Tim Stanley, CIO of Harrah’s Entertainment, the world’s largest casino business, was sitting in the company’s marketing council meeting three years ago, hearing a lot of great ideas but no plans he could act on. He pulled out a yellow sticky note to pass to CEO Gary Loveman. “What you really need is a Chief Innovation Officer,” he wrote.

He hesitated before passing the note, and then added, “P.S.: It’s not me.”
Nice try. Stanley got the role within a year. His new innovation team, he reasoned, would require a clear methodology for identifying the best ideas and test-marketing them quickly. “You can do PowerPoint decks on innovations all day long, but people have to touch it, see it, and smell it,” Stanley says.

The best way to fast-track a promising innovation, he says, is to operate it as an independent venture, separate from the tethers of everyday business processes. That often means running an innovation project on separate IT systems to avoid mingling experimental data with business operations. So, for instance, to run a three-casino test on sending promotions via cell phone text messages, Harrah’s kept the customer data in a database on Salesforce.com, a hosted, subscription-based service.

Harrah’s also is trying to make its innovation program less top-down through an Innovation Portal launched in June based on Salesforce’s Ideas service, where employees vote on ideas. “We found there’s a cluster of employees that are very avid users for submitting ideas and voting on them,” says Chris Chang, VP of innovation, but he wants to expand that community. The team started issuing online newsletters to remind employees about the portal.

Harrah’s is studying the economics of making the portal available to the public, identifying specific areas and concepts for those idea submissions. Focusing those submissions on specific areas fits a philosophy that Stanley has held since he first took on the innovation role (a job he dedicates Wednesdays to, part time the rest of the workweek). His team established six broad target areas: enabling technologies (such as wireless and radio frequency identification); enabling platforms (cloud computing, service-oriented architecture, anything-as-a-service); “smart” service (self-service kiosks); interactive CRM; next-generation gaming; and expanded channels to reach customers.

The structure is designed to keep people from spending energy on ideas that sound cool but don’t meet a top company priority. The team consists of a semirevolving group of about 10 people, sometimes more, from marketing, IT, customer service, gaming, and other areas of the 50-casino company. Stanley, Loveman, and Chang together decide which projects get pushed through.

Why the head of IT to lead innovation? The company’s high-tech gaming systems and sophisticated CRM put data at the center of operations. But Stanley also thinks the choice had to do with IT’s discipline. “A lot of this job is making sure there isn’t duplication of effort,” he says. “It requires corralling and driving forward. IT is known for process management, and it’s arguably better at it than other groups.”

Stanley created innovation labs in several U.S. casinos, where the systems, talent, and culture work for testing new ideas. If a project shows revenue potential, a business leader is recruited to champion the idea and work with the team to execute it. Having “proof of concept” makes business unit leaders and casino operators much less risk averse, he says.

Another big part of the innovation strategy is working closely with tech vendors’ and their latest technologies. This summer, Harrah’s installed Microsoft’s tabletop Surface computers at a bar in its Rio Casino in Las Vegas that lets customers flirt with one another and order specialty drinks. The text messaging pilot involved sending a code, and tapped an Australian startup that got around the problem of bar codes not scanning well from a cell phone screen.

Stanley says innovation can be harder to bring to a company centered on customer experiences rather than tangible products such as computers, toys, and prescription drugs. The key, says the once-reluctant CIO/CIO, is to have a vision, but also a road map for how innovative ideas become products. “Without that,” he says, “nothing generally productive happens.”