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IT as a Competitive Advantage

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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 – PowerPoint PPT presentation

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Title: IT as a Competitive Advantage


1
IT as a Competitive Advantage
  • Presented by
  • Grant Epstein
  • Erin Miltenberger
  • Darren Van Booven

2
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

3
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
4
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
5
IT as a Competitive Advantage
  • Federal Express Package tracking system
  • Mitek Computerized roofing design system
  • Baxter Healthcare Hospital supply ordering
    system

Firms That Have Made it Work
6
Aligning IT Strategy with Business Strategy
Contributions Commodity Differentiator
Critical Aircraft maint. software Baxter Healthcare ordering software
Useful Personal productivity software ICI Paints
7
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.
8
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.
9
Pillar 2 Competitor Response
  • What Competitors Can Respond?
  • Three Components
  • Competitive Scope
  • Geographic, Segment, Vertical, Industry
  • Organizational Base
  • 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.
10
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.
11
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.

12
Case Study Analysis
  • Progressive
  • Sabre
  • Celera Genomics

13
Progressive

14
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.

15
History and Background
  • Founded in 1937 by Jack Lewis and Joseph Green.

www.progressive.com/progressive/history.asp,
viewed February 9, 2003
16
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
17
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
18
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 Progressives PR Department
19
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 Progressives PR
Department, February 2003
20
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 Progressives 30,000 agents.

Progressive Facts, provided by Progressives PR
Department, February 2003
21
ITs 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.

22
Importance of IT
  • Information on Progressives employee count in
    the IT Department not currently available.
  • Has averaged around 2000 over the last five years
  • Information on Progressives IT annual budget
    also not available.
  • Information Week.com, 2000.
  • Gallagher, Julie, Business-savvy CIO turns
    tech-savvy CEO Insurance and Technology,
  • July 2001.

23
Progressives 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 Progressives PR
Department, February 2003
24
Progressives 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 Progressives PR
Department, February 2003
25
Progressives 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
26
Progressives Critical Differentiator
  • Progressives critical differentiator is not that
    it allows customers to shop and buy online.
  • Now we dont think, Boy, were the only one
    that allows customers to buy policies online.
    Its just part and parcel of our entire strategy
    that focuses on the Internet and putting the
    information back into the clients hands.
  • MacSweeney, Greg Progressive, inside and out
    Insurance and Technology, Vol 24
  • Sept. 30, 1999. Pp 13-14.

27
Progressives Critical Differentiator
  • This attitude carries on down the line of
    Renwicks management team.
  • Our guiding principal is to provide customers
    with a well-developed, 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.

28
Critical Differentiator Where it all began
  • Progressives critical differentiator is that it
    has fully integrated technology into it business
    process decisions and its interaction with
    prospects, customers, and agents

29
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 its 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.

30
History of Progressives 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

31
History of Progressives 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
32
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, youre still
  • going to get a paper policy in the mail.
  • Its rare, if it is happening at all, for a
  • completely paperless process.

Hulme, George, Premium Put on Web Initiatives
Information Week, September 11, 2000
33
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, Progressives business
    model
  • made the transition very easy and logical.

34
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 Progressives
    benchmark, it had already moved it further out.

35
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.

36
Conclusion
  • Progressives 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.

37
Sabre
38
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
39
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?b1ahisto
ry/index.html, viewed on March 5, 2003
40
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
41
Sabre Financials
  • Total 2001 Revenue
  • 2.1 billion, 8 increase from 2000

Get There 2
Airline Solutions 9
Travelocity 11
Travel Marketing and Distribution 78
Sabre Annual Report Summary Page
42
Sabre Financials
  • 2001 was a difficult year due to Sep 11 but Sabre
    has seen a gradual improvement.

Sabre Annual Report Pg 16
43
Sabre Bookings Share
Sabres global booking share is 38. Sabre has
the number one booking share in 3 regions.
Sabre Annual Report Summary Page
44
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.
45
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 airlines 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.
46
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
47
Competition
  • Competitive Edge lasts for 5 to 7 years
  • Uniteds Apollo System
  • Amadeus European Airlines

www.sabre.com/about/history/index.html, viewed on
March 6, 2003
48
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.
49
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?b1ahisto
ry/index.html, viewed on March 25, 2003
50
Is the competitive advantage to great?
  • November 1984 11 airlines file an anti-trust
    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/dis
playArticle.asp?ARTICLE_ID3392 , viewed on March
25, 2003
51
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?b1atechn
ology/index.html, viewed March 25, 2003
52
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.
53
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
54
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.
55
New Innovations for Sabre
  • Sabre Pass Touch
  • Self service kiosk to check in using credit card
    or frequent flyer card
  • Sabre Wireless Check in System
  • 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.
56
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.
57
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.

