IT as a Competitive Advantage Presented by: Grant Epstein Erin Miltenberger Darren Van Booven.

IT as a Competitive Advantage

Presented by:Grant EpsteinErin MiltenbergerDarren 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


“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


Federal Express: Package tracking system

Mitek: Computerized roofing design system

Baxter Healthcare: Hospital supply ordering system

Firms That Have Made it Work

Aligning IT Strategy with Business Strategy

Contributions Commodity Differentiator

Critical Aircraft maint.software

Baxter Healthcare ordering software

Useful Personal productivity 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• 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.

Pillar 3: Supply Chain AnalysisWill 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 24Sept. 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 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 24Sept. 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 DifferentiatorWhere 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 acompletely paperless process.”

Hulme, George, “Premium Put on Web Initiatives” Information Week, September 11, 2000

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 webas a viable channel for communicating with the market.

Unlike its competitors, Progressive’s business modelmade 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.


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 ofinnovator and change agent in theauto insurance industry has led to adistinct competitive advantage andhas maintained that advantagethrough continued innovation.

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

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 Company Background

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

Travel Marketing and Distribution – 78%

Travelocity – 11%

Airline Solutions – 9%Get There – 2%

Sabre Annual Report Summary Page

Sabre Financials

Sabre Annual Report Pg 16

0

500

1000

1500

2000

2500

1998 1999 2000 2001

0

50

100

150

200

250

300

350

Revenue Net Earnings

2001 was a difficult year due to Sep 11 but Sabre has seen a gradual improvement.

Sabre Bookings Share

57%

14%

50%

48%

Asia/ Pacific

Europe

Latin America

U.S./ Canada

Sabre’s global booking share is 38%. Sabre has the number one booking share in 3 regions.

Sabre Annual Report Summary Page

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


History of Sabre System

www.sabre.com/about/history/index.html, viewed on March 6, 2003

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%

Competition

www.sabre.com/about/history/index.html, viewed on March 6, 2003

Competitive Edge lasts for 5 to 7 years• United’s Apollo System• Amadeus – European Airlines

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)


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 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/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

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.

How can Sabre compete?

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

• 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.

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.

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?


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.


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 ConclusionSabre 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 WaitTM

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

Craig Venter, Ph.D

Francis Collins, Ph.D

http://www.pbs.org/newshour/extra/features/jan-june00/genome.html, viewed March 01, 2003

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

David S. Block, M.D. VP - Celera GenomicsRobert F.G. Booth, Ph.D. VP - Celera GenomicsSamuel E. Broder, M.D. VP - Celera Genomics

Applera Corporation 2002 Annual Report

Tony L. WhiteChairman, President, CEO

Dennis L. WingerSr. VP, CFO

William B. SawchSr. VP, General Counsel

John S. OstaszewskiTreasurer

Tama OlverVP, CIO

Size of Celera GenomicsFinancial 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%R&D: 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 -


Celera - Stock Price History

Celera Five-year Stock Price (NYSE:CRA)

http://finance.yahoo.com, Yahoo! Inc., viewed March 16, 2003.

Celera – Primary ProductsRevenues 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 - CustomersUsers: 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 Reporthttp://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.

Applera Corporation 2002 Annual Reporthttp://www.celera.com/company/home.cfm?ppage=overview&cpage=platforms, Viewed March 03, 2003

Celera’s Main Data Center:

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-june00/genome.html, viewed March 01, 2003http://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.

http://www.celera.com/company/home.cfm?ppage=overview&cpage=platforms, Viewed March 03, 2003.

Base Pairs:

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=platforms, 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

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.


Does Celera Have a Sustainable Competitive Advantage?

Pillar 2: Competitor Analysis: Who can respond?


1. Only large international governments are capable of duplicating Celera’s supercomputing platform, but they have no competitive need to do so.

2. Content and delivery system pioneered by Celera.3. Access to cheap industrial-grade equipment via Applied

Biosystems4. Well-skilled experts in bioinformatics.

Celera’s competitive advantage is supported by the second pillar.



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.



Celera - ConclusionCelera’s systems provide a sustainable competitive advantage that is supported by the three pillar model.

-but-

Sometimes 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


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 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?

IT as a Competitive Advantage Presented by: Grant Epstein Erin Miltenberger Darren Van Booven.

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