By Ian Ortega
One of the most popular tools or frameworks in Business Schools is the VRIO framework. It’s basically a framework to assessing if a certain capability or resource is a sustainable competitive advantage. VRIO stands for Valuable, Rare, Inimitable (impossible to copy), and Organized.
With this framework, a given capability will be rated across the four letters. For example, if a company picks its Operating Processes as a competitive advantage. Then we ask, is this valuable? Yes. Is this rare? Perhaps not. Is this inimitable? Probably yes. Is it organized? Then Yes. For the capability to be a sustainable competitive advantage, it must fulfil all the four criteria.
Yet, the most I think about it, the more I realize that the hardest thing to impute in a capability or resource is organization. It takes quite a long time to really organize a capability. One could have a valuable skill, it could even be rare and inimitable, yet they will fail to organize it.
It’s for this reason that a great employee in a well-established organization could become a wonderous failure in a startup environment. The startup is usually struggling at the organizing part. Organizing capabilities is perhaps the biggest multiplier of competitive advantage. Think of it as having the best football players and failing to organize them into a team that wins trophies and plays the best soccer.
One of the organizing factors is culture. And for every leader, they will confess that culture is hard to build, harder to reset. But when the work of culture is done, it becomes a self-propelling wheel. Thus, to unlock organization, companies must invest their best efforts around culture. An organized team of average players will often beat a disorganized team of superstars. Partly explains why sometimes poaching star employees often fails. Because these star employees have thrived in a certain culture, it’s not a guarantee that your own culture will guarantee their performance.
About the Writer: The writer is a Managing Partner at O.G, pioneering the industry of Innovation and Strategy.