Getting Back To Basics Means Understanding Your Business

When in doubt, I like to return to first principles. I revisit the most basic foundational element of the subject in question. In an age that seems awash in flawed analogies bolstering dubious claims and assumptions that prove outdated, simple definitions provide a welcome whiff of fresh air. This is particularly true in the business world, where few are willing to risk undervaluing the overhyped.

This point came crystalline clear to me when I recently asked someone in the coin-op amusement business how he defined his business in the current environment. The answer I received was simultaneously extraordinarily mundane and highly disturbing. "We're in the business of fun and creating memories," he answered. While the mundane aspect speaks for itself, what I found disturbing about the answer is that this person likely believed it.

The individual spouting this nonsense is a good, smart businessperson. He watches the bottom line, maintains tight controls and treats employees well. But he had not thought deeply about his business. He had not seriously considered what he was selling, and this became apparent, as the conversation progressed.

If I said, "You're in the out-of-home interactive entertainment business," he would have readily agreed and merrily moved on. After all, business is good at the moment. Where is the value in stating the obvious?

Business historians would disagree. Accurately defining a business, along with its expertise, assets and infrastructure, is not only the first step in more efficient management, but also strengthens a manager's ability to adapt in changing times.

This is something the railroads learned the hard way. At the dawn of the aviation age, they possessed land, brand names, fat bank accounts (with the ability to easily raise more cash), contacts in local governments, enormous infrastructure and longstanding expertise in managing engineering talent. These proud railroad men possessed everything but a firm idea about the actual business they were in: transportation.

On the other side of the coin, bowling centers have reinvented themselves by evolving from the traditional beer-and-a-shot venues with minimal amenities beyond anti-fungal spray for rented shoes to trendy date-night destinations. Casino-hotel resorts are also in a similar transformative mode as they seek to capture the attention, along with the discretionary dollars, of the young and affluent. The jury is still partially out regarding this effort, but the initial signs look positive.

Other examples of transformative successes include the Fisher Body Co., which evolved from horse-drawn carriages to "Body By Fisher" car designs; entertainment giant Nintendo, which started out as a playing card company; and Nokia, a paper and pulp mill that initially produced paper products, and most recently, portable electronic devices.

For coin-op entertainment, the challenges are significant. The industry is comprised of different categories of games dispersed over a wide range of location types. There is also a core demographic of young adults who are not only infuriatingly fickle, but who have also seamlessly integrated portable devices into their lives. Anyone who doesn't feel that locations and game manufacturers are not in need of technological playing catch-up with this important demographic is just fooling themselves.

Years ago, street operators would quip that they were in the moving business. It was a joke based on the heavy lifting involved in rotating videogame equipment through a pipeline of locations. And it was just close enough to the truth to be worthy of a chuckle. Today, operators need to examine their businesses and determine if they are moving forward or getting left behind.