat to the
more attractive "action player" at the tables.
The underlying philosophy that evolved at Harrah's was that a better understanding of
customer preferences and spending patterns, estimating player worth based on analytical
tools, and a focus on which customers were most consistent with Harrah's over-all yield
strategy, would ultimately lead to a far more efficient use of Harrah's physical, human and
analytical resources, and allow for far more effective development of a focused customer
development strategy for the organization. Harrah's eschewed the "build it and they will
come" philosophy pursued by a number of casino companies in the mid to late 1990s in Las
Vegas and rather focused on investing in a deep and rich understanding of the Harrah's
casino customer. They invested millions in technology while others developed bricks and
mortar. Harrah's recognized their inability to compete on this level with their existing assets
and so focused on better understanding the casino customer and their ability to market more
effectively to a core customer than their competitors. Importantly, Harrah's recognized the
value that their marketing programs could drive, and through Total Rewards they developed
solutions that could be deployed in new markets or rolled out to businesses that they
acquired. This was the foundation that allowed Harrah's to capture significant benefits with
the company's acquisitions in the early 2000s, and especially that of Caesars in 2005.
Though Wall Street analysts penalized Harrah's in the mid to late 1990s due to their lack of
any significant presence on the booming Las Vegas Strip, the soundness of their approach has
become increasingly apparent over the years. Between 1993 (when Harrah's was known as
the Promus Companies) and 2006, Harrah's revenues climbed from $1.2 billion to $9.7
billion, net income increased from $86 million to $536 million, and market capitalization
went from $3.3 billion at the end of 1993 to about $16 billion in 2007 at the time of their
announced acquisition in a private equity buy-out. Harrah's adjusted share price in 1993 was
as low as $7; in early 2007, it was around $85 per share.
Harrah's has exploited superior knowledge about its customers derived through its extensive
player tracking systems and data mining capabilities to create a hub-and-spoke system of
casinos, with the hubs being in destinations where tourism demand is greatest, such as Las
Vegas, New Orleans and Lake Tahoe, and the spokes reaching out to casino markets that are
essentially frequented by local or regional customers, such as Joliet, Kansas City, Chester
(Pennsylvania) and Tunica. Harrah's had early on committed to a geographically diverse
strategy, after having discovered that players who prefer to play in multiple markets are also
high value customers who should be targeted.
The multi-property propensity of desired customers is enhanced by the company's loyalty
programs. Players' accumulated Total Rewards benefits are interchangeable among all of the
Harrah's properties; therefore loyal customers from a locally or regionally oriented market
can turn their rewards into a gambling vacation in the more exotic environs of a popular
Question: What is it that Harrah's can do better than anyone else in the world?
Answers: Working with technology suppliers to develop gaming loyalty and
analytical systems that address a massive and geographically distributed
customer base. Utilizing and applying decision science tools to market to their
avid, experienced multi-market gaming customers and to quickly identify others
who may fit that category. Acquiring smaller gaming companies and integrating
their player lists and multiple brands into the Harrah's loyalty programs.
Harrah's has arguably the best distribution structure in the casino industry, with 38 properties
(as of June 2006) operating in 17 jurisdictions world-wide, but with main emphasis (so far)
within the United States. Early on, the company positioned themselves to be the
"McDonald's" of the casino industry, with a consistency of product offering and explicit
development of the primary brand. Over the years, primarily through acquisitions and then
adaptation of the newly acquired casinos into the Harrah's fold, they broadened their stable of
casino brands and worked at market segmentation and product differentiation among their
targeted client base. Initially, they worked with the Harrah's brand (for enthusiastic,
experienced gaming customers), the Rio brand (for younger adventurous professionals), and
the Showboat brand (for older slot-oriented customers.) With later acquisitions, they ended
up with various other brands, the most important of which are probably Caesars, Horseshoe,
and the World Series of Poker. (Their other brands - such as Flamingo, Bally's, and
Grand - may eventually be put up for sale.) As with General Motors in the mid-20th century,
Harrah's are now in a position to offer a broad mix of product at different price/quality/theme
points, thereby capturing more significant market share of desirable core customers in the
Economies of scale and product differentiation have been by-products of the strategies that
Harrah's has fleshed out in pursuit of their Hedgehog Concept. This has allowed them to
leverage their brands in a number of non-traditional ways in the context of the casino
industry, and then apply marketing efficiencies against their customers' preferences in ways
that competitors cannot match. Their sheer size has also given them significant buyer's
power with important vendors such as IGT, food services wholesalers, media companies and
travel partners, as well as with some of the cross-branding ventures they have pursued, as
with NASCAR. Such relationships are still mutually beneficial, but more of the benefits
gravitate to Harrah's because of their improved negotiating position.
Question: What drives the Harrah's economic engine?
