Interview with Stéphane Pallez: Investing in Digital Transformation that Drives Growth
What are the primary objectives of Strategic Plan FDJ 2020: Digital Transformation?
Stéphane Pallez: The objective is to drive sustainable growth in light of the digital revolution and evolving consumer tastes, preferences and behavior. The key asset of lottery operators such as FDJ is their large base of customers. That is why the most critical strategic objective is to meet the needs of the modern consumer and continue to grow that base of players. Presently, the needs of the modern consumer are being shaped by the competition in the entertainment industry. Digital technology is used to enhance the consumer experience at every level and we need to do the same to be a leader in this transition, and therefore, to accelerate the pace of innovation and digital transformation to deliver the very best player experience. That is the key stake of our Strategic Plan FDJ 2020.
What are some of the immediate action-plans of Strategic Plan FDJ 2020?
FDJ 2020 Strategic Plan involves a massive investment in IT to transform all aspects of our business. Digital transformation applies to everything – from game development to inventory management to retail support to CRM to merchandising and distribution and communications and internal operations. It is technology-enabled, but the ability to effect change of this magnitude depends at least as much on cultural adaptation as on technological expertise. And since end results are ultimately determined by players, the real goal is to enrich the relationship with our clients and the value we deliver the players. Digital transformation involves definitely action-plans in every single area of our business.
In that vein, we are developing breakthrough innovation in terms of games, services to the consumer, and support of our retailers. We have now taken direct control of our sales force to enable us to drive change and innovation at the land-based retail level. In sports betting, FDJ is already very successful at developing this very competitive sector and we will continue to grow through the recruitment of new FDJ customers and therefore a key growth driver. The sports betting sector in particular requires large investments in IT systems. These investments can be shared with other lotteries that need sports betting platforms as well.
Would you describe it as the omni-channel model with a “Mobile-first” component to it?
Mobile is key, but I would not describe it only as “mobile-first” because everything – game categories, promotional and distributional strategies, IT platforms, retailing, etc. are all inter-related. It is about integrating devices and channels to enrich and modernize the omni-channel consumer experience and relationship with FDJ, particularly at the physical retail point of sale. An example of that is our new sports-betting mobile app that simplifies, and enlarges our offer right in the physical retail point of sale. This is good for our retailers and good for our customers who find the omni-channel model very natural. Mobile becomes an extension of the retail venue, surrounding the player with a richer, more dynamic and varied relationship to FDJ.
The plan involves “an open innovation approach consisting in partnership with leading companies or startups.”
Our purpose is to integrate the innovation brain-trust from many different resources. FDJ is a technology company, with more than 400 tech experts and an IT system that processes more than 4 billion transactions per year with 3 datacenters. FDJ has also two dedicated subsidiaries handling technological developments: Lotsys that provides equipment, software and services for lotteries and LVS that supplies sports betting platforms and internet technologies in particular for live betting. We have today the opportunity to connect more of these key assets with start-ups and with the broader tech and media leaders in France, and therefore hopefully also contribute to the success of the French tech and digital economy in France. We want to cast a wide net to loop in many partners and multiply and accelerate our capacity to innovate, to capture the intelligence of others who are creating solutions in related but different areas. For instance we are partnering with Asmodée, a world leader in board games, card games, and role-playing games – game categories that are different from ours. It is precisely why we can learn from them about player behavior and fresh new ways to approach innovation and connect to the modern consumer. Our collaboration with Asmodée allows us insights that we would not have otherwise had. One of the metrics of the Strategic Plan is that 10% of our revenues in 2020 will be generated by games that do not exist today.
Our collaborations with Facebook and Google are also enabling us to create new relationships with customers and learn to build and manage social networking communities. This is a rapidly evolving space and we need to apply the most advanced methods to capture data and turn research into executable action-plans.
Our relationship with the Web School Factory (a school and start-up incubator that focuses on digital transformation) is connecting us with the brightest minds of the younger generation. I can tell you, it is a whole different way of thinking – and not just about games and social networking, but about how to solve problems and create business solutions. This is again not just a digital revolution. It’s a cultural revolution and that is what is most promising and exciting.
Our partnership with Partech Ventures, a venture-capital fund, focus on four areas of innovation: emerging consumer behaviors, new modes of mobile use, changes in distribution and innovation in entertainment. At the end of the day, the objective of all this new eco system is to create a “comprehensive customer experience with FDJ”, building on the application of digital services to customers as well as the complementarity between the physical network of Bar-Tabac-Presse and the online games.
FDJ has shown some very exciting increases in instant scratchers. Is there something you’re doing in particular that is driving that success?
FDJ has indeed been very successful in instant scratch games since they represent 46 % of our sales and 19 M clients in 2015. Instant scratch-offs have the potential to engage a very large and diversified customer base. So the portfolio of games must be similarly expansive and diverse to appeal to many different play-styles. We have sophisticated tools for deconstructing, analyzing, and reconfiguring the mechanics of those games. So the game development process is always enhancing the appeal of the games to the expanding variety and narrowing niches of play styles and preferences. The player base wants variety and they want an increased frequency of fresh new game launches. The last two years have been very successful in terms of growth (+ 10 % in 2015) and we are very confident that this is a category that is poised for continued growth. Instants are also a category that supports our digital transformation strategies to integrate the digital and the physical worlds, engaging the consumer on multiple platforms and channels.
FDJ increased Sports betting by 14%. I find that astounding in light of the intense competition in the sports betting space.
The global French sports betting market is still under construction. The online market is growing close to 30% a year. But the physical market is also growing close to 20%, depending on the current sports events, which is remarkable. It does already account for almost 20 % of our total sales and we are proud to be a major actor of this development.
Sports betting is a market that will continue to be shaped by innovation and technology. It is also a market that still has the potential to recruit new players, and that makes it strategically important to FDJ. Our investment in this space reflects our commitment to being a leader in this market in the long term.
What are the synergies between sports betting and other game categories?
The synergies are not so much about sports-betting players migrating to other game categories or vice-versa, but in the meta-branding and the IT and distributional infrastructures that connect FDJ to the players. We want the entire community of consumers who engage in recreational gaming of all varieties to have a positive relation and image of FDJ, as a natural destination for games. The sports betting sector is large and growing rapidly so it is vital that we build a strong branding connection with that player base as with the entire community of gamers. That is the meta-branding component. On the IT systems and digital transformation front, there are powerful synergies that we can leverage to create a global player experience that stretches across all game categories and channels of distribution.
How are FDJ’s skill sets and competencies being leveraged to help other lotteries, like Santa Casa in Portugal, to accomplish their goals?
Since FDJ is investing half a billion euros over the next five years to develop the most sophisticated tools to drive growth, we believe that this investment could and should be leveraged by selling services and entering into cooperation with other lotteries to contribute to their business objectives.
The partnerships we are forging with leaders in the media, consumer marketing, technology, and gaming outside of the Lottery industry are transforming our whole approach to business. It is our hope and expectation that the solutions we create for FDJ will be of value to others facing similar sets of challenges.
Our subsidiaries Lotsys and LVS, under a new international brand to be announced in Singapore, will be the key actors to operationalize this strategy.
What can be done to improve stakeholder relations and Lottery’s influence in the arena of Public Affairs?
Pallez: It is essential that lotteries are recognized as key partners in the public debate about regulatory and public policy as relates to gaming, lottery, and online gambling. Lottery operators have much at stake in this debate. Lottery’s dedication to the highest standards of Responsible Gaming can help inform the process of establishing standards that apply to all operators of games-of-chance for the benefit of society. Our mission is to serve the best interests of society and that’s why our contribution to the public and regulatory policy debate is relevant and needs to be heard. Lottery operators must communicate proactively and assertively to ensure that the political process is well informed by their experience and perspectives. After all, we are the ones who are genuinely and fully dedicated to the protection of the best interests of society.
Paul Jason: What is your view of EL and your main goals as Chair of EL Public Affairs Coordination Committee?
Pallez: European lotteries have evolved greatly over the past decade. There is now quite a diverse set of business models. European lotteries are now involved in all sectors of the broader games-of-chance industry. Some, like FDJ and many others, now offer sports betting and many forms of internet gaming in addition to traditional lottery games sold through land-based retail. We are all innovating and working hard to ensure that the industry evolves in ways that align with the best interests of society. Responsible Gaming and Corporate Social Responsibility are core to our mission and are applied to the development of new games, new channels of distribution, and the manner and methods in which all aspects of our business are conducted. Aside the office in Lausanne and all the work it is doing for EL from there, we also have an office and representation in Brussels which represents the interests of the membership of the EL and is very active in all matters of European government policy-making and legislation.
Fast Facts about Française des Jeux
- 2015 total sales: €13.7 billion; +5.4% increase over 2014
- Lottery games sales: €11.4 billion; +3.8% increase
- Scratch games sales: €6.3 billion; 46% of total FDJ sales; +10% increase
- Sports betting sales: €2.3 billion, 17% of total FDJ sales, up 14%
- Digital sales (retailer network and online) increased by 19% to €570 million, or 4.1% of sales, with a total of 1.3 million online customers
- 3 million customers wagered an average of €10 per week
- Omni-channel distribution network that includes 31,900 points of sale
- 23,000 new betting terminals to digitize the physical network
- €3.1 billion net funds distributed to the national community:
- The FDJ 2020 Strategic Plan reinforces the company’s commitments concerning responsible gaming, making use of the potential offered by digital technology. The Plan also reinforces the company’s CSR policy in terms of the economic, social and environmental impacts of its activity.
- New Partners: Asmodée, YouTube / Google and Web Factory School
- € 100M of future investments; € 13 million committed in start-up (fund Partech International)
- International: FDJ operates sports paris of the Portuguese Lottery Santa Casa de Misericordia
Biography of Stéphane Pallez
After graduating from the Institut d’Etudes Politiques de Paris and ENA, Ms. Pallez began her career at the French Treasury Department and was Deputy Director at the board of the World Bank in Washington between 1988 and 1991. She was then appointed Advisor on industrial affairs to the Minister of Economy and Finance until 1993. She held different positions in the French Treasury including Insurance Supervision and Regulation and monitoring of State-owned companies. From 2000 to 2004, she was the Head of the European and International Affairs of the Treasury Department. In 2004, she joined France Telecom-Orange as Deputy CFO. In July 2011, she became President and CEO of CCR (Caisse Centrale de Réassurance). She was appointed President-Director General of Française des Jeux in 2014 where she is now leading the digital transformation of the 4th largest lottery in the world. She is VP of EL Excom and member of WLA Excom. She is also member of the Board of several French leading companies such as CNP Assurances where she chairs the Audit Committee, ENGIE and Eurazeo.
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