Casino Operators – What is the True Price of Risk Aversion?

The Law of Large Numbers implies that the more times you play a game, the more likely it is that your net gain, divided by the total amount you have bet, will be close to the game’s expected value. In other words, if a game can be repeated many times, good luck and bad luck tends to wash out. Can this be done with the decisions of technology in the gaming operations? Or running the business?What happens, though, if the game isn’t going to be repeated over and over? What if the game – purchasing technology, for instance – is played only once or just a few times? That’s when risk aversion comes into play.Being “risk averse” means that you are willing to pay money to avoid playing a risky game, even when the expected value of the game might be in your favor. Let’s consider the “risk” of investing in technology. Why do a few casino operators are willing to take the option that the other operators are not willing to take with technology? Why don’t some casinos purchase technology unless there are 20 other casinos that have done it, even though those that are leveraging technology are doing well in this current economic slump?As I visit with both commercial and Native American casino operators, I encounter many who are not willing to calculate the rate of return or use a return on investment (ROI) calculator to justify investing in technology. I can prove on paper how such an investment would result in efficiency gains, lower labor costs and better visibility into casino operations. But, many are uncomfortable with the risk of investing in technology simply because it is a change or because they would be the first on the block to do so.Stockholders, owners and tribal members want high rate of returns, but use 1970′s technology. Most operators employ generation that has grown up on the X-Box and knows technology inside out, but the C-level management may have an issue turning on a computer.Many C-level operators cannot answer the questions of how they are using business intelligence tools, what they are doing with their data warehouse, how they are leveraging payroll or business analytics. Would your CFO be able to give you a real-time cash value? Probably not. Many casinos may have educated employees that are stymied because the technology to answer these questions is either not available or not being used.Most successful businesses in corporate America have learned that when technology is used correctly, real business value is delivered. They have clear insight into business intelligence, have multiple systems integrated, and have full visibility of their data warehouse and business analytics. Most importantly, these companies can measure the ROI of their technology systems and how they contribute to the bottom line.I suggest that casino operators follow the lead of corporate America and adopt the technology advances that have already been proven to be critical in running a profitable operation.