7-Eleven CIO Discusses Business Intelligence

Next up, an IT “rock star,” as Saffo called him: Keith Morrow, CIO of 7-Eleven.

So, what does a purveyor of Slurpee and Big Bite and beef jerky have to tell you?

A lot about leveraging business intelligence (BI) to make better decisions. Morrow began by quoting the ice merchant whose business eventually became 7-Eleven, Joe Thompson: “Give them what they want, where and when they want it.” He was a practitioner of BI before it had a name. When people switched from using icebox to fridge, they didn’t need to go to the ice dock anymore. But he started getting in other things they wanted (bread, eggs, milk) and brought it to out to their cars. He listened to the customer and gave them what they wanted. That little vignette still drives 7-Eleven, though it now has 30,000 stores worldwide and 2,500 items per store.

Morrow defines BI as the process of enhancing data into information and then into knowledge that can be used for decision making.

The average loyal 7-Eleven customer visits a store more than two times per day. In Japan it’s 3.5 times per day, mostly for meals. Fresh food is the fastest growing category at 7-Eleven, and it is driven by “what the customers want.” And by intensive inventory analysis, with each item in each shop being examined at least weekly if not daily, to understand how long it’s been on the shelf to move it, change it or get rid of it to maintain “inventory velocity.” Each store (mostly franchises, but not all) has an HP Proliant server and each store manager is certified up to three levels to be able to place orders. Orders placed by noon are shipped at midnight. The ordering information is aggregated and managers work with suppliers to “iterate products” almost daily. That is, change ingredients, packaging color, size, etc.

It is truly staggering how much detail is dealt with in such short spans of time. Morrow warned, however, that BI is not a panacea. It cannot compensate for a bad business model or strategy, execute strategy or change culture, or overcome executive misalignment, lack of vision or weak leadership. In short, it’s an enabler; it won’t run the business for you.

Morrow shared some more pointed lessons learned (the hard way, he said) at 7-Eleven.

• Continuous improvement requires continuous sponsorship of senior team.

• The BI business case is very difficult to quantify in terms of tradional ROI analysis. Consider return on invested capital (ROIC) as an alternative.

• Allow enough business collaboration, transparency and governance into the BI program to maintain high trust over time. In 7-Eleven’s case, the business “makes” the BI program, tweaking and defining what it contains.

• Think about cultural or organizational barriers, and try to set up standard business rules and reports versus ad hoc ones.

• 7-Eleven has an annual visioning meeting with the strategic planning group. “We roadmap where we’re taking the BI platform over the next three years.”

• There’s an enhancement committee of midlevel midmanagement key users of platform.

• Performance and capacity planning is necessary. Expectations always go up, so always ask where there are bottlenecks or latency at any point in system…

• Ensure governance to prioritize investments.

• Vendor management of key BI tech providers is very important (especially watching how their roadmap aligns with yours). Info security enters into it too…this intelligence is your crown jewel, must protect

There were many good questions from the audience.

One about core technologies: Besides the HP Proliant 2-way server in every store, 7-Eleven uses a SQL database. Frame relay to one huge instance of Oracle at the back end. Business Objects is the high end tool, used to push out Web daily reports to retailers. Ascential is ATL tool.

Q: Why can’t I as a consumer be validated at the gas pump that I have more than $50 in my checking account–the tanks shut off at that point.

A: Our experience is that a lot of customers don’t want us to know they were at our pump. Until gas prices really started going up we were 80-90 percent cash. They want to come in, come out, transact, not have customized, intrusive bells and whistles. We err way on the side of protecting confidentiality and privacy of consumers. 

Q: But has all the BI given you any insights on your customers?

A:Well, we sold $57 million worth of condoms last year…. I don’t know how interesting that is, but, you know, we’re doing our part ….

Q: From the idea of BI to the first implementation of turning information to knowledge, what was the time frame?

A: Probably a year from idea to starting to implement. Two years of  “hand to hand combat” every day. Basically consolidating to a culture of three standard merchandizing reports and 20 standard retail reports…. But it was hard to get buy-in while operationalizing that. End to end, three years to get to critical mass.

Q: Since you’re a “rock star,” can I get your autograph?

A: No. No signatures. It might end up on a vendor contract or something!

–Sandy Kendall