MIT OpenCourseWarehttp://ocw.mit.edu 15.571 Generating Business Value from Information TechnologySpring 2009 For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.Class 6: 7-Eleven Japan and the Replication Operating Model 15.571 15.571 Generating Business Value Generating Business Value From Information Technology From Information TechnologyJeanne W. Ross Director & Principal Research Scientist Center for Information Systems Research (CISR) MIT Sloan School of Management Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2009 MIT Sloan©CISR2009 MIT Sloan CISR - RoRoss-ssCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 1 Different Standardization Requirementsof the Four Operating ModelsDifferent Standardization Requirementsof the Four Operating ModelsSource: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, D. Robertson, HBS Press, 2006.2Tokyo, Japan, January 18, 2006Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2009 MIT Sloan©CISR2009 MIT Sloan CISR - RoRoss-ss3 Tokyo, Japan, January 18, 2006Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2009 MIT Sloan©CISR2009 MIT Sloan CISR - RoRoss-ssCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 4 7-Eleven Japan 1,890.0 Revenue from operations 502.5 474.2 424.0 384.4 2,500 2,000 1,500 1,000 500 0 (Billions of yen) 02/2 03/2 04/2 05/2 06/2 E 197.5 Ordinary income 178.2170.0 153.7148.5 300 200 250 150 100 50 0 (Billions of yen) 02/2 03/2 04/2 05/2 06/2 E Operating income Financials 170.7 199.0 165.6 149.9 155.8 250 300 200 150 100 50 0 (Billions of yen) 02/2 03/2 04/2 05/2 06/2 E Net income/Net income per share 96.3 106.5 81.7 82.8 Net income (left scale) 98.3 100.6 115.7 120.1 132.9 93.1 125 150 100 75 50 25 0 125 150 100 75 50 25 0 (Billions of yen)(Yen) 02/2 03/2 04/2 05/2 06/2 E Net income per share (right scale) Figure by MIT OpenCourseWare.Center for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 5 7-Eleven Japan Adapted from: Seven Eleven Japan 700 600 500 400 300 200 100 0 Seven-Eleven Japan Competitors 610 470 (Thousands of yen) Average daily sales per stores 700 600 500 400 300 200 100 0 Seven-Eleven Japan Competitors 515 404 (Thousands of yen) Average daily sales per store of new stores Figure by MIT OpenCourseWare.Center for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 7-Eleven Japan Source: Seven & i Holdings, Corporate Outline 2007http://www.7andi.com/en/ir/tool_co2007.html Financial Data of Major Retailers in Japan 500,000 1,000,000 1,500,000 2,000,000 2,500,000 0 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 2,114,013 2,213,298 2,343,177 2,440,853 2,498,754 2,533,534 1,377,8421,360,4951,329,0771,285,0181,291,0301,282,369 898,651 931,808 954,445 998,491 898,741 1,031,736 1,068,821 872,844700,094_ _ _ Seven-Eleven Japan Lawson FamilyMart Circle K Sunkus 26 28 30 32 34 24 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 30.4 30.5 30.6 30.7 28.5 28.4 28.8 30.8 30.7 31.0 31.2 28.8 29.1 29.0 29.0 31.3 30.9 30.330.3 28.5 28.3 _ _ _ Seven-Eleven Japan Lawson FamilyMart Circle K Sunkus Total store sales Millions of yen Gross margin (%) Figure by MIT OpenCourseWare.The 7-Eleven Japan PlatformThe 7-Eleven Japan Platform Store level (franchisee) – POS technology and systems – Scanning and ordering technologies – Processes for ordering, store operations, and inventory management (training provided by Operation Field Counselors)  Corporate level (franchisor) – Networks connecting stores to headquarters – Shared infrastructure with links to partners – Analysis system – Order and sales data from each store – Multimedia data (e.g. weather) Center for Information Systems Research (CISR)Center for Information Systems Research (CISR) © 2009 MIT Sloan©CISR2009 MIT Sloan CISR - RoRoss-ss 7Center for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 7-Eleven Japan Source: Seven & i Holdings, Corporate Outline 2007http://www.7andi.com/en/ir/tool_co2007.html 77.2 78.2 79.2 80.2 81.2 82.2 83.2 84.2 85.2 86.2 87.2 88.2 89.2 90.2 91.2 92.2 93.2 94.2 95.2 96.2 97.2 98.2 99.2 00.2 01.2 02.2 03.2 04.2 05.2 06.2 07.2 Started EOS Started EOB POS system introduced Computers using color graphics introduced Interactive POS registers introduced GOT, ST and SC introduced ISDN put into operation New POS registers introduced Introduced a weather information system Installed satellite antennas Installed optical fiber network Store system introduced New POS registers introduced Fifth-generation total information system New POS registers introduced Ticket sales using multi-functional copier Sixth-generation total information system Information System Innovation Figure by MIT OpenCourseWare.Center for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 7-Eleven Japan Source: Seven & i Holdings, Corporate Outline 2007http://www.7andi.com/en/ir/tool_co2007.html Sales area Overview of the sixth-generation total information system Back room Router Wireless antenna Multi-function copier Store computer ATM 20.50 POS cash registersST GOT Figure by MIT OpenCourseWare.Center for Information Systems Research (CISR) © 2009 MIT Sloan CISR - RossCenter for Information Systems Research (CISR) © 2009 MIT Sloan CISR - Ross 7-Eleven Japan Source: Seven & i Holdings, Corporate Outline 2007http://www.7andi.com/en/ir/tool_co2007.html 0 50,000 100,000 150,000 200,000 250,000 0 500 1,000 1,500 2,000 2,500 Number (Thousands)Cash volume (Billions of yen) Development of Payment-Acceptance Services Growth in volume of payment-acceptance services 7-7-Eleven Japan has been offering payment-acceptance services since 1987. The services are used widely, gaining popularity among