COVID-19 – A WAKE-UP CALL

I wrote a blog “Digitalization of Lottery Business” two months ago. I will now continue with the same theme and this blog will partly be the same than that previous one. I believe on principle “Repetition is the mother of learning”. I got the impulse for this one from the virtual SBC Digital Summit event where I participated in panel discussion last week. I discussed with Steen Madsen (A Game Above), Stuart Godfree (Mkodo) and Chris Armes (GiG) about mobile and digital opportunities for lotteries. I have thought that issues a lot during last few days and believe that we could help operators, lotteries and the other ones, who would like to develop their offering and service in that area.

It is already now obvious that Covid-19 has changed our lives. It has been amazing how fast that changed has happened. Unfortunately, it has not been good changes, but I would say that it hasn’t been totally bad either. Of course, I’m not talking about the number of dead or sick people, but how we have changed our habits to buy things and spend our free time. That “damn virus” has also showed to companies that there should be agile ways to change business strategies and plans very quickly. Those companies who have managed to do that, have better possibilities to stay alive during that crisis and after that.

Covid-19 has shown one big weakness from gambling business which is mainly problem for casinos and lotteries. That weakness is to big role of retail business and the lack of digital online business. It’s not good solution if you have “all your eggs in the same basket”. We have the best/worst examples of that in Las Vegas where casinos have been closed now some weeks and most of them have just minor online business going on or in many cases not at all online business. That has meant 95 – 100 % lost of sales and profits have changed to losses. Too many lotteries have faced similar problem. When places where you are used to sell your lottery tickets are not allowed to be open, you don’t have any places where you could get sales if you don’t have online/digital channel. There are examples where big lotteries have been forced to stop whole operations when they haven’t had online sales at all, or the share of that business has been too small.

The other example of “all eggs in the same basket” problem is sports betting. Those operators who have had just sports betting business without any other gambling verticals have faced extremely big problems. If you have offered only sports betting and there are no sports events going on, what else you could do than stop your operations? Those sports betting operators who have had for example virtual sports and/or online casino games in their product portfolio have had possibility to continue their businesses.

I said in panel discussion last week that hopefully Covid-19 is the wake-up for lotteries. Actually it should be wake-up call also for some other gambling operators too! It is not useful to say that lotteries should understand the need of change already many years ago. It is better to concentrate on the future and how they could make things better. As a skeptic guy, I‘m not sure how many of them are willing to change and how fast they are ready to do it. The time for action is NOW not sometimes in the future!

There are many things what gambling operators should have learnt from the crisis we have faces during last 2 -3 month. Companies should have adaptive strategy which means capability to react on big changes fast. They should also have capability to move changes in strategy to business plans and further to operational level as quickly as possible but in the way which their organization and customers will understand. The main problems in that area are slow processes, the fear of change and the lack of communication with employees and customers.

There are at least four areas where the most of lotteries should make improvements. Those area are digitalization, customer centric operations, products & services, and technology. All those areas would be worth of own blog, but I try to explain the main changes now shortly.

Although retail is really important part of lottery business, lotteries should have digital business too. Lotteries should understand that online sale is not against retail business but rather will support that. The next step for more developed lotteries will be omni-channel solution where retail and online will establish “one package” and work as a one sale channel. We have noticed that it is easier to offer services for customers in digital channels than in traditional retail network. But it would be possible to offer those supporting services and new kind of products also in retail network if companies could utilize digitalization in all channels, not only in online channel. Lotteries should start digitalization immediately if they haven’t done that yet.

Lotteries should have capability to serve their customers whenever and wherever they are willing to buy products. It is old fashioned way to think that good product would be enough to get customers and sales. Companies should understand and admit that customers are kings and queens and they will decide what, when and where they are going to buy. We should understand more about our customers and data is one important part of that. Lotteries should put more resources on data utilization and automatization. I’m sure that it would bring them more satisfied customers and better business.

I already wrote about “all eggs in the same basket” dilemma. Gambling companies should have wider product portfolio than the most of them have at the moment. That is big problem for lotteries mainly. There are still plenty of lotteries who are offering just basic lottery products like Lotto and scratch cards. There might be legal reasons for that, but I would say that in many cases those legal and regulative problems are just too easy explanations. I don’t believe that it would be impossible to add for example horse and sport betting to product portfolio. From business risk management point of view it is better to have wider product portfolio than limited one.

I have always seen technology as a tool for business. I must admit that it is extremely important tool which allows you to develop your business. Gambling operators should have as modern and agile technology solutions as possible. Companies should have as fast time to market time as possible and technology is the most important element there. I think that one big challenge in that area for lotteries is unwillingness to make changes to technology which they are used to use. The most of lotteries are used to buy everything from same technology supplier and that would block the possibility for change and opportunity to use the best solutions in different areas.

Lotteries should be more ready to take more risks, controlled ones of course. I’m extremely keen on helping lotteries, and other gambling operators, if they would like to start to change their business now. The game is not over, but Covid-19 has showed that time for change is now!

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.

DIGITALIZATION OF LOTTERY BUSINESS

Lottery business has been based on monopoly all over the world as long as I could remember. Lottery games have been run by national lotteries mainly. Those companies have been owned by states, but that’s not the case anymore. There are already many countries where lottery games are operated by private companies which are trying to make as good business as possible. That has changed the lottery world a lot and has caused big differences between different lotteries. Lottery companies used be like state offices in old days and they still are in some countries. At the same time there are modern business companies running those games too. It would be interesting to see what will happen in lottery business if for example Virgin Group will win the UK lottery license…

Because the ownership and business strategies of lotteries are so different, it’s natural that the state of digitalization of those companies varies a lot. We have lottery companies where the share of digital business is something like 50 % of total business and companies which haven’t even started the digitalization of their business. Someone could guess that state-owned companies are in the latter group and private companies are in the first group, but that’s not the case. For example, my former company Veikkaus is 100 % owned by the Finnish State and almost 50 % of lottery business is coming from digital channels. Another similar example is Norsk Tipping.

I have said many times before that gambling, or lottery, business is not specific and separate business area. Our consumers are used to use digital channels to get other services and products. People are using internet and their mobile phones almost for everything and it’s strange if they can’t get their lottery products from there too. Actually, lottery products are more suitable for digital channels than many other products, because there is no need for distribution. Lotteries should be part of normal life and be available in digital channels if customers would like to get them there.

Veikkaus introduced lottery games in internet already in 1996/1997 as the first lottery in the world – sorry my Icelandic friends! I was in charge of that digital business first years and due to that I was visiting many lotteries and events and told about our solutions and experiences. Those days the most of lotteries were afraid of reactions from retail network and weren’t ready to introduce digital solutions. It took surprisingly many years until lottery companies outside the Nordic countries started digitalization of their business. Veikkaus and other Nordic lotteries (Danske Spil, Norsk Tipping and Svenska Spel) have further developed their digital businesses. Someone might say that we are using digital tools even too much and trying to sell more than enough. Digitalization and utilization of customer data enable us to make more effective marketing and product development and that will improve the business results. Lotteries should find out the balance of business and responsible gaming together with regulator, but that is partly another story.

I believe that digitalization will give lottery companies and regulators more tools for responsible gaming too. We get lots of data from digital channels and that make it possible to analyze customer behavior more than it’s possible in retail channels where gambling has been anonymous. Digitalization makes it possible to give better service for customers. We could also offer more entertaining games and services. Of course, it’s important that lotteries understand how far they could go and control their actions. Otherwise there is a risk that gambling problems would increase.

The market situation has also changed. There are nowadays companies like Lottoland operating in lottery sector and traditional lotteries should compete against those modern companies. It’s impossible “fight” if we are not using the similar tools. I think that it’s better way to compete by developing our own business than try to beat those newcomers in courtrooms. I would almost like to thank Lottoland about “wake up-call” for lotteries…

It’s important to understand that digitalization of lottery business doesn’t mean just new digital channels internet and mobile. There are also lots of new opportunities for traditional retail channel. It’s possible and necessary to utilize new technology in retail business too. We have already lots of example of multi-channel products. We have brought digital services to retail network and that has utilized both sales channels. FDJ in France and Danske Spil in Denmark have managed to get excellent business results when they have launched new digital services for their retail network. I have admitted that I believe in omni-channel solutions. I’m sure that lotteries will introduce games where customer could play same game in retail network and continue that game in digital channel or vice versa. I’m also sure that customers will use their mobile phones for gambling when they are physically in retail shops – we have already seen some small examples of that. It might be impossible to say in the future which part of lottery business is digital and which retail business and it doesn’t matter at all. Lotteries should understand that retail business is the asset which the most of other gambling operators don’t have and that’s why it’s important part of the business to further develop!