Answers: Same store sales growth as a metric to gauge individual property
performance. The percentage of the gambling budget from their target of avid,
experienced, enthusiastic casino patrons.
Harrah's is perhaps the most "scientific" casino company in the world today. This might be
partly influenced by the fact that Gary Loveman used to be a Professor of Marketing at the
Harvard Business School, specializing in strategic marketing and large database management.
They have become well known as a company with many "propeller-heads' in the back office:
geeks and nerds (as they used to be called) who now are using decision science to outperform
the competition. In an industry known for machismo, brashness, risk taking, and "over-thetop"
posturing, Harrah's came onto the scene as the kid with thick glasses, a pocket protector
and a calculator, who was soon outperforming their bigger, stronger and more attractive
A good illustration is Harrah's emphasis on capturing a greater percentage of the gambling
budget of existing customers by persuading them to be "less promiscuous" and more faithful
to Harrah's, rather than "playing around" with other casinos. In the late 1990s they publicly
stated they felt there was greater value in gaining a greater proportion of gambling spend
from existing customers than in cultivating new customers. By making it less attractive for
their customers to gamble in competitors' casinos than with Harrah's, they have pursued this
objective relentlessly. Much of their recent success is arguably attributable to successfully
expanding this one metric. Harrah's has also established a well-defined set of incentives for
their employees and managers tied to other key metrics such as Service Scores and Employee
Engagement Scores, all of which closely correlate with Same Store Sales Growth. When
well-defined targets are met or exceeded, bonus payments are made to affected employees or
responsible managers. Again, this is an exercise strongly influenced by objective measures
and quantitative objectives.
So what is Harrah's Hedgehog Concept? We suggest it is: The development and utilization
of decision science tools to effectively understand and respond to the needs and wants of
the company's target customer - the avid, experienced user of casino gaming for
personal entertainment. As with Steve Wynn and Wynn Resorts, Harrah's has bred
imitators in the gaming industry such as Ameristar and Station Casinos. Interestingly, Station
has recently also taken a chapter from the Steve Wynn playbook with their recent casino
openings of Green Valley Ranch and Red Rock in the Las Vegas locals market.
Collins in GOOD TO GREAT identifies other characteristics of Good to Great companies.
While Wynn Resorts and Harrah's may not meet all the criteria that would define them as
"great," they have established clearly defined strategies that, from external observation, can
be readily identified. Customers know what to expect from Steve Wynn when they enter a
Wynn property or see a Wynn design. Likewise Harrah's is entirely committed to Total
Rewards and the returns it can yield when properly managed. While more of Harrah's
strategy is "under the hood" than with Wynn, it is nevertheless a strategy which the company
openly communicates, especially to the financial community. Total Rewards has become the
industry benchmark for Customer Relationship Management, while Wynn's designs are often
considered the benchmark for casino architecture - amongst the casino-going public if not the
entire architectural community. The Bellagio, for example, was recently ranked 22nd
on the American Institute of Architecture's list of America's favorite works of architecture, the only
casino to be so included in the top 150.
It can also be noted that both Steve Wynn and the current Harrah's organization were very
much influenced by William Harrah, the somewhat eccentric but widely admired founder of
Harrah's. Bill Harrah's original Hedgehog Concepts had been based around cleanliness
within the casino, attentiveness to creating a positive experience for the customers, and being
respectful of the company's employees. (For an excellent summary of Harrah's management
philosophy, see EVERY LIGHT WAS ON: BILL HARRAH AND HIS CLUBS REMEMBERED, University of Nevada Oral History Program, 1999.) When Steve Wynn
opened the Golden Nugget in Atlantic City in 1982, he paid homage to both Bill Harrah and
Walt Disney as his creative influences.
The value of a Hedgehog Concept is perhaps most obvious when we examine companies that
did not seem to have one, and which drifted into difficulty or oblivion as a result of not
having strong guiding principles. Bally's in the late 1980s was a good illustration of such a
gaming company, as was Caesars when it was owned by ITT Sheraton and then later by
Starwoods. The Trump casinos in Atlantic City might provide a similar example. If a
company is not organized around a compelling Hedgehog Concept that permeates the
organization, then Jim Collins would suggest it is not "built to last," and indeed, it may not
Establishing a Hedgehog Concept is useful at any level, whether personally or for an entire
company. It may also be useful in going from Average to Good, or from Start-up to
Achieving Initial Target Performance Levels. In its simplest form, it is about finding a
positioning that the individual or the company can enjoy, a niche that can be exploited, that
the individual or the company can be good at, and a reason - economic or otherwise - to do
As this review suggests, other gaming companies would be well advised to take heed of
lessons learned from Jim Collins, Wynn Resorts, Harrah's Entertainment, and the hedgehog.