58
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.

59
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 Sabres
    systems
  • The key has been to be first to market and to
    continuously innovate

60
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.
61
Celera Genomics, Inc.
  • Discovery Cant WaitTM

62
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-jun
e00/genome.html, viewed March 01, 2003
. http//www.ornl.gov/TechResources/Human_Genome/,
viewed March 20, 2003.
63
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

Craig Venter, Ph.D
Francis Collins, Ph.D
http//www.pbs.org/newshour/extra/features/jan-jun
e00/genome.html, viewed March 01, 2003
64
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?ppageoverv
iewcpagebackground, viewed March 05, 2003.
65
Celera Executive Management
David S. Block, M.D. VP - Celera
Genomics Robert F.G. Booth, Ph.D. VP - Celera
Genomics Samuel E. Broder, M.D. VP - Celera
Genomics
Applera Corporation 2002 Annual Report
66
Size of Celera Genomics Financial Overview - 2002
(Amounts in Millions ) 2001
2002 Increase/(Decrease) Revenues
89.4 120.9 35.2 Cost of
Sales 43.0 51.9
20.7 RD 164.7 132.7
(19.4) Net Loss (186.2) (211.8)
13.7 Cash Cash Equivalents
995.6 888.9
(10.7) Total Debt 0.0
18.0 -
Applera Corporation 2002 Annual Report
67
Celera - Stock Price History
  • Celera Five-year Stock Price (NYSECRA)

http//finance.yahoo.com, Yahoo! Inc., viewed
March 16, 2003.
68
Celera Primary Products
  • Revenues come from two primary sources
  • An online information and discovery system
    through which users can access Celeras 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?ppageoverv
iewcpagefaq, viewed March 01,
2003. http//www.celeradiscoverysystem.com/contact
/home.cfm?ppagecontact_services, viewed March
28, 2003.
69
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?ppageover
viewcpagecustomers, Viewed March 03,
2003. http//www.celeradiscoverysystem.com/testimo
nials/home.cfm. Viewed March 28, 2003.
70
Celera - Annual IT Budget
  • IT budget is not disclosed.
  • Celera IT department contains roughly 50
    employees.
  • RD 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.c
om/company/home.cfm?ppageoverviewcpageplatforms
, Viewed March 03, 2003
71
Celera - Annual IT Budget
  • Celera has built one of the most powerful
    non-government supercomputing facilities in the
    world with 800 interconnected computers.

Celeras Main Data Center
Applera Corporation 2002 Annual
Report http//www.celera.com/company/home.cfm?ppag
eoverviewcpageplatforms, Viewed March 03, 2003
72
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 commercial-grade 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-jun
e00/genome.html, viewed March 01,
2003 http//www.appliedbiosystems.com/products/pro
ductdetail.cfm?prod_id40
73
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!
  • Celeras 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?ppageoverv
iewcpageplatforms, Viewed March 03, 2003.
74
Critical Differentiator
  • Celera developed supercomputing facility for
    processing DNA sequencing data produced by its
    Celeras 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 Celeras Competitive Advantage.

http//www.celera.com/company/home.cfm?ppageoverv
iewcpageplatforms, Viewed March 03, 2003.
75
How CDS is Used
http//www.celera.com/company/home.cfm?ppageoverv
iewcpagefaq, viewed March 01, 2003.
76
Online Demo
  • http//www.celeradiscoverysystem.com/index.cfm

77
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
  • Celeras information delivery system and data are
    patented and trademarked.
  • Significant technology start-up cost in a
    low-margin industry and rough economy.
  • Celeras competitive advantage is supported by
    the first pillar.

Applera Corporation 2002 Annual Report
78
Does Celera Have a Sustainable Competitive
Advantage?
  • Pillar 2 Competitor Analysis Who can respond?
  • Competitive Scope
  • Organizational Base
  • Information Resources
  • Only large international governments are capable
    of duplicating Celeras 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.
  • Celeras competitive advantage is supported by
    the second pillar.

Applera Corporation 2002 Annual Report
79
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
  • Most powerful gene sequencing center in the
    world.
  • Celeras information delivery system and data are
    patented and trademarked.
  • Brand recognition.
  • Celeras competitive advantage is supported by
    the third pillar.

Applera Corporation 2002 Annual Report
80
Celera - Conclusion
Celeras systems provide a sustainable
competitive advantage that is supported by the
three pillar model. -but- Sometimes it isnt
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
81
Overall Summary
82
Overall Summary Contd.
  • 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
83
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.

84
Lessons for the CIO
  • 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.

85
IT as Competitive Advantage
  • Questions?
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