Undercover Boss: How the Kentucky Derby Went Digital

Last Updated Mar 18, 2010 8:59 PM EDT

Churchill Downs Bill CarstanjenWe all know the Kentucky Derby, the nation's longest running sporting event. But we don't know that Churchill Downs -- the company that produces the race -- is in the process of growing a gaming empire. In addition to running a number of the world's most famous racetracks, the company has expanded by bringing its intellectual property, or digital content, to customers on the Internet, on television, and in gaming casinos.

According to Bill Carstanjen, Churchill Downs' chief operating officer, the company's biggest challenge is melding two contrasting worlds: the old traditionalists from the horseracing side of the business, and the company's growth strategy of introducing new entertainment options and experiences to customers outside the track.

The company's decision to go on the Undercover Boss reality show was a means to help bridge that gap.

"Sometimes change isn't easy. Sometimes those two worlds clash," Carstanjen told me recently. "In the last 5 years we've become focused on digital rights, the internet, and casinos, all in addition to our horse racing operations. We really wanted an unfiltered, unvarnished view of how our team members were dealing with that."

"We also wanted the country to get the opportunity to see what else we do here and what our team members are like. The truth is that our company is much bigger than producing horse races, and our focus and strategy has taken us well beyond that."

I think Bill got way more than he bargained for when he agreed to be an Undercover Boss. There were some extraordinary lessons for all of us in this week's episode:

  • Bill showed an entire stadium of people that he has no talent as a bugler. But he also learned that, "To fail spectacularly is actually a liberating experience."
  • While working as a jockey's valet, Carstanjen realized how much he was losing by separating his personal and business lives: "A lot of the way I interact with employees is very impersonal. To really be the best you can be, it's got to be a little bit personal. You lose a little bit of control, but it's worth it to get to the truth."
  • And tending horses, he learned that there are talented young folks in his organization who not only want his job, but who may someday be more adept at it than he was at theirs. I guess a little competition is good for all of us, right?
During our interview last Friday, I found Carstanjen to be smart, competent, articulate, and controlled. Later, watching the show, I got a real chuckle when his wife said how much he liked to control his environment. Not surprising from a former corporate attorney and general counsel of General Electric. What is surprising is that he agreed to take the leap and do the show. Here's why he did it and more insights from the interview:

Tobak: Are you really afraid of horses?

Carstanjen: Well, they put me in a stall with a 1200-pound highly trained athlete that wanted to have lunch, who had never seen me before, and who knew that I wasn't carrying lunch with me. So yes, I was afraid of that horse, for sure.

Tobak: Tell me about the challenges of the company's growth and diversification strategy.

Carstanjen: We used to be the content producer, and the customers would come here to enjoy the content. Over time, we've transitioned to customers accessing our "product" from a variety of sources. It really has been a change in the focus of the whole company. We had to be experts in digital rights, and we had to build that expertise in our management team and our sales team, because that's how we're delivering our product to our customers. We never thought of ourselves as an intellectual-property-based company, but that's really been the metamorphosis the last few years.

Tobak: Why'd you agree to do something as risky as Undercover Boss?

Carstanjen: I wish I could tell you that it was mathematical calculus to get to that conclusion, but it really was as simple as this for us: nothing ventured, nothing gained. We're proud of our company and our team members. We wanted to take the risk that people would like what they see, that the employees would be proud of what they see, so we decided to just close our eyes and jump.

Tobak: What about the experience surprised you most?

Carstanjen: There's some good and bad. For me, the good was the undercurrent of passion our team members have for the thoroughbred racing business. It's more than just a job for them. But in a horse-track environment, a 250-acre piece of real estate, in addition to the folks who work with the horses, you have folks with graduate degrees working in corner offices, and everything in between. With so many different economic, educational, and social backgrounds, we sometimes spend too much time on our differences and forget about the thing we have in common. So now we have a program called "walk a mile in someone's shoes" where we ask our managers to go out and work a front line job, to give everybody a better sense of what the team members are doing here. We want all our managers to experience that firsthand, not just watch it on television.

Image: CBS Entertainment
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