YOU CAN’T MAKE GOOD DECISIONS WITHOUT CORRECT DATA

I have written this blog for LotteryDaily.com and they published it few days ago. This text is partly modified by Chris Murphy.

In my previous columns I have presented my thoughts on the most important success factors of 2020’s lottery business. I have written about digitalization of the lottery business and the need for new gambling verticals to be added to product portfolios. These are topics that every self-respecting lottery should be interested in. Now I will continue my journey into a little “deeper water” with the third theme. I have noticed that many lotteries are lagging in one specific area which is data-driven management.

When I started in the gambling business almost 30 years ago, the only metrics to follow in the development of the business were turnover and the number of coupons played. Sometimes we tried to find out how many players we had through customer surveys.

My former employer, Veikkaus, has invested a lot in collecting and analyzing business data for the long-term. I took it for granted that all other lotteries also developed or purchased similar data management systems. I have learned that this is not the case after we established in the spring with my colleague the gambling consulting company which aims to serve lottery companies.

Unfortunately for the weakest positioned companies, the level of utilization of business data is still at the same level as we had it in Veikkaus in 1990s.

Why is it so important to gather data? I should use the term correct data because there is no sense to gather data which you can’t utilize. Gathering data is important so that we have the possibility to lead our company towards better business results.

Many companies have written phrases “the best customer experience in the industry” or “satisfied customers” as the goal of the strategy. But how do you lead your business to reach those goals? How do you monitor the impact of your own measures on the achievement of strategic goals? If the correct business data is not collected or analyzed, management or monitoring cannot succeed.

At this point, it should be noted that unfortunately in the case of many lotteries it is not possible to collect the correct data. If the digitalization of business that I wrote about earlier in my column has not been done – the situation is bad. An estimate of a company’s ability to leverage customer data is the proportion of turnover that it generates from identified customers. You can’t run a business based on data if most of gambling happens in a way whereby you don’t know who has played those games.

Let’s look at those companies that use some sort of customer authentication and collect the data. Many companies think the situation is in order because “we have CRM systems in place”. That’s only the first step towards data-based management. The main question is whether the most important components relevant to management have been identified, and whether this data is collected comprehensively and utilized all the way to operational operations.

The world is full of great theories about management by data. It is possible that the company has developed great segmentations and customer value calculation models to support management, but they still cannot be utilized.

In the big picture, the situation seems to be such that the base is built to a good or at least satisfactory level, but its use is deficient from the beginning and its benefits cannot be transferred to the operational level. Of course, in many cases, there are already fundamental shortcomings in the basis of the system, which makes it impossible for you to manage operational activities.

I challenge every lottery director to look critically at their own company. Do we know our customers and business? Can we predict at an adequate level the impact of our actions and reliably measure them? Do we have the ability to steer operational activity towards a better business? If the answer to any of those questions is “no”, it is now time to take a break and think about how to get the situation fixed.

When we carry out product renewal, marketing or actually any operational activity, each operation must have defined goals. What customer segments and profiles are we aiming for? How much is the measure aimed at increasing the customer values of different groups’ accounts and how much we reach new customers?

The numerical objectives must be clear and closely monitored. Based on what exists, you have the opportunity to learn and find and further develop more functional products and concepts. The amount of money customers spend on gambling is usually distributed among different gambling companies.

It is extremely important for lottery operators to understand whether the euro played on a new product has previously been spent on another of their own products, games from another gambling company, or whether it is a whole new gambling spend. If sufficient data on gambling is not collected, it is not possible to make such a reasoning.

With correct data, companies can achieve the benefits of both business and responsible gaming. With the help of data, it is possible to target offerings to the right customer groups and thereby generate more sales. On the other hand, the data can be used to better identify potential customers with gambling problems and to reduce or even stop their gambling.

I understand that getting to the optimal situation is an extremely long and challenging project. Sometimes, however, the first steps have to be taken. Without a sufficient understanding of the key data of your business, it is not possible to succeed in the fierce competition of the 2020s. The goal can be to make the data a tough and productive helper for you. The positive thing is that benchmarking information and other help is available to achieve this goal – also directly from me!

