This is why you should find YOUR durable advantage

May 16, 2020

VRIO framework

Today let’s consider a 4-question framework or strategic tool for analysing the resources and capabilities of a business.

The VRIO framework was a business school staple of the 1990s, and it still has great value today in terms of business strategy and market positioning.

Here are the four key questions to ponder:

(i) Valuable – do you have a resource that is valuable, or which can be used to exploit an opportunity?

(ii) Rare – does your resource or capability have rarity value, or is it genuinely scarce?

(iii) Inimitable – is it difficult to imitate what you do, or might it be expensive for others to copy you?

(iv) Organisation – are you organised in such a way as to be able to capture the value?

If you can answer these questions positively, then you may have found yourself a durable competitive advantage.

Exploiting opportunity

Some of the opportunities businesses can look to exploit include those arising from technological change, for example, or cultural or demographic shifts.

You should also consider using the VRIO framework when choosing companies to invest in.

If a business doesn’t have a durable competitive advantage then eventually its earnings will shrink over time, as competitors erode away its edge.

A list of great businesses which have historically demonstrated a durable competitive advantage might include McDonalds, Coca Cola, Johnson & Johnson, Proctor & Gamble, Colgate-Palmolive, Louis Vuitton, Walmart, Visa, Mastercard, Google, and Apple.

Your personal brand

Interestingly, you can also apply the VRIO framework to your own personal development.

What skills or attributes do you have that others might find it costly or even impossible to copy?

How can your unique skills and insights be valuable to others?

And how can you position yourself to capture this value?

Your unique abilities

It’s worth take some time to think carefully about what your unique skills, abilities, and attributes are…and the possibilities are quite diverse!

For example, you might be an expert in time management, teamwork, conflict resolution, problem solving, writing, or presenting live events to an audience.

Or perhaps your unique skill set is in the field of design, or marketing, or selling.

I’ll never forget a head teacher I had at junior school who told us that while we can’t all be good at everything, everyone can be good at something.

I didn’t always agree with what he said (he thought school sports such as football should be banned, as for some reason he didn’t like competition!), but that particular point has always stuck with me.

I discussed these ideas a little further in the short video here

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