Paul’s Wall September 26

Paul’s Wall September 26

The presenters at Lottery Expo Miami delivered an unforgettable program. They circled around some elusive concepts at the ‘30,000 foot’ level - then brought it down to a practical real-world application level. Margaret DeFrancisco’s (CEO Georgia Lottery) call-to-action to beat down the corporate “hairball” set much of the tone. Described as being “an entangled pattern of behavior or mess of bureaucratic procedure that discourages originality and stifles imagination”, the hairball is the nemesis of innovation and progress. Margaret points out that Lottery is not somehow different or special with respect to being bedeviled by obstacles to change. That’s just business and we need to do what successful companies all do to drive an agenda that keeps them in the leadership position. Cynthia O’Connell(Secretary Florida Lottery) welcomed the conference participants to the great state of Florida with a question: Why can’t lottery apply the kind of demanding business principles found in the private enterprise sector to achieve more ambitious results; to systematically build them into our DNA like all successful businesses do? The methods of operation, the tools to set a business plan into action, measure performance, hold business units accountable for achieving results, build customer satisfaction with retailers as well as the consumer, can all be done to effect accelerated growth and the achievement of more ambitious growth targets for Team Lottery. Gardner Gurney (Deputy Director and Director of operations for the New York lottery) led the vendor-operator panel. Ultimate performance depends on a productive hand-in-glove relationship between operator and its commercial partners. Gardner’s panel included Gary Grief (Exec’ Director Texas Lottery), Jenny Canfield (Acting Exec’ Director Minnesota Lottery), John Pittman (Vice President Marketing INTRALOT), and Doug Pollard (Co-CEO of Pollard Banknote). It’s called “not for the faint of heart” panel because of their willingness to tear into the hairballs that get in the way of perfect alignment between the actions of the commercial partners and the objectives of the lottery. Warwick Bartlett (Founder and CEO of Global Betting and Gambling Consultancy GBGC) closed the first session with an analysis of the position of Team Lottery in the bigger scheme of the global gaming and wagering business; one over-arching conclusion being that Team Lottery has decisive competitive advantages but the window of opportunity will not be open for long. Another, though, is that the mission of Lottery varies from one jurisdiction to another. Maximizing revenue and transfers to Good Causes is never the sole objective and sometimes not even the primary objective, and so the performance assessment model needs to include a precise and nuanced definition of those objectives.

As per Warwick’s theme of differing objectives, Ana Paula Barros (Director of Legal and External Affairs for the Portugal Lottery, Santa Casa da Misericordia) described how the mission for lotteries in Europe is fundamentally different than it is in the U.S. In Europe, generating funds for Good Causes is secondary to player protection and responsible gaming. We all know that preservation of the monopoly system for lotteries is vital to a business model that yields such high margins for the benefit of Good Causes. But, Ana Paula explains how in Europe, preservation of the monopoly system is also vital for the protection of the player and to manage consumption (as Loto-Quebec’s Alain Cousineau explains in an interview that reflects a view quite similar to Ana Paula’s). Of course, lotteries accomplish all the above - generating funds for good causes, protecting the player, channeling economic turnover away from untaxed criminal enterprises and into channels that deliver economic benefit to society. But still, Warwick and Ana Paula explain why the way we measure performance and clarify objectives can be radically different depending on the public policy mission.

The Canadian provincial lotteries do not all approach Internet gaming in the exact same way. But they do all have progressive approaches to channeling the i-gaming player to the legal operator, which in all the provinces is the exclusive role of the lottery operator and nobody else. Kevin Gass (Vice President of Lottery Gaming for BCLC) gave a 360 degree overview of the issues that go into the development of a sustainable i-gaming business plan. It is a complex undertaking, especially when collaborating with other provincial lotteries on i-poker and other social games. There was not time enough to drill down into details of implementation, but a clear roadmap of all the necessary components to a plan that optimizes the potential and minimizes problems was provided.

The “Elephant in the Room” panel addressed the gulf that can exist between clarifying objectives and implementing an action plan that achieves the desired results. Led by moderator Rebecca Hargrove (CEO Tennessee Education Lottery), panelists delved into the ways in which management structure helps, or hinders, the effective implementation of a business plan. Including two Lottery Directors, Gary Grief(Exec’ Director Texas lottery) and May Scheve Reardon (Exec’ Director Missouri Lottery); and two commercial executives, Connie Laverty O’Connor (Chief Marketing Officer GTECH and also CEO of the NorthStar Lottery Group which runs the Illinois Lottery) and Jim Kennedy (Chief Marketing Officer Scientific Games which is also a partner in the NorthStar Lottery Group), the panel addressed the differences between management models and how they can work to optimize performance within each model. This is a complex issue which involves missions defined by shapers of Public Policy, and a wide variety of strategic approaches. And it takes us directly to the theme of the conference which is how to Unleash the Power of Brand lottery; how to fully leverage the entrepreneurial resources abundant in all lottery operations, whether operated under a state-agency model or by a private-enterprise commercial manager.

I mistakenly introduced Kurt Freedlund’s (Senior Vice president and General Counsel) to the Georgia Lottery) presentation as a 30,000 foot view of what is possible in the realm of creative collaborations between lottery operator and major consumer brands - Sort of a follow-up to the Imagineering session he held at our March NYC conference. What I did not realize is that the vision he shared just six months ago has been turned into a reality, shattering the assumption that bureaucratic ‘hairballs’ cause the time-line from concept-to-implementation to be impossibly long. Kurt explained how partnering with multiple major consumer brands, collaboration on a scale that reflects the potential for national initiatives to transform our business, is being implemented by the Georgia lottery. The panel that followed Kurt confirmed that a new attitude of hopeful optimism is already reshaping the U.S. lottery industry. “Extending the Power of Multi-State Collaboration” is more achievable than ever, and the time-lines for making things happen is being compressed. Moderated by Terry Rich (CEO of the Iowa Lottery Authority and Chair of the MUSL Marketing and Promotions Committee), the panel of Jim Haynes(Exec’ Director Nebraska Lottery and President of the Powerball Group), Alan Yandow (Exec’ Director of the Vermont Lottery and immediate past President of the Powerball Group), Kevin Gass (Vice President of BCLC and one of the leaders of the collaboration between Canadian provincial lotteries), andChuck Strutt (Exec’ Director of the Multi-State Lottery Association-MUSL), we couldn’t have asked for a better team to address the topic of leveraging the collective power of lotteries. I can’t begin to tell you how inspiring it is to hear the over-riding sense of confidence that ambitious agendas that will benefit all lotteries are now thought possible and action is being taken to turn them into reality. Innovation that happens at a snail’s pace will be obsolete before it hits the market and therefore benefits nobody. Our leaders are ramping up in an exciting way, accelerating the rate of progress, pushing hard to convert promising concepts into collaborative action plans that will transform our industry and increase funding to the beneficiaries of all state lotteries. And it’s happening now.

Another call-to-action came from Don Feeney (director of Research and Planning for Minnesota Lottery). The good news is that the interests of lottery stakeholders are aligned with the interests of the public and the state legislators charged with defending those interests. That’s good because our adversaries (commercial casino and offshore i-gaming operators) are pouring millions into an agenda that would transfer regulatory authority of the gambling industry over to the federal government, disenfranchising states and their lotteries in the battle over control of the gaming and wagering markets. As Ana Paula also emphasized, it’s also about player protection. And what’s at stake is much more than the limited sector of Internet gaming. As Don, Warwick, Ana Paula, and others explained, the regulatory model that defines the i-gaming sector is the Trojan Horse that will have dramatic impact on the entire industry, including the lottery model that generates billions of dollars for Good causes.

We’ve talked about the chasm between the 30,000 foot view and the rubber-hits-the-road action plans needed to turn vision into reality. There’s another chasm that separates the energy, imagination, lifestyles, and game preferences of the next generation from the sophisticated business sensibilities required to run multi-billion dollar enterprises. There was much talk about the need to inform our business strategies with the views of younger people. Nikki Orcutt (Deputy Director of Marketing for the West Virginia Lottery) gave us an exciting glimpse into how that gap is being closed. Combining the intelligence of a seasoned business pro with a direct connection to the zeitgeist of popular youth culture is rare indeed. Nikki delivers with a picture that makes the job of connecting lottery with the next gen’ gamer not only do-able, but replete with the feeling of “gee, why didn’t I think of that”.

