Conversation on innovation with Jean Marc Landry

The domino effect that forces business model innovation

Jean Marc Landry is Director of Customer Innovation at Atlantic Lottery. With over 12 years of experience in the lottery industry in Canada and Mauritius, Jean Marc Landry is an ‘innovator from within’. Jean Marc has been leading the design and implementation of an innovation practice that applies Design Thinking to create new lottery propositions to support the company’s long-term sustainability amidst industry disruption. .

Corporate Startup: How does a lottery work from a business model perspective?

Jean Marc Landry: The lottery industry has existed for more than 50 years in some countries; it’s a way for governments to raise funds for important causes. In our market, lottery proceeds go back to the government’s general revenue fund. In other markets lotteries sometimes directly fund programs like education, healthcare or national sports teams; education is one of the more common beneficiaries

One of the peculiarities of our industry is that we have no regulated direct competitors as all lotteries are bound geographically. For example, Texas Lottery operates the lottery for the State of Texas and then right next door there would be another lottery that does exactly the same thing and looks after that State. In Canada, there are five lotteries that are geographically bound. This being said, there are many offshore operators that illegally sell in our markets, which presents another challenge for lotteries to fend off these operators.

CS: What channels does the lottery industry use in its business model?

JML: The lottery industry’s core channel is retail. Lottery games are sold at various retailers, convenience stores, gas stations, grocery stores etc. We also have e-commerce sites — a website where you create an account, we verify that you’re of age and that you’re a resident of the geography we serve, and then you can buy your games there. On our site we have games that are only sold online. And of course nowadays we have mobile extensions of this.

CS: To your knowledge, what’s the percentage of business generated through ‘brick-and-mortar’ channels: gas station, corner stores, convenience stores etc.?

JML: I would say that approximately 95 per cent of sales are from retail and 5 per cent online. We are seeing revenue growth from both channels, but online is growing more rapidly.

CS: What’s the biggest challenge when you rely so much on a ‘brick-and-mortar’ channel?

JML: The biggest challenge is with evolving customer behaviors. What’s interesting is that there’s almost a perfect correlation when you compare the slow erosion of lottery play with the erosion of smoking. Lottery tickets are normally purchases that are bought on impulse, meaning they often add lottery to other purchases while in a store. If people are going to stores less for other reasons such as not renting videos anymore, buying fewer newspapers, etc., and they now have same-day delivery from Amazon, then it makes sense that it has impacted our sales at retail stores because they’re not exposed to our product as much.

Another medium-to long-term threat to our sales are electric and self driving cars. People will be at gas stations less and less so their exposure to our products will decrease.

And finally, another threatening trend is Amazon and their cashier-less concept where you just pick up and go. For us, the retail cashier acts as a sales rep. So imagine if you take that away? Will people buy the lottery ticket, and even then do we have a solution to confirm that these people are over 19, as we are an age-gated industry?

These are some real trends, potentially threatening our business model by directly impacting our main channels.

TCS: What are, the lotteries in general and Atlantic Lottery in particular, doing to mitigate these risks?

JML: For Atlantic Lottery, we ideate and experiment a lot. And once we have validation that an idea is wanted by the market we try to scale it as fast as we can. Some concepts are simple business model pivots. For example, we are in pilot for a subscription / home delivery service for Scratch’N Win tickets. We are learning tons from this pilot and have a better idea of what our customers want. So we have some concepts that are service innovation while others are new product innovation focused.

TCS: So how do you go about user testing ideas when, for quantitative data and scaling, you have to rely on legacy systems?

JML: To get quantitative validation data on our ideas we need commercial grade MVPs. Which for us means three things: we can accept payment, create accounts and have security integrity. The challenge is that it needs to be separate so it doesn’t need to go into the master backlog where all the day-to-day improvements and requests go.

One of the challenges that used to hinder our scaling and quantitative validation speed were the legacy IT systems. It’s not that the systems are old and archaic at all, it’s that in our case (I’m sure banks and insurance companies are the same) we don’t have one system. Instead we have a couple dozen systems that need to ‘talk’ to each other. So any new initiative that needs to plug into our system needs to be cross-tested to ensure it doesn’t compromise other systems. Which means that there’s a backlog of initiatives that we want to get to market, which kind of makes scaling difficult, especially when you have an idea that’s not the next billion dollar idea but might be the next 10 million dollar idea. And that’s labeled as ‘low priority’ against the other things.

To solve for speed we created a new ‘sand-box’ infrastructure. We chose to have this ‘sand-box’ system, because it’s easier to launch new innovative things and send them to market there than it is through our normal lottery system. We may even scale them inside the ‘sand-box’ too and never send them back for integration in the corporate infrastructure, as we don’t want to run in to the prioritization issue I mentioned earlier. To scale inside a big system, you want to make sure that everything you put into that machine is going to pay off, it’s going to have the very rapid ROIs that we’re used to. Some of the ideas we work on are far from that, so we’d rather have them live in the ‘sand-box’ than under scrutiny in the main systems. So it’s almost like having a dual scaling platform.

TCS: In your opinion what are the main three blockers when it comes to scaling innovation in your industry?

JML: We just covered legacy infrastructure and I think this the primary challenge. The second would be the fact that we must abide by regulation unlike some other disruptors. The third challenge is impatience rooted in a traditional lottery view of launching products. We have been accustomed to seeing very quick ROI but now we need to think more like startups and be happy with small customer centered incremental progress that will eventually lead to breakthrough.

TCS: How about scaling the innovation mindset — the mindset going against impatience? What can you tell us about that?

JML: We have a dedicated program that’s been inspired by actually going to some of these intrapreneurship conferences. We’ve met a few other companies that have innovation catalyst training programs, and we launched our own, and by the end of this fiscal year we’ll have 100 employees trained in Design Thinking. The whole idea is while I’m in an Airport in Toronto there’s probably four or five people back at the office that are using these methods to design new things for themselves.

So we’ve started seeing innovative solutions on business process redesign too — not just new business ideas. For example, one of my favorite catalysts inside our company is our Manager of Risk and Assurance — an audit type person. And this person definitely has her role to fill, but has the mindset of an innovator. She wants to find new solutions for issues in her department. So she shaved two weeks off of a six-week process for how they conduct audits. Perhaps that doesn’t qualify necessarily as innovation, but you know what, in the course of a year they can complete more audits and allow the company to be tighter and have his processes and systems tighter and get more throughput. Well that’s really good because by getting more throughput, company’s stronger. And a stronger company means a successful company.

So that’s happening while other sales and marketing individuals are tackling their own challenges. So we’re seeing kind of innovation happen in small ways around the company.

The other unintended positive consequence is that we see more and more people that haven’t gone through the catalyst training supporting initiatives brought forward by the people that were trained.

I see exciting times ahead for the lottery industry and I’m happy to be here doing what I’m doing — helping a massive ship, Atlantic Lottery, navigate uncharted waters!