Not all opportunities are created equal. Organizations need to take a step back and analyze what drives their customers, what’s profitable, what’s not, and how they can drive revenues in areas with the strongest performance. By focusing on their strengths, organizations can stay focused on areas with strategic growth potential while weighing revenue rewards against business and reputational risks. To manage risk effectively, it is vital to clearly document how the organization has identified, assessed, measured and mitigated each risk arising from technology, process and people changes that come with changes to property, products and delivery channels.
Drive cultural change
Organizations in this industry need to invest in the right technology and processes to turn customer data into targeted business intelligence. Beyond the technology, however, the people in the business need to be driven by the need to know the customer and use that knowledge to approach the market in a more focused, profitable and risk intelligent way.
Anticipate customer expectations
Customers expect personalized information that is tailored to their interests. General messages about products, improved controls and responsible gaming are not enough. Organizations need to adapt their approach to reflect shifting demographics and to capitalize on new forms of entertainment and communications. Every customer interaction is an opportunity to reinforce the industry’s commitment to provide a gaming environment that is based on fairness and integrity.
UPHOLD SOCIAL RESPONSIBILITY
It’s all about playing fair. “This industry is a major contributor to the public purse, yet it constantly walks a fine line between generating funding for social programs and championing responsible gaming,” asserts Pierre Belhumeur, a Deloitte partner whose professional practice is focused on the gaming industry. Further upping the social responsibility ante, the industry must remain particularly conscious of generating revenues in both a socially and environmentally responsible manner.
Look beyond processes, anticipate risks
Processes and controls are already in place to educate the public and train employees about gambling addiction. Now, organizations need more mature risk management processes that tap into integrated systems to anticipate the risks and spot the trends. Changes such as demographic shifts toward higher immigrant populations, more single-person (and potentially socially isolated) households, and an aging population, require enhanced controls that will demonstrate due diligence and transparency.
Raise the bar
Addressing gambling addiction remains a fundamental industry priority. Organizations can work together to further elevate the reputation of the industry. Social responsibility revolves around two core elements - consumer protection, which includes informed consent and duty of care; and therapeutic measures, which include prevention, early intervention and treatment - to address the reality that gambling is hazardous to some participants. For example, European and North American lottery organizations have addressed this issue by adopting World Lottery Association (WLA) standards. The Canadian industry should ensure standards acknowledge industry benchmarks and expectations and go one step further to better align with peers.
Adjust to online interactions
Most current controls, processes, programs and employee training are geared to spot problem and fraudulent gambling behaviours face to face. What happens when that human interaction is replaced by online transactions? With players able to establish different or multiple online identities, it’s difficult to know who the customer is. The industry needs to learn how to identify and intervene with at-risk individuals playing online.
Think (and act) green
Part of social responsibility is environmental accountability. Conducting an environmental assessment can identify everything from immediate changes that can be made to reduce the organization’s environmental footprint, to long-term strategies that can transform the organization into a model of environmental sustainability.
PLAY BY THE RULES
To protect against major losses – from reputation to risk – requires providing empirical evidence that you’re playing by the rules. Proactively addressing compliance and regulation opens a vault of opportunity. It’s about seeing regulatory requirements as just one element of a much broader risk management mindset.
Be risk intelligent
Better prevention, detection, correction and reporting on critical risk issues takes a more optimal balance to risk and control; one that leverages integrated systems and processes. In an environment of cost reduction, this focused risk intelligent approach to compliance and regulation will help guide risk and control activities, as well as demonstrate decision-making transparency.
Increase industry collaboration
Gaming organizations can work together to set high industry benchmarks, anticipate future risks, and reassure the public of the industry’s integrity. When one operator’s reputation is called into question, it impacts the entire industry. Collaboration is essential. Fostering dialogue and sharing lessons learned can help organizations avoid surprises and predictable failures, while also ensuring that risk issues are explicitly considered in decision making. Doing this across the industry will help to align risk exposures and mitigation programs and eliminate duplication of efforts.
Each organization needs to be risk-aware and to communicate that this awareness is making a difference to customers and stakeholders. Organizations should identify and evaluate current and future risks, clearly document how each risk is being monitored and addressed, provide evidence-based data that desired outcomes are being achieved and inform regulators.
Give a strong voice to the industry
Transparency is the key to public confidence. To prevent today’s risks from becoming tomorrow’s headlines, the industry needs to alert stakeholders to activities, issues and resulting risks. A balanced approach with processes that surface today’s challenges and opportunities, and a strategy to manage future risks, will bolster confidence. One red-flag area is online gaming. Although the Internet has no geographical boundaries, consumers consider their local gaming organization to be the industry’s voice. In addition to being clear about local online gaming policies and processes, organizations should alert consumers to the risks of online gaming outside their jurisdiction, and advocate on behalf of consumers to ensure federal and provincial laws around illegal gaming are being enforced.
SEE BEYOND THE NUMBERS
With computer-driven analytic methodologies, it is possible to mine data to uncover patterns of fraud and help understand customers. Tapping into existing data silos can unleash competitive intelligence to increase the commercial value of products, while effectively demonstrating social responsibility, effectively moving the organization from a state of “we don’t know” to “we can find out.” It requires moving beyond traditional analytics (which often respond to regular reporting needs or ad-hoc requests) to predicative analytics that can identify opportunities and optimize resources. “Effective use of predictive analytics with this tremendous data asset will be critical to driving future growth and will support the continued enhancement of gaming social responsibility” claims Deloitte partner Brad Hutchings, who leads the firm’s national gaming practice.
Base decisions on evidence
Organizations in the gaming industry are constantly managing financial, political, regulatory and reputational risks. To move toward making evidence-based decisions, organizations need an effective data analysis strategy coupled with analytic execution abilities that include people, process and technology.
Know the customer
“With the right data, organizations can perform customer segmentation to optimize product mix and develop customer niches,” says Simon Brodeur, Senior Executive Advisor, Gaming Industry, Deloitte.
Gaining that competitive edge requires matching products and services with your customers' needs and wants. Using data to assess and analyze product satisfaction, conduct service delivery and to tailor delivery channels based on customer insights is essential for corporate sustainability.
Identify the unknown
Creating a competitive advantage requires assessing the interrelationships between hundreds of metrics simultaneously and holistically. This requires working with data in its rawest form to create analytical data sets more capable of providing new insight for stakeholders related to everything from social responsibility to revenue optimization to cost efficiencies to regulatory transparency. Using the data to identify previously unknown interrelationships can position the organization to make informed decisions.
True transformation means an organization-wide shift in perspective to a single vision that encompasses all lines of business: retailer-based lotteries, resorts, slots, casinos, VLTs and bingo operations. That vision must be instilled in everything from people and processes, information systems and marketing, to bring all of your internal players to the same table.
See the whole view
Transformation is a time to assess every area of operations; systems, process and people. It’s an opportunity to eliminate redundancies, address significant gaps or risks and approach the organization as a single business with deeper insight into customers and markets.
Recognize the cost of doing nothing
Streamlining operations is a critical element of profitability. However, in the gaming industry there may be a certain wariness about changes that might affect reliable revenue streams. Organizations that go beyond the basics when sharing plans with stakeholders, document how cost-savings will affect the overall business, itemize investments required to address gaps, and explain how they will apprise their stakeholders about progress will find change easier. It is important to also be clear on the cost of doing nothing, as it raises a whole other spectrum of long-term risks resulting from missed strategic growth opportunities.
Adopt a risk intelligent mindset
Regulators expect a strong risk management framework with air-tight controls. With heightened risk sensitivity from a range of stakeholders, organizations face both challenges and opportunities in raising their risk management game, operational excellence and competitive advantage. When stakeholders hear about streamlining, they’ll ask how such changes impact risk and related controls. For every effort made to increase efficiencies, it is important to identify, assess and manage any immediate related risks, as well as to broaden the perspective to encompass short-term cost-savings and long-term rewards and opportunities.
Involve customers in the conversation
Customers need to be involved if your transformation efforts are expected to result in changes to properties, products or programs. While strategic decisions are often based on quantitative data, the customer’s qualitative experience is also important to consider. An effective change management approach includes customers in the conversation, and clearly explains how customer input was incorporated into the decision-making process. Once a decision has been made, communication with customers about the changes helps manage expectations for their next visit to a lottery retailer kiosk or VLT, or step inside a resort or casino.
DIFFERENTIATE YOUR CUSTOMERS
Influenced by the Internet and rapidly shifting North American demographics, the player base will continue to evolve into a constantly connected, culturally diverse population. Connecting with customers, requires a strong customer relationship management (CRM) strategy
Ensure return on investment
It takes money to make money, but there needs to be a reasonable expectation of the return on investment. A robust CRM system is typically an expensive long-term investment, and a strong business case is essential to get buy-in. Done with an organization-wide vision, a comprehensive CRM system is an investment with tangible rewards that will make marketing efforts more efficient.
Identify opportunities across the business
Customers want products and services that cater to their preferences. An effective CRM system will track when, where, what and how individuals play, which in turn can help organizations modify or target existing products, or develop new products, that match customer preferences. To win in the CRM game, the system must be able to support all available data throughout the business, ultimately enabling more informed decisions within a risk intelligent organization. Organizations that successfully leverage their data to broadly understand an individual's habits will be in a better position to cross-market multiple delivery channels to customers.
Ingrain social responsibility
While it’s important to be able to identify VIPs to grow revenues, it’s equally vital to uphold social responsibility principles. Data infrastructure must be designed to support self-limiting and ingrain controls that can automatically flag potential at-risk gamblers. For example, CRM systems should be capable of alerting gamblers who have begun to show patterns of at-risk gambling and be backed by processes that allow the organization to quickly provide access to support for at-risk gamblers.
While there’s a definite public appetite for VIP service, regulators and the public want assurance that personal information is being used responsibly. When implementing a CRM system, be prepared to illustrate the actions being taken to comply with privacy legislation – complete with a clear, up-front privacy statement, with behind-the-scenes processes that back it up.
The industry is evolving at break neck speed; a change driven by wide-spread technological advances, shifting demographics and fundamental cultural shifts. No doubt, Canada's gaming landscape is marked with exciting challenges and enticing opportunities. Choosing the right business strategy to embrace change requires a constant focus on fundamentals with a roving eye for data-driven insights that will lead to business success.
This report was authored by the following Deloitte representatives: