A recent debate in a controversial industry — gambling — illustrates a common dilemma faced by many companies: An incumbent faces a wave of digital disruptors who operate in a legal gray zone offering pure online gambling products like live betting and casino games. In 2021, liberalization of the online gambling market brought new competitors into the market. How could a company with legacy and regulation compete?
Nederlandse Loterij, the Dutch Lottery, faced this problem. So when Arjan Blok, the CFO leading their digital transformation (and one of the authors), proposed implementing a “KPI butterfly” to balance doing well (being commercially successful) against doing good (protecting society), there were those who scoffed. How could they spare one ounce of efficiency if they were ever going to beat pure play disruptors?
But today, Nederlandse Loterij is a leading — and responsible — player in the Dutch market, managing to shake the stereotypical incumbent inertia to lead the field in front of online upstarts. This story provides instruction on successful digital transformation and how leaders can use digital transformation to do both well and good.
Defining Who You Will Be
Digital transformation is about asking how digital tools allow us to serve customer better. But as technology becomes ever more powerful and central to business, these tools — depending on how they are used — have equal potential to enable customers, employees, and stakeholders as to disappoint, alienate, and anger them. As companies continue their digital journey, there is an opportunity to ask how can use digital to do well and do good?
Doing so begins by asking who the company wants to be. Most companies make the mistake of starting their digital transformation by looking inward — pushing internal functional improvements and external products while checking the box on regulatory requirements. If Nederlandse Loterij had started this way, they might have focused on better internal systems or pushed out a few online gambling products. But they would soon find that their systems did not fully meet the customer needs and likely their products would be quickly imitated all while external stakeholders became increasingly dissatisfied as fraud and addiction increased due to lack of oversight online.
Instead of looking inward, the Nederlandse Loterij looked outward, taking a hard look at what its customers and stakeholders really wanted. What did the company want to be in the emerging landscape of possibilities? Several digital native players were entering the market to satisfy the demand for more convenient mobile-based gaming. Meanwhile, the Nederlandse Loterij was deeply rooted in a brick-and-mortar ecosystem of a large retail network providing pregame sportsbetting where it had limited visibility into end customers.
Starting with the customer journey, the company identified the leverage points where it could make change. This meant reimagining their products, and their organization, around the customer: What kinds of games did people want to play, when, and where? For example, the rise of online betting introduces a new category — live betting on sports events — that requires real-time odds making, which required a retooling of the organization.
Likewise, they asked: How do we change the interface with retailers to gather insights on the end customer? For example, could the company change its point-of-sale interactions to get clean, actionable data that could be used to make data-based decisions? The goal was to serve both the customers’ and the retailers’ interests.
And just as importantly, they asked: What makes us distinct from these native digital players? Part of the answer was the company’s reputation and responsibility to the larger society, which meant taking issues like addiction and fraud, seriously. In this journey the team defined the company’s mission to become the most responsible providers of truly compelling games, online or offline. To do so, it added an abundance of additional measures to protect the customer, above and beyond already tight regulation, under the campaign “Online gaming, doing it the Nederlandse Loterij-way.”
Defining the Right Goals and KPIs
To fulfill this mission the Nederlandse Loterij needed to define the right goals and KPIs. To do this, it established their KPI “butterfly” framework to balance doing well and doing good. One wing of the butterfly captures more traditional performance KPIs like revenue, cost to acquire, cost to serve, net result, and so on.
But optimizing on these alone could lead to long-term harm to stakeholders: getting more revenue per customer increases addiction by facilitating a potential gambling habit. Indeed some of the customers most willing to spend money could be doing so for the wrong reasons. How do you allow people to have fun without hurting themselves? Moreover, online gambling is an easy environment for fraud and money-laundering since it can harder to establish identities and trace money, so how does one protect society at large? Thus, the other wing of the KPI butterfly seeks to balance with measures of doing good. In the case of Nederlandse Loterij this means measuring risks and cases of addiction, fraud, money laundering, compliance, and customer satisfaction.
Companies can design interventions that create positive change. For example, a recent academic study identified that startup investors often question women differently than men which puts women at a disadvantage in getting funding. (Women are more frequently asked about preventing losses while men are asked about capturing opportunities.) Fortunately, a separate study found that training before an investment meeting can counteract this negative bias, leading to more equal questioning and investment opportunities.
In the case of Nederlandse Loterij, the ambition level has been set extremely high: It wanted to be the most responsible provider of online games. Therefore they need to capture data so that they can spot addiction at an individual customer level and design an intervention to help that person (rather than just cutting them off which does not solve the problem, as the customer will simply turn to less responsible competitors). Moreover, Nederlandse Loterij would need to honor the KPI butterfly: Employees would need to be compensated on both wings of the KPI butterfly. If they pump up revenues, but failed to focus the responsibility, they should see that reflected in their bonus.
Capturing the Right Data
To do well also requires data, but not just more data. Many organizations undergoing digital transformation fall into the trap of thinking trying to capture all the data they can imagine. While one day this data might prove valuable, they almost never arrive at their objective, as they get overwhelmed with an overload of data, much of it poor quality, disaggregated, and irrelevant. Moreover, the data literacy of team members is often too low to make good use of the data. Organizations need to define the business cases for data, capture clean and well-labeled data, then develop the capability to use it.
But leading a digital transformation to do good requires a vital extra step, asking: What are the customer, employee, or stakeholder challenges we could either solve or avoid with the thoughtful design of our data capture?
For example, as part of their digital transformation, a major contract manufacturer we studied sought to digitize their supply chain. But in the design phase, they asked: Could we also create honest, transparent measures of our environmental impact? Doing so required working with suppliers to explore how to develop some new measures, but the rewards have been surprisingly positive. Their customers — familiar clothing and furniture brands — value this honest and transparent insight into their carbon impact so much that most sales conversations have shifted: “Our conversations are almost never about price anymore, surprisingly, but about the added value we provide,” the CEO told us.
By contrast, when major electricity supplier EDF replaced their electricity counters with smart meters, it provided real-time insight into power usage, empowering power-saving recommendations for customers, but it also put several thousand meter readers out of work. Rather than simply terminate these employees, EDF worked to upskill and find new roles for people who had give time and energy to the company. This generous move helped allay fears that many other employees had about digital transformation, decreasing their resistance and facilitating major changes which has led EDF to create a powerful new digital suite of digital tools — called the digital house — to better run their business.
For Nederlandse Loterij, capturing the right data meant defining measures that could help them understand how to improve their business, as well as data to identify fraud, addiction, and related problems. For example, by developing an omnichannel picture of each customer, they will be able to both spot opportunities to improve, and danger spots where fraud or addiction could be a problem. AI could further help identify, flag, and suggest action based on this data.
In addition, the leadership, particularly Blok — responsible for leading the customer-first digital transformation — led the charge in helping develop the data literacy to use the data. They started by elevating the importance of “data nerds,” promoting the head of data analytics, and expanding the time the executive team spent on data-related topics, all to signal the importance of digital skills to the future of the organization. Next, they purposely started promulgating stories about cases where people used data to make better decisions, especially around customer needs. Meanwhile they provided training for everyone to improve their data literacy — not by making everyone take coding or statistics course but by making data easy to use. Of course this meant that the data-architecture had already been set so that there could be one source of truth. But then they set expectations that leaders should use this data in meetings and decision making. This journey took almost two years but led to a total change in how decisions are made.
Transforming to a Transparent and Responsible Culture
Data and tools are powerful, but successful digital transformation also requires transforming the culture, especially if such tools are used to do good. That means that everyone is involved in the digital transformation, everyone is responsible, and the results are transparent internally and externally. At Nederlandse Loterij, the KPI butterfly is reviewed internally with the entire organization every six weeks. All individuals, including business directors, are also reviewed based on their contribution to the KPI butterfly as part of bonuses and performance reviews. It also required reorganizing around key activities, such as fraud and addiction prevention.
One of the most interesting side effects of this transparency and consistency is how it has helped Nederlandse Loterij retain the best talent in the industry. Moreover, the KPI butterfly is also used externally to demonstrate social responsibility with the larger set of public stakeholders and regulators.
Differentiating on ESG
By defining better data and measures, Nederlandse Loterij has discovered several unforeseen advantages. First, they have been able to differentiate with customers, who appreciate their more ethical approach, allowing them to retain greater loyalty from customers who have ESG concerns. Second, by creating better measures, it has allowed Nederlandse Loterij to get out ahead of regulators. When the laws changed to officially allow online gambling, Nederlandse Loterij was one of the first to get a fully compliant license. As Blok argues: “Being good enough doesn’t provide you many advantages. In today’s world, differentiating on ESG isn’t only advantageous, it’s the right thing to do.”
In the context of the Industrial Revolution, applying technology to operating mechanisms in each organization is extremely necessary, and is also an inevitable trend to minimize workload while still ensuring efficiency and enhance its competitive position in the market. Furthermore, applying management software into a business will also help build an organization with a clear system, promoting consistency, transparency and accuracy. Tasken eOffice, researched and built by Opus Solution – a business consultant in Vietnam – is an internal work management system as well as the management of automated, online, user-friendly approval processes, allowing businesses to operate more effectively on the path of digital transformation.