Which brings us to the Emerging Leaders Program, the Tennessee Lottery’s groundbreaking initiative to develop executive talent. Investing in the talent that will lead Team Lottery into the future is more necessary than ever. Introduced by Rebecca Hargrove (CEO of the Tennessee lottery) and Wanda Young Wilson (Executive Vice President and General Counsel to the Tennessee Lottery), the Tennessee Lottery Young Executive team presented a business plan, created wholly by themselves, that combined the out-of-the-box thinking needed to drive change in our industry with a solid action plan. Sandy BeCoats(Retail Sales Manager), Nancy Williams (District Office Supervisor), David Kan (Director of Software & Data Systems Services), and Ron Jackson (Product & Retailer Accounting Manager) won the team competition and impressed the audience (as it would also impress in the corporate boardroom) with the strength of a plan that covered all the bases. As a sales guy whose big ideas are not always supported by the requisite focus on the details of a well-conceived business plan, it is an inspiration to witness the discipline and sophistication of our next generation of leaders.

I handed Team Delaware Lottery the challenge of presenting on the theme of “Embracing Complexity: Building synergy in an expanding portfolio of products and channels”. The Delaware Lottery has a larger variety of game categories than any other U.S. lottery. That creates a whole new level of complexity when it comes to getting it to all work together for optimal overall performance and results. Insofar as the variety of games and channels is increasing for all lotteries everywhere (albeit more for some than others), the business of effective portfolio management will be increasingly challenging for all lotteries. Vernon Kirk (Principal Deputy Director and Deputy Director Sports Betting), Jim Logue (Deputy Director Video Lottery), Richard McDonald (Deputy Director, Table Games), and Brian Peters (Deputy Director, Traditional Lottery) described the changes they are making to meet those challenges and the dividends accruing to a model that incorporates this new business theme of “managing complexity”.

The conference closed with a galvanizing presentation by Team Florida Lottery. These are the specific initiatives that are driving the 5% + increase in sales that the FL Lottery promises to deliver in fiscal 2012. As Marcy Jackson (Chief Financial Officer) points out, profit is a function of both costs and revenues. Many of us think of Lottery as a “top-line” driven business. But with budgets being tight, cost savings can provide the critical funding needed to improve the operational activities that ultimately drive revenues. Those costs savings can be derived by investing in new technology that not only reduce costs, they also improve customer service and therefore the value of the product. Maybe we can’t get the increase in the ad’ budget so sorely needed. But maybe we can get approval to invest in the technology that reduces costs, streamlines operations, improves service, and generates funds that can be allocated towards sales support functions. An extreme makeover of the FL Lottery’s Prize Payment System is the specific initiative that Marcy described as delivering outstanding results that are contributing to the FL Lottery revenue goals. Tom Dolan (District Sales Manager for South Florida, with over $900 million in sales) described the tools used to manage a sales district that is larger than 21 U.S. state lotteries and is far more diverse (culturally, economically, ethnically) than any district or lottery. We are talking about how to harness limited resources to meet the needs of extreme market segmentation. And the leadership needed by the sales manager to deliver stretch goals in order for the lottery to meet its revenue target. Dennis Harmon (Deputy Secretary) explains the cutting edge tools that connect the lottery operator to its retailers and customers in real-time. The process that governs player research and retailer input is being automated into a system of real-time feedback that turns “data-driven decision-making” into a reality that informs all aspects of promotional and marketing strategy, game development, and operational improvement.

Wayne Lemons is retiring after 21 years of running the Delaware Lottery. We want to thank Wayne for his years of service and leadership, for being such a good friend to Susan and me personally as well as so many others, and for being such a good sport to allow us to present him and his wonderful wife Janet with the PGRI Lottery Industry Statesman Award. Only the second award to ever be presented (the first being to Dr. Ed Stanek in 2006), the room was packed at 10:00 am. on Weds morning to share this special moment with Wayne and Janet. Best wishes to Wayne and Janet as you embark on your next exciting adventures in life!

Thank you to the entire team of Lottery Expo Presenters for delivering a fabulous conference experience! And thank you to our Commercial Partners and Sponsors whose financial support makes it all possible. It will take a few weeks to edit the video-recordings. We will have those posted for you atwww.PGRItalks.com by the middle of November. Thank you all so much for your input and support. We very much appreciate it and are dedicated to working hard to earn it. Please feel free to e-mail me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .