Entrepreneurs

4 key business tips from the man behind Atari and Chuck E. Cheese's

Nolan Bushnell doesn't have to worry about a legacy as an entrepreneur. He's already got several.

But the creator of Atari, Chuck E. Cheese's and several other ventures (including his latest, Brainrush, a site focused on learning games) isn't someone who enjoys sitting around. Instead, he focuses much of his time on figuring out what business to start next.

"A lot of the time, I've been marinating business plans," he said. "I'll write a two- or three-page plan based on an idea I've had. Then, instead of acting on it immediately, I put it on the shelf. Eventually, one will choose me."

So far, he's had a pretty good run of things. With Atari, Bushnell became one of the fathers of the home video game industry. Even in the age of Xbox, PlayStation and virtual reality, the Atari 2600 is one of the first systems to spring to many people's minds when you talk about games. And Chuck E. Cheese's quickly became a go-to destination for children and parents nationwide.

Along the way, Bushnell learned several lessons. Among the biggest, he said, were these.

1. Timing is everything.

Good timing has worked for and against Bushnell. With Atari, he said, it probably couldn't have been better. Having worked in the coin-op arcade business, he said he always suspected games were headed for the home as soon as the price point became reasonable. That prompted him to start the company.

"It was serendipity," he said. "From the time I started working on the technology, the chips dropped to 30 percent of what they were when I started the project. ... They went from being $2 apiece to 30 cents."

It struck again in 1983. Bushnell and Stan Honey, a scientist at SRI International, were sailing in the Transpac yacht race when Bushnell became particularly impressed with Honey's satellite navigation system. The two talked about non-nautical uses of the technology, and Etak, the first commercially available navigation system, was ultimately born. Six years later Rupert Murdoch's News Corp. bought the company for around $30 million.

Sometimes he's on the wrong end of things, too. He chuckles as he thinks of his failed venture in the robotics industry — Androbot — saying, "Using a 386 motherboard was a really dumb idea."

2. Focus on people, not technology.

Any technology can seem cool in a lab or the vacuum of a start-up, said Bushnell. But if the focus is just on tech for tech's sake, it's going to fail.

"Focus on the people. It's so easy for people with tech training to get focused first on the technology," he said.

That's where Bushnell's game-developer background came in handy with Atari. While the hardware, of course, was important, he ensured there was a sizable catalog of games available for the system.

(Nine were available on day one, and ultimately 470 were published.)

History, of course, would show that more careful screening of those games would have been wise, as a flood of truly awful titles ultimately doomed the system.

"The minute that you know you have a lifetime value of a [loyal] customer … then suddenly you can raise money from anybody," he said. "Entertainment is driven by novelty. What you want to ask is: Am I building the movie or building the theater? Because the theater is built to last."

Nolan Bushnell, founder of Atari, Chuck E. Cheese's and several other ventures, photographed here in 2010.
Adolph | ullstein bild | Getty Images
Nolan Bushnell, founder of Atari, Chuck E. Cheese's and several other ventures, photographed here in 2010.

3. Plan for the unforeseen.

As hard as it is to believe today, Chuck E. Cheese's was originally created as a distribution business, said Bushnell. But when Warner Communications bought Atari in 1976, it had no interest in that particular unit, so Bushnell decided to see what he could do with it.

The decision was made to focus more on families.

"Three things were not envisioned at the onset," he said. "One was the ball crawl and the climbing tubes. Video games weren't really appropriate for kids under four, but they could crawl around and jump. Also, believe it or not, we didn't start with birthday parties. Talk about viral marketing! Every kid that went to one came back the next year and wanted to do it at Chuck E. Cheese's."

It also almost had a much different name. Originally, the chain was called Coyote Pizza, and Bushnell and team thought a coyote would be a great mascot. Then they made the mistake of letting Bushnell order the costume.

"I purchased what I thought was a coyote costume from an amusement park costume vendor and had it shipped to the company," he said in a separate interview. "When it got here, it was obvious to everyone but me that it was a rat costume. Rather than get another costume, we decided that we would use a big rat as the mascot. Marketing didn't like Rick Rats Pizza and came up with Chuck E. Cheese's — as they called it a three-smile name."

"Build your team...like a sea crystal. If there's a defect, it replicates itself." -Nolan Bushnell, founder of Atari and Chuck E. Cheese's

4. The team is critical.

Too many people today depend on analytics to guide their thinking. Bushnell said there's nothing wrong with big data, but it's even more important to have people who have good gut instincts.

"Analytics is, in some ways, a substitute for experience," he said. "What we're looking for is efficiency. The only tools you had before is your hunch "that worked in '05. Maybe I can do it again. ... [But] the data is only good at a moment in time, and what's happening is the [product] has a half-life of less than six months. If you get the perfect analytics at about the time you're going to try to raise money, your analytics fall apart. That's something that's very hard to predict."

Bushnell, through his years as an entrepreneur, has specialized in building strong teams with past employees, including Bill Gates and Steve Jobs, both of whom were Atari employees.

"Build your team ... like a sea crystal," he said. "If there's a defect, it replicates itself."

— By Chris Morris, special to CNBC.com