The Konami Way
It was just a few weeks ago that Konami Gaming Executive Vice President and Chief Operating Officer Steve Sutherland was sitting in on a companywide meeting. While most companies’ all-employee meetings typically center around intense strategizing, or delivering mandates or new directives, Konami’s meeting had more of a tone of revelry.
The Las Vegas-based gaming equipment manufacturer was fresh off setting new records for sales and revenue, and this meeting was called to note that, and reward those responsible - the company’s employees.
“The fruit of your labor is when you can call all of your employees in and tell them you’ve had a good year and you hand out very significant bonus checks,” Sutherland said. “It’s really a day of celebration because the employees walk out of there knowing that they contributed to the result and there’s also a financial benefit to them. The financial benefit is not just to the executive management team. Everybody who is an employee is part of the success. It’s the one day of the year you get to be the good guy. And with that you can see that the company strategy is working. We got to do ours two years in a row, so it’s definitely working.”
For Sutherland, who has taken a very hands-on approach to developing Konami’s reputation, brand awareness and marketplace leadership, he smiles when telling of his company’s recent successes. For years, Konami has flown below the radar in game and systems development in the industry. The company’s name has been better associated with its work on the digital entertainment and video game side (Konami Digital Entertainment) than for its share of a casino floor.
Yet, quietly, Konami has been growing. And Sutherland has been at the forefront of fostering that growth while purposely keeping the company out of unnecessary limelight.
Sutherland explained that Konami’s strategy has been to thoroughly study technology and the directions it is going within the industry. Unlike some of its peers and competitors, the company does not rush products to market for the sake of getting it in front of customers. In fact, there are countless projects that have spent years in the development cycle, Konami’s management team of technologically-minded professionals wanting to refine and perfect products until they meet virtually any demand or desire the market can dream up.
That concept of building a foundation of a company’s strengths is part of what lured Sutherland to join Konami in July of 2000. Having a strong technology background has helped him craft Konami’s internal strategies and practices - that, and the opportunity to work with what he calls “the best cast of talented individuals.”
“When you wake up in the morning excited about going to work, you’re dealing with great people, you can deal with some of the internal process issues. We have very good processes in the gaming industry, but they are not as well structured as I have found in other industries. Konami has done a better job of getting to what I’ve come from based on my background and the executive management team. It‘s very key to have that strong foundation in the processes because it‘s the foundations that accompany long term.”
Now, the foundation is strong and Konami’s business is snowballing thanks to strong game titles and finely-tuned technologies like its Konami Casino Management System. And make no mistake, Sutherland envisions Konami swallowing a significantly larger portion of market share in the very near future.
“I could see us definitely being in the top three [of gaming manufacturers],” he said. “We’d settle for three, but I’d like us to just jump past that to the number one or two spot.”
Expanded experienceBefore entering the gaming industry, Sutherland spent more than 17 years working in other technology fields. He started out selling mainframe computer systems into the financial industry, followed by joining what was at the time a very small Department of Defense-related company that was going into the commercial sector and ultimately went public. “I spent about 15 years in that arena, principal focus on the commercial side of the business, working at a number of different areas within the company,” Sutherland said.
In 1993, after spending out 15 years with that company, he decided it was time for a change and began looking at new opportunities. Eventually, he was recruited by the executive recruitment firm Korn/Ferry International, which had been contracted by Bally Gaming International Inc. to find someone to fill a role as vice president of sales and service.
“So I joined Bally Gaming in 1994 and I stayed there until January of 1999. I was basically part of the turn-around team that had taken a company that was in very bad shape and was charged with [righting the ship],” Sutherland said. “We were trying to put some solid business practices back in place at the point in time.”
When the company was sold to United Coin and became Alliance Gaming in 1999, Sutherland was looking at going back into the technology industry and relocating his family back East.
But something told Sutherland to stay in the gaming industry. After some discussions, he joined Shuffle Master, where he stayed for a year and three months. Sutherland took about a three month respite then joined Konami Gaming in July of 2000, where his technology skills and the company’s technology focus proved a natural fit.
“Since then it’s all been about building a company, building a foundation,” he said.
The reason Sutherland said he chose to stay in the gaming industry was because of the people. In the more technology-centric industries that Sutherland had previously worked in, everything was very logical, rigid, the problems are easily solved because everything is so well defined, he said.
“They utilize technology appropriately, you’re dealing with people who are highly educated, have detailed processes laid out in how to react to very specific things … but when you take a look at that industry in that rigidness and the process, it lacks a level of personality,” Sutherland said. “In this industry [gaming] it’s a relationship-based industry. When you come in on Monday morning you have your plan for the week and it’s blown out of the water with the first phone call. In prior industries you’d come in with three major tasks that you wanted assigned to your employees, have a road map for the week that would get done. When you come into the gaming industry you find you have a road map but trying to get down the road is much more difficult. It’s because of the distractions that come into play. We have a very active industry. It’s the entertainment industry. There is a lot of excitement and one phone call can divert you off onto one of the side roads and you still have to get to your destination. You’re going to take all these journeys to make sure you’re meeting the customer’s requirements.”