THE IMPORTANCE OF FACTS

I have a problem, big personal problem! I’m a person who likes to make decisions based on facts. I haven’t understood how someone can trust on decision-making process where they haven’t used correct information. But now, someone could say finally, I have realized that it is not always clear what the facts are. “The truth” could be different for me than for the other person.

It has been obvious that there are almost always lack of information and we have to make decisions without all facts. We are living in the middle of chaos and we should accept that. But I still believe that right information will help you to make better decisions and that’s why you should try to collect as much facts as possible.

My company made quite big report for one of our customers. We needed there lots of information about different countries and market developments. As always, I made a list of statistics and other information which we should have before writing the final report. It sounded as a quite simple process to collect that kind of background package and the idea was to make analysis based on that information. It wasn’t so difficult to collect information, but we made one mistake which caused me personal crisis. We were curious to hear two different stories about the same situation. Both of those stories were believable ones and they were based on facts. How it could be possible that two bodies were using different facts when they were talking about the same situation?

The outcome of our work would be quite different if we would believe on the other story but not on the other one. That’s why we decided to have the third opinion from the independent research company. We got there the third version of “the truth”. Which one of those three stories is the right one? We don’t know but it was easy to choose the facts from the research company because they probably don’t have reason to have wrong data by purpose. But those two other bodies are working in that area and they should have more information than the foreign research company has, so did we make right decision?

Of course I have known that companies are using data which is supporting their own business goals. Here in Finland we are even used to say “lie, whopper, statistics” which describes that it’s possible to “prove” with statistics whatever you want. My problem is that I don’t understand why we are doing that? I believe that the world would be better place and companies would make better business if we would have the real data available. Sharing the information would help everybody and then it would be up to companies and persons how they would use that information.

I describe two cases from the gambling world where the correct information would help almost everybody. The first case is the prevention of gambling problems. The gambling industry has all data of their customers’ gambling behavior. If ministries or other authorities who are taking care of gambling problems would have that data and if they could link that to other information they have about same persons, they would have much better tools for fighting against gambling problems.

Someone might say that gambling companies are not willing to share all information about their customers because they are afraid of loosing too much revenue by doing that. They have risk of loosing customers who are playing much, probably too much. From short term business point of view they are the most profitable customers, but is that the case in long-term? If gambling business would manage to reduce gambling problems, the reputation of whole industry would increase and in long-term it might mean better business for all gambling companies. If regulators would have better information and tools, they could set more personalized limits and let normal customers continue gambling without so tight restrictions.

The other case is the discussion of market shares and the size of gambling business in specific countries. I take Finland as an example although I believe that it is not the worst example at all. Does anyone know what is the size of whole gambling business in Finland and how big market shares different gambling companies have here? No, although all data is there but companies are not willing to share it. Just the total numbers from monopoly operator Veikkaus are available and everything else is based on estimations or even guesses.

Veikkaus used to publish their own analysis about the size of total gambling business and their own market share of that in Finland. Offshore companies were saying that Veikkaus was underestimating the offshore gambling business in Finland. At the same time gambling problem researches were saying that Veikkaus was overestimating that offshore gambling. That led to the situation where Veikkaus is nowadays using the independent estimation from H2GC, but the similar discussion is still going on around that issue. Offshore companies say that offshore business is bigger than H2GC is estimating and authorities say vice versa. It is easy to understand what the reasons for that are. Both bodies are trying to improve their own interests.

It would be important to have the real data from the offshore companies to make correct decisions about the gambling law and regulation. Now the authorities have to make decisions based on incomplete information and there is the risk that they will make wrong decisions. I would like to develop the system where we would have all important facts available for decision making. That would make gambling business better for the customers for sure and probably it would be better for the companies too.

MY NEW BUSINESS LIFE

This blog will be quite personal and commercial one. I’m going to tell something about my business future and would like to hear what you think about my/our plans.

As you might have read, I resigned from Veikkaus two months ago and now I’m officially out from there and it’s time to do something else. I have started today new consulting company together with my friend Reijo Anttila and would like to give some information about our plans. Our timing is not at all perfect “thanks” to Covid-19, but we believe on our ideas and expertise and trust that there will be request for our service soon or later anyhow.

We have established consulting and development company called The Finnish Gambling Consultants which will concentrate on gambling related operations globally. We are targeting international gambling operators and suppliers. Me and Reijo (also from Veikkaus) own that company together. Both of us have worked 20+ years in the Finnish gambling operators in many different high positions and have got lots of knowledge about successful gambling business.

We have managed to make non-exclusive partnerships with five excellent professionals who will give us more resources and expertise if needed. I guess that you have heard names Philippe Vlaemminck, David Sargeant, Christian Kalb, Robin Bowler and Mark Knighton before. We have also informal network of esports experts which we could utilize if there would be need for esports consulting. It’s possible that there will be few more partnerships quite soon.

We have recognized our focus areas. There could be even more of them, but we have decided to concentrate on these six areas mainly.

Digitalization of gambling business. We have both over 20 years’ experience about that. I was responsible for online business when Veikkaus introduced that as the first lottery in late 1996. Reijo led the project when horse betting company Fintoto did the same some years later. We believe that we could help companies as well in strategic planning’s as at the executive level. During that special Covid-19 pandemic time it has been easy to notice that some companies, mainly lotteries, should be much more active in digital business.

New gambling verticals. We could help gambling companies, including lotteries, if they want to introduce new gaming vertical to their product portfolio or establish gambling business for the first time. We could help customers to find the most tempting products for their customer segments. We have recent experience from that when we were involved in the merger process of three gambling companies here in Finland. Nowadays all gambling verticals (lottery, casino, sports betting) are in the same company.

Improvement of existing business. We can help companies to make analysis of existing situation and give proposal of potential improvement areas. We could also help them in the decision-making process and further execution of that plan. We are used to make lots of analysis in our works and managed to get good results from that work.

Horse and sports betting. Our deepest experience is from horse and sports betting sector and we could offer new business and products ideas for that business sector. I’m sure that give lots of help for example to the lotteries who would like to introduce sports betting to their product portfolio. The other special knowledge we have from that area is pool-based games which are popular ones here in Nordic countries.

Utilization of data. We have worked many years with customer and product data and are able to help companies to create customer-oriented business models. We know gambling specific features about data and measurements. We believe that same models with local tunings work well around the globe and that’s why we would be able to help all kind of gambling companies globally in that area.

Strategy work. We could help companies to plan the strategy work of the company or the specific business division. We have done that many times in Veikkaus and Fintoto and could utilize that knowledge for sure. We could also provide content for that work if needed. Especially in that area we have excellent partnership network!

We are not going to concentrate only on consulting business although it will be big part of our business. The remarkably interesting area will be our own development & innovation. I would describe that as the seventh area.

New business models. We are doing the development of new business models for gambling operators by ourselves and are ready to make revenue shared business contracts about those models with operators. I’m excited about that area! I’m sure that we have and shall have excellent new business ideas and hopefully we’ll find out companies who would like to utilize those ideas.

You could find out more information about the company and us from our internet site: www.finnishgc.fi . You could send me your comments about our business plan/focus areas to my new email address jari.vahanen@finnishgc.fi . You could use the same email if you would start cooperation discussion with us too.

RESPONSIBLE GAMING HAS IMPACT ON THE REPUTATION OF GAMBLING INDUSTRY

I have worked almost 30 years in gambling business and most of that time in lottery world where I was told to use word “gaming” instead of “gambling” when I was talking about our business. I’m not native English-speaking person so I don’t recognize all details in that language, but I believe that it wasn’t only about detail issue but rather about reputation of business. Lottery people have always thought that lottery is much softer and not so dangerous business than casino business is. Sports and Horse Betting are somewhere between those two areas. To me they all are gambling business and it doesn’t matter how soft or hard versions they are. I use gaming when I’m talking about casual and social games like for example Candy Crush Saga.

It is true that lottery games have caused much less, or almost at all, gambling problems than other gambling verticals. That’s one of the main reasons why lottery has had much better brand in the society than other games groups have had. The other reason has been “benefits for the society and good causes” ideology which has been the model all over the lottery world. It’s still very common that states have monopoly for lottery games and profit from those games is going to good causes. In other games groups that hasn’t been the case or if it has it’s not anymore. The gambling world has changed and is going to change.

Responsible gaming has always been important part of gambling business, but its role has increased rapidly during last few years. Especially in Europe responsible gaming has big role in political level discussion and I’m sure that other continents will follow soon or later. It’s important to understand what responsible gaming is about. To be honest I’m not expert on that area, but I have my own view about responsible gaming and I’ll try to explain how it should work.

Problem gambling and responsible gaming are not exactly the same issue but of course those two things are linked together. There are about 3 % of adults who have had gambling problems here in Finland. About 40 % of that group are serious problem gamblers which means that there are 50 – 60 000 people who really suffer. At least in Finland the most of gambling problems are caused by casino games and especially by slot machines. That’s why the former lottery company and horse betting company haven’t thought so much about gambling problems. Of course Horse and Sports Betting are reasons for some of those gambling problems but not at all at the same level than casino games. All game verticals have become quicker and harder and they are not anymore so different than they used to be before. Responsible gaming should be in the agenda of all gambling companies.

Gambling professionals seem to be worried what will happen to the reputation of our industry. There is more and more public discussion about that and unfortunately that discussion sounded to be rather negative one. It looks like gambling will follow the way which has happened in tobacco industry already many years ago. Smoking was very common when I was young adult, but nowadays it’s not acceptable at all. I think that gambling and smoking are not the same. Smoking is unhealthy for everybody, but gambling is not so dangerous for 80 – 95 % of people. Gambling is more like alcohol than tobacco when I think about problems caused by those things. It’s sure that gambling companies should do more in responsible gaming area, but there is no reason to ban whole gambling, because it causes problems for some of customers. We should concentrate on finding effective solutions to prevent those problems!

The problems won’t be solved if just some companies would change their rules, business models or whatever is needed to change. I think that whole industry should take responsible gaming really seriously, because it will affect on the reputation of industry. If there are companies which don’t care about the welfare of their customer, we can’t solve these problems, because problem gamblers would have companies where to move from the responsible companies. How we could solve that?

States, regulators and social welfare bodies, should decide and describe guidelines and the most important features for gambling companies which should operate according to those rules. I would describe that like “box” where companies should stay inside, but there they could run their business quite freely. If there would be any company which is not following those rules, that company should be punished very heavily and finally prevent whole operations of that kind of company. That model would work if whole industry would agree on that and there would be good cooperation between the industry and regulators.

What would be the best way to prevent gambling problems? I believe in personalization where gambling companies could utilize also other data sources than their own customer data. Unfortunately, it’s not legal to combine for example company’s customer data and data of the customers who have got help for gambling problems. In principle GDPR is good thing, but in gambling problem area it prevents to solve even bigger problems than customer’s privacy. One solution could be state level data center which could have “black box” where regulator could combine information about gambling problems, income/tax level and gambling data. The result of that kind of information would be personal level gambling limits and/or bans for gambling which should be mandatory for all license companies.

I believe more in personal limits than general level limits. I’m not sure if customers could really make right decisions by themselves when it’s about gambling limits. Regulators and social authorities & experts together with gambling companies should help customers to set them the best possible limits. Those limits could be separate in different gambling verticals (lottery, casino etc.). Gambling companies have and will have tools like AI and machine learning which could help them to make better work in responsible gaming area. I hope that gambling industry could find out the way to prevent gambling problems in more effective way than it’s the case now and at the same time we could continue to run our business without causing any useless disruption for those customers who could play our games without any problems!