Transcript IT as a Competitive Advantage Presented by: Grant Epstein

IT as a Competitive
Advantage
Presented by:
Grant Epstein
Erin Miltenberger
Darren Van Booven
The Importance of IT in an
Organization

Understanding IT and its Role can…
•
•
•

Gain a competitive advantage
Improve efficiency of business processes
Expand/revolutionize markets
Not Understanding IT and its Role can…
•
•
Lead to Wasted IT budget
Lead to Business Failure
IT as a Competitive
Advantage

“the ability to maintain an initial gain in
business performance from strategic IT”
•
Concept that has grown in
importance and acceptance.
Kettinger, Grover, Guha, and Segars. Strategic Information Systems Revisted: A Study in Sustainability
and Performance – MIS Quarterly 1994, page 32
IT as a Competitive
Advantage

Systems that can lead to a competitive
advantage in the short or long run have a
high value to the initiating company

Systems that cannot maintain the
advantage will lead to the initiating
company being surpassed by the
competition.
Kettinger, Grover, Guha, and Segars. Strategic Information Systems Revisted: A Study in Sustainability and
Performance – MIS Quarterly 1994, page 32
IT as a Competitive
Advantage
Firms That Have Made it Work
Federal Express: Package tracking
system
 Mitek: Computerized roofing design
system
 Baxter Healthcare: Hospital supply
ordering system

Aligning IT Strategy with
Business Strategy
Contributions Commodity
Differentiator
Critical
Aircraft
maint.
software
Useful
Personal
productivity
software
Baxter
Healthcare
ordering
software
ICI Paints
IT as a Competitive
Advantage - Framework

Three Pillars of Sustainable Competitive
Advantage
Project Life Cycle Analysis – How
long until a response?
• Competitor Analysis – Who can
respond?
• Supply Chain Analysis – How
effective will response be?
•
Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a
Strategic Resource, Willcocks, Leslie, Feeny, David. McGraw-Hill Education-Europe, 1997, pp 43-61.
Pillar 1: Project Life
Cycle

Focuses on the idea that when a company
uses IT to gain a competitive advantage,
it can expect competitors to respond.
•
Project life cycle is the time between
release of the new system and competitor
response.
•
•
•
•
Awakening
Win approval
Project Build
Project Launch
Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a
Strategic Resource, Willcocks, Leslie,
Feeny, David. McGraw-Hill Education-Europe, 1997, pp 43-61.
Pillar 2: Competitor
Response


What Competitors Can Respond?
Three Components
• Competitive Scope
•
•
Organizational Base
•
•
Geographic, Segment, Vertical, Industry
Structure, Culture, and Physical Assets
Information Resources
•
Technology Infrastructure, Application Inventory,
Data bases, Knowledge bases
Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic
Resource, Willcocks, Leslie, Feeny, David. McGraw-Hill Education-Europe, 1997, pp 43-61.
Pillar 3: Supply Chain Analysis
Will a Response Work?

Steps to Insure a Response Will Not be
Effective.
•
•
Find exploitable link – Find a point in the
supply chain where resources are limited and
few participants control the link.
Secure the “pole position” – Create a unique
relationship with the market.
•
Increased value will result in a more secure
relationship and prevent loss to competition.
Feeny, David & Ives, Blake, “IT as a basis for sustainable competitive advantage” in Managing IT as a Strategic
Resource, Willcocks, Leslie, Feeny, David. McGraw-Hill Education-Europe, 1997, pp 43-61.
Pillar 3: Supply Chain
Analysis

Keep the Gate Closed – Create a perception
amongst users of tangible and intangible
switching costs. This is the basis for maintaining
a competitive advantage.
•
•
•
Applications – Users will have to learn a new system
Database – Loss of stored information during a switch
Community – Switching may have an adverse effect on
the way the user does business – IT has become a part
of its infrastructure.
Case Study Analysis
 Progressive
 Sabre
 Celera
Genomics
Progressive
Why Choose Progressive?

Pioneering efforts in the use of IT in
the auto insurance industry

Leading the way in the use of the
Internet to improve communication
with customers, independent
agents, and prospects.
History and Background

Founded in 1937 by Jack Lewis and
Joseph Green.
www.progressive.com/progressive/history.asp, viewed February 9, 2003
History and Background

Early innovations
• 1990 – first insurance provider to provide
24 hour claims service at the accident site
• 1992 – first insurance provider to offer
competitor quotes as well as its own.
• 1994 – launched Immediate Response
Vehicles (IRVs) allowing claims agents to
settle many claims at the accident site.
• 1995 – first major insurance provider with
a presence on the Internet
www.progressive.com/progressive/history.asp, viewed February 9, 2003
History on the Internet

Prior to 1995, no major insurance
providers were on the Internet.

Progressive launched its site in 1995.
• Site had mostly a brochure look
“It was a matter of getting to know the technology… to get something up and see what
we can do.” – CEO Glenn Renwick (Glenn Renwick, CEO of Progressive, interviewed by
phone by Grant Epstein, March 14, 2003)
www.progressive.com

In 1996, Progressive allowed customers
to get competitive bids online.
www.progressive.com/progressive/prg_firsts.asp, viewed February 9, 2003
History on the Internet

First insurance company to let customers
buy online (1997)
“We see the trend moving more and more to online buying” (Glenn Renwick, CEO oof
Progressive, interviewed by phone by Grant Epstein, March 14, 2003)


First insurance company to let customers
access their account online in 1998.
Launched agent site, ForAgentsOnly.com
in 1998.
www.progressive.com/progressive/prg_honors.asp, viewed February 9, 2003. and information provided by
Progressive’s PR Department
Insurance Products

Auto, commercial vehicle, motorcycle,
personal watercraft, ATV, and RV
insurance.

Primary target range is drivers aged 18 –
34.
• Also provide information about insurance to
teens and driving issues they face on
progressive.com
Progressive Facts, provided by Progressive’s PR Department, February 2003
Insurance Products

Progressive writes insurance in 48 states
and the District of Columbia.
• Currently not doing business in MA or NJ.

Drivers can buy over the phone, online,
or from one of Progressive’s 30,000
agents.
Progressive Facts, provided by Progressive’s PR Department, February 2003
IT’s Importance at
Progressive

CEO Glenn Renwick believes in the philosophy
that “technology and business alignment are
key.”
“…Ray (Voelker) is an integral part of the decision process.
The organization builds technology into the business
decision process.”
“Our business plan and IT are inextricably linked because
their job objectives are.”
Glenn Renwick, CEO of Progressive, interviewed by phone by Grant Epstein, March 14,
2003
Gallagher, Julie, “Business-savvy CIO turns tech-savvy CEO” Insurance and Technology,
July 2001.
Importance of IT

Information on Progressive’s employee
count in the IT Department not currently
available.
• Has averaged around 2000 over the last five years

Information on Progressive’s IT annual
budget also not available.
Information Week.com, 2000.
Gallagher, Julie, “Business-savvy CIO turns tech-savvy CEO” Insurance and Technology,
July 2001.
Progressive’s
Growth and Market Share

Since 1993, growth rate has far exceeded
that of the industry
• Growth rate has ranged between 13.6%
and 36%.
• Industry growth rate has ranged between
2.6% and 5.9%
• Exception is 2000, when the entire industry
experienced minimal growth.
Progressive Facts, Provided by Progressive’s PR Department, February 2003
Progressive’s
Growth and Market Share

Industry rank has increase from No. 34 to
No. 3 in the last 20 years
• Rank has gone from No. 15 to No. 3 since it began
offering competitor rates and developed a web
presence.
• State Farm and Allstate are #1 and #2 respectively.

Market share
• Increased 1% over the last three years (2000 –
2002).
Progressive Facts, Provided by Progressive’s PR Department, February 2003
Progressive’s
Critical Differentiator

The insurance companies that are most
likely to develop a competitive advantage
in the industry are those that employ
technology in a manner that more
effectively delivers their business model.
-Ted Devine, Principal of McKinsey and Company
Erlanger, “Enhance web site value, carriers told” National Underwriter Vol 16 July 2002. Pp – 15-16
Progressive’s
Critical Differentiator

Progressive’s critical differentiator is not
that it allows customers to shop and buy
online.
• “Now we don’t think, ‘Boy, we’re the only one that allows
customers to buy policies online.’ It’s just part and parcel of our
entire strategy that focuses on the Internet and putting the
information back into the client’s hands.”
MacSweeney, Greg “Progressive, inside and out” Insurance and Technology, Vol 24
Sept. 30, 1999. Pp 13-14.
Progressive’s
Critical Differentiator

This attitude carries on down the line of
Renwick’s management team.
• “Our guiding principal is to provide customers with a welldeveloped, easy-to-use Web-site that meets the spectrum of their
needs.” – Toby Alfred, Internet Site Manager
MacSweeney, Greg “Progressive, inside and out” Insurance and Technology, Vol 24
Sept. 30, 1999. Pp 13-14.
Critical Differentiator –
Where it all began

Progressive’s critical differentiator is
that it has fully integrated
technology into it business process
decisions and its interaction with
prospects, customers, and agents
Critical Differentiator
Where it all Began

Began in 1990 with the launch of
Immediate Response and continued in
1994 with its IRVs and in 1997 with it’s
Claims Workbench software.
• Allows claims agents to cut checks for
policy holders at the site of the accident.

Former CEO Peter Lewis…
• Progressive is “leading a wave of change.”
Salter, Chuck, “Progressive Makes Big Claims” Fast Company Issue 19, Nov. 1998 pp
176.
History of Progressive’s
Internet and IT Advantage

At the time progressive.com was
launched, no other major providers had
an online presence.

Progressive was not even sure what the
reaction in the market would be.
• “…we figured the Internet would be a good thing for us to
get into… we wanted to get out there and see how people
would respond.” Alan Bauer, President of Direct Group
Alan Bauer, President – Direct Group of Progressive, interviewed by phone by Grant
Epstein, March 3, 2003
History of Progressive’s
Internet and IT Advantage

After strong initial response, Progressive decided
to take its website from informational to
functional.
• “There are people who like to buy online and we are an option for
them.” - Alan Bauer.

Progressive was in a great position to take its
website to a more functional level and allow
customers to buy online.
• Call center already set up to sell directly
• Automated approval process(no need to interact with an
agent)
• Necessary technology was already in place.
Alan Bauer, President – Direct Group of Progressive, interviewed by phone by Grant Epstein,
March 3, 2003
What does the future hold?
CIO Ray Voelker says his vision is to see the
true, Internet-only insurance policy.
“If you buy a policy today, you’re still
going to get a paper policy in the mail.
It’s rare, if it is happening at all, for a
completely paperless process.”
Hulme, George, “Premium Put on Web Initiatives” Information Week, September 11, 2000
Does Progressive Have a Sustainable
Competitive Advantage?

Pillar 1: Life Cycle analysis: Time to
competitor response
•
Awakening, Approval, Building the System, Product
Launch
While it would not take substantial time to build a
“brochure” website, most competitors did not see the web
as a viable channel for communicating with the market.
Unlike its competitors, Progressive’s business model
made the transition very easy and logical.
Does Progressive Have a Sustainable
Competitive Advantage?

Pillar 2: Competitor analysis: Who can
respond?
•
Competitive Scope
Organizational Base
Information Resources
•
Could competition respond?
•
•
• Limited website content
• Increased fucntionality required changes in competitor
business process.
• By the time competitors reached Progressive’s
benchmark, it had already moved it further out.
Does Progressive Have a Sustainable
Competitive Advantage?

Pillar 3: Supply Chain Analysis: Will Copying Help?
• Find Exploitable Link
• Capture Pole Position
• Keep the Gate Closed
• Competitors have followed suit in part or whole.
• Though churn is an issue in the industry, whether or not
competitors following suit will erode its competitive advantage
remains to be seen.
• Progressive has maintained its lead through continued innovation.
• Progressive displays continued growth that far exceeds that of
the industry and continues to climb the market share ladder.
Conclusion
Progressive’s self-assumed role of
innovator and change agent in the
auto insurance industry has led to a
distinct competitive advantage and
has maintained that advantage
through continued innovation.
Sabre
Sabre Company Background


Provider of technology and distribution
and marketing services for travel industry
Leadership position in every travel
marketing and distribution channel
•
•
•

Travel Agency
Online Consumer
Online Corporations
Known for its notable “firsts” and “bests”
Sabre Annual Report Pg 2
Sabre Company Background

Headquarters: South Lake, Texas

6,500 employees located in 45 countries

Carol Kelly – Senior Vice President and
CIO
•
Reports to CEO
http://www.sabre.com/about/index2.html?b=1&a=history/index.html, viewed on March 5, 2003
Sabre Customers








Airlines
Car Rental Agencies
Corporate Travel
Cruise Lines
Hotels
Tour Operators
Travel Agents
On Line Travel Consumers
www.sabre.com/products/index.html, viewed March 12, 2003
Sabre Financials

Total 2001 Revenue
•
$2.1 billion, 8% increase from 2000
Airline Solutions – 9%
Get There – 2%
Travelocity – 11%
Travel Marketing
and Distribution
– 78%
Sabre Annual Report Summary Page
Sabre Financials
2001
was a difficult year due to Sep 11 but
Sabre has seen a gradual improvement.
350
2500
300
2000
250
1500
200
1000
150
100
500
50
0
0
1998
1999
Revenue
Sabre Annual Report Pg 16
2000
Net Earnings
2001
Sabre Bookings Share
Sabre’s global booking share is 38%. Sabre has
the number one booking share in 3 regions.
48%
U.S./Canada
50%
Latin America
Europe
Asia/Pacific
Sabre Annual Report Summary Page
14%
57%
History of Sabre System

1960 – IBM and American Airlines had a
plan to automate the process of reserving
airline seats.
•

Booking process involved 12 people, 15
procedural steps and up to 3 hours.
Created Sabre – Semi-Automatic
Business Research Environment
•
•
Processed 84,000 telephone calls per day
Development cost was almost $40 million
www.sabre.com/about/history/index.html, viewed on March 6, 2003; Scheier, Robert, “35 years of IT Leadership: Technology
takes Flight” Computerworld, Vol 36, 40, 2002, pp. 34-36.
History of Sabre System

1964 – Final Sabre system cutover is
complete
•
•
•
Network extends coast to coast
Largest, private real-time data processing system
Internal inventory system owned by airline
• Installed only at airports and airline ticket
offices
• Used to track airline’s seats, flights and
operational information
www.sabre.com/about/history/index.html, viewed on March 6, 2003; Scheier, Robert, “35 years of IT Leadership: Technology
takes Flight” Computerworld, Vol 36, 40, 2002, pp. 34-36.
History of Sabre System

Benefits of Sabre
•
•
•
•
Manage inventory and seats faster and
more accurately
Get paid quicker for tickets purchased
Saves American 30% on investments in
staff alone
Error rate of less than 1%
www.sabre.com/about/history/index.html, viewed on March 6, 2003
Competition

Competitive Edge lasts for 5 to 7
years
•
•
United’s Apollo System
Amadeus – European Airlines
www.sabre.com/about/history/index.html, viewed on March 6, 2003
Sabre – The Next Step

1976 – Sabre moves to travel agencies
•
•

By the end of the year it is installed in 130 locations.
86% of top agencies in competitive markets use Sabre.
American began to “co-host” other airlines
on Sabre for a fee
•
•
Helped airlines compete against United where American had
no routes
Gave Sabre competitive edge with travel agencies
• One stop shopping
• Evolved into Global Distribution System (GDS)
www.sabre.com/about/history/index.html, viewed on March 6, 2003; Scheier, Robert, “35 years of IT Leadership: Technology
takes Flight” Computerworld, Vol 36, 40, 2002, pp. 34-36.
Sabre – 1980s

1986 – Sabre installs first automated yield
management system
•

Prices airline seats to yield maximum revenue for
each flight
1988 – Sabre stores 36 million fares which
can be combined to create over 1 billion fare
options
http://www.sabre.com/about/index2.html?b=1&a=history/index.html, viewed on March 25, 2003
Is the competitive
advantage to great?

November 1984 – 11 airlines file an antitrust suit against Sabre
•
•

Claimed reservation system restraining
competition
American had advantage because their system
was on travel agents desks and their flights were
shown first
American decided to end preferential
treatment for their own flights.
http://www.pcma.org/resources/convene/archives/displayArticle.asp?ARTICLE_ID=3392 , viewed on March 25, 2003
Sabre GDS Today

Connects over 60,000 travel agencies
with…
• 400 airlines
• 58,000 hotel properties
• 53 car rental companies
• 9 cruise lines
• 33 railroads
• 232 travel operators
http://www.sabre.com/about/index2.html?b=1&a=technology/index.html, viewed March 25, 2003
The Web – A New Threat

The web bypasses GDS – directly links
customer to airline
•
•
Self service web-based sites allow travel industry to
take advantage of less costly systems.
Offers ease of use and ease of operations
How can Sabre compete?
Scheier, Robert, “35 years of IT Leadership: Technology takes Flight” Computerworld, Vol 36, 40, 2002, pp. 34-36.; McCarthy,
Jack, “Troubled Travels” InfoWorld, Vol 24, 35, 2002, pp. 44-45.
New Innovations for Sabre

www.Travelocity.com
•
•
First site to offer travel reservations and
comprehensive destination and event
information on the Internet
Leading on-line consumer travel website
www.sabre.com/about/history/index.html, viewed on March 6, 2003; Sabre Annual Report Pg 3
New Innovations for Sabre

Get There
• Leading provider of web-based corporate travel
procurement
• Helps companies to track and control travel costs
• Signed up two largest travel agencies
• Customers build own travel booking sites
• Privately negotiated fares
• Travel policies
• Preferred suppliers
• Solidified position in business to business market
Sabre Annual Report Pg 3; Rosen, Cheryl, “Sabre thinks big for booking and reporting system” Informationweek, Issue 808,
2000, pp 172.
New Innovations for Sabre

Sabre Pass Touch
•

Sabre Wireless Check in System
•
•

Self service kiosk to check in using credit card or
frequent flyer card
Allows travelers to check in using wireless phone
Receive automatic flight notification
Sabre Roving Agent
•
Hand held device to make seat assignments, print
boarding passes and bag tags and issue vouchers
www.sabre.com/about/history/index.html, viewed on March 6, 2003; Sabre Annual Report Pg 3; Meehan, Michael, “Sabre
launches wireless flight check-in” Computerworld, Vol 34, 44, 2000, pg 72.
Changes for Sabre

Transition from GDS to open platform
•
•
•
•

Allows for greater access, availability, content
Greater integration and increased speed to market
Only non-stop capability in industry
For pricing, reservations and ticketing
Outsourcing to EDS
•
•
Sold airline infrastructure technology business to EDS
• Sabre will focus on its core areas and higher margin,
faster growing business
EDS will manage Sabre information systems
• EDS will contribute $20 million for Sabre product
development
Sabre Annual Report Pg 12; Hickey, Kathleen, “Outsourcing in a big way” Traffic World, Vol 265, 13, pp 40.
Does Sabre Have a Sustainable
Competitive Advantage?
Pillar 1:
Project Life Cycle Analysis - How long until a response?
•
•
•
•
Awakening
Approval
Building the System
Project Launch
The original Sabre system had a competitive advantage for
5 to 7 years. Other airlines were able to create similar
systems, however…
Sabre has continued to keep a competitive advantage by
using information technology to create new products.
Does Sabre Have a Sustainable
Competitive Advantage?
Pillar 2: Competitor Analysis: Who can respond?
• Competitive Scope
• Organizational Base
• Information Resources
Sabre products face competition from many different
sources… they have to be continuously updating and
creating new value for their products…
For example, they were the first to “co-host” on their
system so they became the preferred provider for travel
agents.
Does Sabre Have a Sustainable
Competitive Advantage?
Pillar 3: Supply Chain Analysis: Will Copying Help?
• Find Exploitable Link
• Capture Pole Position
• Keep the Gate Closed
Other companies have been able to copy Sabre’s
systems…
The key has been to be first to market and to continuously
innovate
Sabre Conclusion
Sabre has maintained a competitive advantage in its
industry by continuously working to create the next
best thing…
It may not be possible to maintain a competitive
advantage over a long period of time for one product
but it is possible to by continuously improving your
products.
Celera Genomics, Inc.
Discovery Can’t Wait
TM
Human Genome Project –
Cracking the Code



Begun in 1990, the Human Genome Project (HGP)
is an effort by the DOE and NIH with the primary
goal of discovering all of the 80,000+ human genes
and rendering for study.
Originally planned to last 15 years, but Celera said
in 1998 it could finish the job in a third of the time,
and announced April 4, 2000 that it had indeed
finished.
Bicycle Example (billions of parts).
http://www.pbs.org/newshour/extra/features/jan-june00/genome.html, viewed March 01, 2003 .
http://www.ornl.gov/TechResources/Human_Genome/, viewed March 20, 2003.
Celera - Origins

Dr. Craig Venter began working on the
human genome at the NIH, a major
backer of the project, with Dr. Francis
Collins, Director of the NIH.

Frustrated with Collins and his slow pace,
Venter left and started his own team.

Heavily criticized and doubted by other
scientists about his claim.
“We knew it would either work
spectacularly or be the biggest flameout
in history.” – Craig Venter
http://www.pbs.org/newshour/extra/features/jan-june00/genome.html, viewed March 01, 2003
Craig Venter, Ph.D
Francis Collins, Ph.D
Celera - Background

Established in 1998 by Applera Inc., and Craig
Venter. Main offices in Rockville, MD and San
Francisco, CA.

Celera is engaged principally in integrating
advanced technologies to discover and develop new
therapeutics by leveraging capabilities in
bioinformatics and genomics.

Celera Genomics and the Applied Biosystems Group
are the two operating groups that comprise Applera
Corporation.
http://www.celera.com/company/home.cfm?ppage=overview&cpage=background, viewed March 05, 2003.
Celera – Executive Management
Tony L. White
Chairman, President, CEO
Dennis L. Winger
Sr. VP, CFO
William B. Sawch
Sr. VP, General Counsel
David S. Block, M.D.
Robert F.G. Booth, Ph.D.
Samuel E. Broder, M.D.
Applera Corporation 2002 Annual Report
John S. Ostaszewski
Treasurer
VP - Celera Genomics
VP - Celera Genomics
VP - Celera Genomics
Tama Olver
VP, CIO
Size of Celera Genomics
Financial Overview - 2002
(Amounts in Millions $)
Revenues:
Cost of Sales:
R&D:
Net Loss:
Cash & Cash Equivalents:
Total Debt:
Applera Corporation 2002 Annual Report
2001
2002
% Increase/(Decrease)
$ 89.4
43.0
164.7
(186.2)
$120.9
51.9
132.7
(211.8)
35.2%
20.7%
(19.4%)
13.7%
995.6
0.0
888.9
18.0
(10.7%)
-
Celera - Stock Price History
Celera Five-year Stock Price (NYSE:CRA)
http://finance.yahoo.com, Yahoo! Inc., viewed March 16, 2003.
Celera – Primary Products
Revenues come from two primary sources:

An online information and discovery system through which
users can access Celera’s genomic and related biological and
medical information. Customers pay for subscription access to
CDS.

Service Revenues
• Customized datasets and proprietary mapping.
• Customized analysis and algorithm development.
• Database design and implementation.
http://www.celera.com/company/home.cfm?ppage=overview&cpage=faq, viewed March 01, 2003.
http://www.celeradiscoverysystem.com/contact/home.cfm?ppage=contact_services, viewed March 28, 2003.
Celera - Customers
Users: 250+ Commercial, Academic & Institutional Organizations
Sample of Commercial Customers:
Sample of Academic/Institutional Customers:
- Harvard University
- Oxford University
- California Institute of Technology
- National Cancer Institute
http://www.celera.com/genomics/home.cfm?ppage=overview&cpage=customers, Viewed March 03, 2003.
http://www.celeradiscoverysystem.com/testimonials/home.cfm. Viewed March 28, 2003.
Celera - Annual IT Budget

IT budget is not disclosed.

Celera IT department contains roughly 50
employees.

R&D spending was $132 million in 2002.
Jamie Lacey, Celera Communications, e-mail to Darren Van Booven, March 03, 2003.
Applera Corporation 2002 Annual Report
http://www.celera.com/company/home.cfm?ppage=overview&cpage=platforms, Viewed March 03, 2003
Celera - Annual IT Budget
Celera has built one of the most powerful
non-government supercomputing facilities
in the world with 800+ interconnected
computers.
Celera’s Main
Data Center:
Applera Corporation 2002 Annual Report
http://www.celera.com/company/home.cfm?ppage=overview&cpage=platforms, Viewed March 03, 2003
Origins of Celera Systems



Systems
originate
with
the
formation of the company. Venter
claimed in 1998 he could beat NIH
by by relying heavily on robots and
computers.
Venter and Applied Biosystems,
Inc. built the first commercialgrade DNA sequencing robots.
Celera now has over 200 ABI
PRISM® 3700 DNA Analyzers
(shown). The PRISM 3700 is the
first DNA sequencer designed for
production-scale sequencing.
http://www.pbs.org/newshour/extra/features/jan-june00/genome.html, viewed March 01, 2003
http://www.appliedbiosystems.com/products/productdetail.cfm?prod_id=40
Critical Differentiator

The key to Celera's unprecedented sequencing speed
and productivity is its whole genome "shotgun"
sequencing approach and sequencing them with brute
force. Billions of base pairs to sequence!

Celera’s approach is much faster than previous mapping
methods and dramatically increases the amount of
genomic and data available to researchers.
Base Pairs:
http://www.celera.com/company/home.cfm?ppage=overview&cpage=platforms, Viewed March 03, 2003.
Critical Differentiator



Celera developed supercomputing facility
for processing DNA sequencing data
produced by its Celera’s robots.
With its robots and supercomputers,
Celera was able to sequence and
assemble the human genome in just nine
months.
Celera Discovery System was initialized
and embodied Celera’s Competitive
Advantage.
http://www.celera.com/company/home.cfm?ppage=overview&cpage=platfo
rms, Viewed March 03, 2003.
How CDS is Used
http://www.celera.com/company/home.cfm?ppage=overview&cpage=faq, viewed March 01, 2003.
Online Demo

http://www.celeradiscoverysystem.com/index.cfm
Does Celera Have a Sustainable
Competitive Advantage?
Pillar 1:
Project Life Cycle Analysis - How long until a response?
•
•
•
•
Awakening
Approval
Building the System
Project Launch
1. Celera’s information delivery system and data are patented
and trademarked.
2. Significant technology start-up cost in a low-margin industry
and rough economy.
Celera’s competitive advantage is supported by the first pillar.
Applera Corporation 2002 Annual Report
Does Celera Have a Sustainable
Competitive Advantage?
Pillar 2: Competitor Analysis: Who can respond?
•
•
•
1.
2.
3.
4.
Competitive Scope
Organizational Base
Information Resources
Only large international governments are capable of duplicating
Celera’s supercomputing platform, but they have no competitive
need to do so.
Content and delivery system pioneered by Celera.
Access to cheap industrial-grade equipment via Applied
Biosystems
Well-skilled experts in bioinformatics.
Celera’s competitive advantage is supported by the second pillar.
Applera Corporation 2002 Annual Report
Does Celera Have a Sustainable
Competitive Advantage?
Pillar 3: Supply Chain Analysis: Will Copying Help?
•
•
•
Find Exploitable Link
Capture Pole Position
Keep the Gate Closed
1. Most powerful gene sequencing center in the world.
2. Celera’s information delivery system and data are patented
and trademarked.
3. Brand recognition.
Celera’s competitive advantage is supported by the third pillar.
Applera Corporation 2002 Annual Report
Celera - Conclusion
Celera’s systems provide a sustainable competitive
advantage that is supported by the three pillar model.
-butSometimes it isn’t enough.
“There is a high degree of uncertainty that the Celera
Genomics group will be able to achieve profitable
operations” – Celera Executive Management
Applera Corporation 2002 Annual Report
Overall Summary
Overall Summary – Cont’d.
Obstacles to competitive advantage:
- Capital Costs
- Intellectual Property Rights
- Switching Costs
- Skills
- Management Buy-In
MIS Quarterly, 1995 “IT and sustained competitive advantage” by Francisco Mata
Conclusion



IT can be used to create a sustainable
competitive advantage for the business!
A competitive advantage leads to a
significant edge over rivals, which usually
leads to greater market share and profits.
Some competitive advantages are
sustainable, while others are not.
Lessons for the CIO
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Must do things better, more efficiently, or
special in the eyes of your customers.
Patent methodologies and innovation so
that competitors cannot use them.
A system can be the best, but without
coupling it to business strategy it may not
offer any benefit to the bottom line.
Continuous innovation is needed to remain
competitive.
IT as Competitive Advantage
Questions?