A technology evolutionWhen Sutherland joined Konami in 2000, the company had just acquired its Nevada gaming license and had become the first Japanese manufacturer to crack the U.S. gaming market. Already knowing the technological challenges the gaming industry had faced to that point and the regulatory hurdles that often thwarted significant progress, Sutherland and his Konami counterparts decided a good technology strategy needed to be in place on day one.
“At Konami, we opened with a clean slate,” Sutherland said. “There were a couple of us that had strong technology backgrounds and when you have that you can start putting into place the proper infrastructures. We had convinced the parent company in Japan that we needed to be a turnkey provider of games and systems to the industry because the industry was transitioning.”
Sutherland said that in order to gain the knowledge to run an effective systems business, the parent company had to be convinced of the need to have the architecture of a Fortune 100 company - TCP/IP Ethernet network, mainline middleware server architecture, a mainline server in the back room, large-scale database, etc. Today’s modern casino floors, Sutherland said, are in effect, financial institutions in and of themselves.
“The casino floor is essentially a bank. By bank I mean that we understand that there are numerous gaming transactions but there is also the financial aspect. There’s an analogy between the casinos and the banking industry. It’s thousands and thousands, millions upon millions of transactions. It’s the same product except that one is in the casino, the other is in the banking system with proper infrastructure.”
Sutherland said Konami’s gaming industry division had received authorization to acquire products and/or companies needed to address that large-scale infrastructure demand. Right after the company opened its Las Vegas doors, it began reviewing the infrastructure systems currently on the marketnone of them, Sutherland said, matched the standards a Fortune 100 company’s architecture should have.
“Somewhere in that interview process I had run across someone from the financial industry who told me about a small company here in town called Paradigm Gaming Systems. With Paradigm we found a company that had very few customers, had a rough working relationship with its clients and the product needed to be rounded out,” Sutherland said. “But it had a good slot accounting package, a great table games package, it had great patron points and marketing - more so than what the competition could do at the time.”
However, Sutherland said Paradigm’s system didn’t have the bonusing and there were a number of what he called “warts” on the system that had to be fixed. Konami acquired the product and began working with the customers trying to resolve any relationship issues.
“We basically shut down the sale of that product for two years. We went out and we secured, as part of the acquisition, the person that currently heads our systems group, Tom Soukup [Konami’s senior director systems research and development]. He comes from the high-tech industry and understands the importance of architecture. He rounded out that product, made sure it was robust and sustainable. Today it is a very strong product and a foundation for the product of the future in the industry.”
Soukup and others that came from the Paradigm side, as well as a technology commitment from Konami CEO Satoshi Sakamoto combined to give the company a leg up when it came to establishing the company’s core technology foundation.
Creating the full packageKonami has built a reputation from its game content and game titles. Its first licensed slot game was based off the popular “Rocky” movies. Yet its own internally crafted games also grew popular among players as well, including titles like Money in the Bank, African Treasure, Mariachi Madness, Big Payoff, Flame Jumpers and others. It didn’t hurt that all of the parent company’s years spent as a video game designer lent a little extra to its slot game play.
“Our game business is the major sector of our business,” Sutherland said. But hiring and maintaining talented game designers and systems engineers in Nevada has been a challenge at times, he added.
“We’re pulling from the high-tech industry from wherever we can around the country. It’s difficult at times but we have to have a very strong recruiting program, we also back that up with third party resources, one in Montreal and resources from India as we have relationships with companies there,” Sutherland said. “The majority of the game designers didn’t have a lot of gaming industry experience … and its very hard because game designers are usually already under contract. But over the past eight years between beginning game designer and intermediate game designer we’ve seen very significant experience in the industry. We took a step back a few years ago and made some changes. We decided to foster a more creative development area within the engineering group and that’s when we brought in another person from the high-tech industry, Yuji Taniguchi, that set up a world-wide game division development on the casino side of our business.”
The development of how the games would be played was looked at as well. The company was developing a five-reel product for the industry, and could have come out with it 18 months sooner than it did, but Sakamoto wanted to start the project over after evaluating it.
“If you take a look at our five-reel today it looks a lot different than the competition. Yes it has five reels, but it’s a slide reel, there’s a lot of lighting, a lot of amusement. That’s because we started drawing upon the resources within KDE from the amusement side of the business. That product is doing exceptionally well,” Sutherland said.
Sutherland said the key is taking full ownership of your systems and product development.
“Even though we’ve driven this process in the systems side and the gaming side, we’ve had to drive our own internal processes to get our people to take ownership of the system here,” he said. “The implementation of a system in this industry, and I don’t care if it’s on the manufacturing side or the casino side, can not be taken lightly. You need your internal operating control or your procedures, and you have to match that up against the system. Not all systems can do all things. And when you go from one employer to another, though I understand that you may have done it a different way there, this is the Konami way.”
The Konami way has bred success, for certain. And it’s put the company in a market leadership position. Now, Sutherland said, is time for the company to really flex its muscles and begin showing what all that attention to detail has produced.
“Coming up at the [Global Gaming Expo] later this year, we will have two new products on the game side that are not ‘main piece’ products,” Sutherland said. “We’re investing more of our budget to differentiate ourselves in the industry. This is the Konami the industry expects and this is the Konami that will deliver.