When Gary Loveman arrived at the headquarters of Harrah's Entertainment, in 1998, as chief operating officer, most of its employees weren't prepared to wager that the Harvard Business School professor had what it takes to succeed in the gaming business. "Most people thought I'd leave in two years and go back to Harvard," Loveman recalls. "They thought this would be like a kidney stone: it would hurt for a while and then it would pass."

The skeptics stopped taking bets long ago. In five years, Loveman has reinvigorated the company—largely by developing a successful gaming-business strategy rooted in smart retailing. In the process, he led a transformation of his company's casino culture, created a national brand unique to its sector, and doubled revenues and earnings.

Loveman acknowledges that such results were hardly a sure thing when he arrived. A decade ago, as a handful of states began to liberalize their gambling regulations, Harrah's seemed to be on a roll: it quickly expanded outside Nevada, opening casinos and riverboat-gambling venues in several Midwestern and Eastern locales. But as the opening of new jurisdictions ground to a halt, competitors noticed the profits Harrah's was making outside its traditional Nevada and Atlantic...