Enabling Rapid, Radical Innovation Within The Lottery Sector

A guest contribution for the EL Magazine from Rob Beattie (Head of Camelot Labs) and Matt Godfrey ( Head of Consumer Strategy & Innovation at Camelot and Chair of the EL Innovation Working Group)

This week, one of the last few Blockbuster Video stores in the USA closed its doors for the last time. Most of us are familiar with the demise of this once-dominant leisure giant and may  recall Jim Keyes, their CEO, declaring confidently in 2008 that “Redbox and Netflix are not even on the radar”. Of course just four years later, Blockbuster was all but dead and Netflix had grown enough to be very much “on the radar” of media behemoths like Verizon and Sky, with growth rates and NPS[1] ratings previously unseen in the sector.

Many of the challenges facing Blockbuster in 2008 are similar to those facing our sector today. Far too few young adults are engaged in our propositions – and we know that if we aren’t part of their behaviour by the age of about 30, we probably never will be.

Consumer expectations of “leisure” have grown (and are likely to grow further and faster as technologies like VR and AR become widely adopted), social interaction is more immediate and compelling than ever before and retailers like Amazon have set a very high bar for convenience (offering delivery within the hour in most UK cities). We also – like Blockbuster – face the increasing likelihood of unseen competitive disruption.

Of course many other sectors are also trying hard to find relevance in the 21st century, and most face similar challenges with legacy platforms, processes and attitudes – publishing, news, telecoms to name a few. Most are using common techniques such as beta programmes, incubator businesses and continuous integration to rapidly evolve their existing products and create new ones, coupled with agile transformation programmes to unlock platform and delivery capability.

As lotteries, however, we face challenges unique to our sector that limit our ability to achieve true end to end agility:

Business model: Our margins are typically low and our business models are heavily regulated, so our opportunities to generate cash, raise capital or form partnerships to fund NPD is limited.

Risk appetite: In our sector, small errors can carry major consequences (easily costing exponentially more than the face value of tickets sold, in addition to reputational damage or regulatory sanction). Our risk appetite is therefore understandably very low.

Little correlation between cost and scale: A lottery game for 100 people requires the same integrity as a game for 5m people, so it is almost as expensive and time consuming to build. Our IT processes and systems are built around delivering high integrity, large scale products. For most of us this is compounded by intensive regulatory oversight and the need for approval of detailed plans in advance.

In consequence, we find ourselves investing a lot of our available NPD resource into a very small number of concepts, fairly early in their development, with very limited opportunity to evolve as true consumer needs emerge due to the high cost of change. These are usually evolutionary concepts which are unlikely to solve our long-term problems.

Simultaneously, the more radical concepts are discarded too early because they’re too expensive or disruptive to take to the next stage and they have a high chance of failure.

The challenge in unlocking these more radical concepts is simple to state: They need to have a high chance of success before we commit to expensive delivery. Given that around 80% of new ideas fail, how can we achieve this?

Firstly, we need to use a broad spectrum of exploratory methods to ensure that the product is well specified, with low commercial risk and low player protection risk, before we commit to build.

Currently, we rely heavily on traditional research methodologies, focus groups and user testing, which are vital for identifying the direction of travel for our NPD, but fail to reliably tell us how consumers use our emerging products and react to them over time, in a natural environment. Critically, conventional research and user testing does not provide us with the opportunity to quickly evolve the product experience and execution based on real life consumer behaviour.

Secondly, we need the ability to prove concepts at high volume, since most of our radical ideas will fail. We need to be able to do this cheaply and quickly because we’re financially constrained and – as Jim Keyes, Blockbuster’s CEO – found, our platform might burn faster than we think.

So how can we enable rapid, radical innovation at speed? The key is to test and prove, or discard a high volume of concepts in conditions as close to real market as possible, in order to generate enough confidence to take them to market.

Firstly, bringing commercial risk (at a feature-by-feature level) to the front of our product development processes helps us to very quickly prioritise our effort in order to identify, test and solve for the elements that are most likely to cause our product to fail. For example, if acquisition cost is our biggest worry, we could test this immediately by running a small advertising campaign and measuring response rates. We can then decide (on the basis of real data) whether to evolve our proposition, reject it or proceed to run a test on the next highest risk.

Secondly, using this “risk first” approach, we can progress through small iterative phases of research, prototyping and (ultimately) launching semi-functional games into market in order to prove the business case as far as possible before committing to the inevitably high cost of building a fully functional game. Creating the right environment (structure, skills, tools and culture) to enable this is key.

Thirdly, people with NPD responsibility should remain close to technology strategists, architects and business change teams, to ensure that opportunities to enable greater agility through organisational change are identified.

Finally, despite the challenges that we face, our desire to work together and share experiences gives us the opportunity to place our industry in a far better position than many to succeed.

[1] Net Promoter Score

A guest contribution for the EL Magazine from Rob Beattie (Head of Camelot Labs) and Matt Godfrey ( Head of Consumer Strategy & Innovation at Camelot and Chair of the EL Innovation Working Group).

Rob Beattie, Head of Camelot Labs

Matt Godfrey, Head of Consumer Strategy & Innovation at Camelot and Chair of the EL Innovation Working Group

Synopsis

Français

Favoriser une innovation rapide et radicale dans le secteur de la loterie

Comment peut-on favoriser une innovation rapide et radicale ? La clé consiste à tester et approuver (ou rejeter) un grand nombre de concepts dans des conditions aussi proches du marché que possible, pour générer suffisamment de confiance pour les mettre sur le marché.

En plaçant le risque commercial (au niveau de chaque caractéristiques) au premier plan de nos processus de développement de produits, nous pouvons très rapidement fixer les priorités par rapport à nos efforts afin d’identifier, de tester et de résoudre les éléments les plus susceptibles de causer l’échec d’un produit. Si, par exemple, le coût d’acquisition est notre principale inquiétude, nous pourrions le tester immédiatement en lançant une petite campagne publicitaire et en mesurant le taux de réponse. Nous serons alors en mesure de décider (sur la base de données réelles) de faire évoluer notre proposition, de la rejeter ou de procéder à un test sur la plus grande source de risque suivante.

Deuxièmement, en utilisant cette approche basée sur le « risque d’abord », nous pouvons progresser à travers de petites phases itératives de recherche, de prototypage et (pour finir) de lancement de jeux semi-fonctionnels sur le marché pour déterminer autant que possible la pertinence de l’analyse de rentabilité avant d’investir dans le développement du jeu complet, dont les coûts sont inévitablement élevés. Pour y parvenir, la clé consiste à créer le bon environnement (structure, compétences, outils et culture).

Troisièmement, les personnes impliquées dans le développement de nouveaux produits doivent rester au contact des stratèges technologiques, des architectes et des équipes de gestion des changements opérationnels pour mieux identifier les opportunités de gagner en souplesse via le changement organisationnel.

Finalement, malgré les défis auxquels nous sommes confrontés, notre désir de travailler ensemble et de partager nos expériences nous donne l’opportunité de placer notre secteur dans de bien meilleures conditions de succès que beaucoup d’autres.

Español

Posibilitar una innovación rápida y radical en el sector de la lotería

¿Cómo podemos posibilitar una innovación rápida y radical a gran velocidad? La clave está en poner a prueba y validar o descartar un gran volumen de conceptos en condiciones lo más similares posible al mercado real, con el fin de generar suficiente confianza para llevarlos al mercado.

Llevar el riesgo comercial (característica por característica) al frente de los procesos de desarrollo de producto nos ayuda a priorizar nuestro esfuerzo muy rápidamente para identificar, poner a prueba y resolver aquellos elementos que tienen más probabilidades de provocar el fracaso del producto. Por ejemplo, si nuestra mayor preocupación es el coste de adquisición, podemos analizarla inmediatamente lanzando una pequeña campaña publicitaria y midiendo los índices de respuesta. Entonces podemos decidir (basándonos en datos reales) si desarrollar la propuesta, rechazarla o analizar el siguiente mayor riesgo.

En segundo lugar, usando este enfoque del “riesgo primero”, podemos progresar mediante pequeñas fases de investigación iterativas, creando prototipos de juegos semifuncionales y (finalmente) lanzándolos al mercado para probar dicho modelo de negocio hasta donde sea posible antes de comprometerse al inevitablemente alto precio de construir un juego totalmente funcional. Crear el entorno adecuado (estructura, aptitudes, herramientas y cultura) para posibilitar esto es esencial.

En tercer lugar, quienes tengan responsabilidad en NPD [New Product Development (Desarrollo de Nuevos Productos)] deberían permanecer cerca del personal de estrategia y diseño tecnológico y de los equipos de cambio empresarial para garantizar que se identifican las oportunidades de posibilitar mayor agilidad mediante cambios en la organización.

Finalmente, a pesar de los retos a los que nos enfrentamos, nuestro deseo de trabajar juntos y compartir experiencias nos da la oportunidad de situar nuestra industria en una posición mejor que la de muchos otros para tener éxito.

Deutsch

Radikale Innovation in der Lotteriebranche

Wie können wir hochfrequenter radikaler Innovationen den Weg ebnen? Zentral ist, möglichst viele Konzepte unter möglichst realistischen Bedingungen zu testen, um sie schnell zur Marktreife zu bringen – oder sie zu verwerfen.

Indem wir das Geschäftsrisiko (pro Element einzeln berechnet) zum integralen Bestandteil unserer Produktentwicklungsprozesse machen, können wir unsere Initiativen schnell priorisieren und diejenigen Elemente identifizieren, testen und anpassen, die den höchsten Risikofaktor darstellen. Wenn beispielsweise die Ankaufkosten das größte Risiko darstellen, so können wir dies unmittelbar testen, indem wir eine kleine Werbekampagne durchführen und die Resonanz testen. Dann können wir auf der Basis von Daten entscheiden, ob wir unsere Initiative weiterausbauen, sie verwerfen oder den nächsten Risikofaktor testen.

Zweitens können wir mit dieser risikobasierten Methode rasch hintereinander mehrere Zyklen von Entwicklung, Prototyperstellung und Markteinführung semifunktionaler Glücksspiele durchlaufen, um das Geschäftsszenario vor Eingehen der finanziellen Risiken eines vollfunktionalen Glücksspiels so ausgiebig wie möglich zu testen. Eine zentrale Voraussetzung hierfür ist die richtige Umgebung (Struktur, Kompetenzen, Tools und Kultur).

Drittens sollten Mitarbeiter mit NPD-Aufgaben eng mit Technologiestrategen, Technologiearchitekten und Geschäftstransformationsteams zusammenarbeiten, um Gelegenheiten zur Dynamisierung durch Unternehmenstransformation wahrzunehmen.

Trotz der Herausforderungen der heutigen Zeit können wir unsere Branche gemeinsam in eine bessere Ausgangsposition bringen, als viele anderen vergönnt ist.

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