The VRIO framework as an internal strategic analysis tool

When I did my MBA coursework, I specialized in Strategic Management (that’s my minor where my major is Technology Management). Despite the fact that most of my current research work is primarily focused on organizations in all three realms – government agencies, industrial plants and civil society organizations – I rarely examine internal firm strategies (e.g. the business strategies). For those of you arriving just recently to my blog, I conduct research on environmental social movements and their strategies to influence governments, wastewater governance and intergovernmental relationships and urban sustainability under multiple stressors, as well as public policy applied to environmental issues.

Recently, I had a fantastic meeting with Lisa Thomas-Tench (Redwerks) where we both were talking about our MBA coursework and I noticed she had a copy of the book by Jay Barney “Gaining and Sustaining Competitive Advantage”. We share many interests and a very similar training and background, and we even took courses with some of the same faculty members. I was fortunate to have had two of UBC’s best economists (Dr. Helen Michelson and Dr. Tom Ross) as my mentors and professors. Both of them are extremely good at game theory and business strategy, and they both taught me in the many courses I took with them (yes I am addicted to learning from smart people) about the value of both industry (external) analysis and firm (internal) analysis. External (industry) analyses are usually conducted with the models popularized by Michael Porter (the 5 forces model)

Lisa and I both discussed an interesting and puzzling finding – the relative lack of popularity of the VRIO framework (whose Wikipedia page is orphaned because NOBODY links to it). I find extremely puzzling that very few people pay attention to a tool that can be applied at multiple scales and in a myriad of contexts. Admittedly, the VRIO framework emanated from the resource-based view of the firm, and therefore it is mostly used for internal (business) analysis within the organization. However, think about it for a second. I would argue that you can examine entire industrial sectors, firms, products and individual behaviors through the VRIO framework quite easily. Do you want to know if your product will succeed? Examine whether it is Valuable, Rare, Inimitable and Organizationally-exploitable?

(Side note – no, I’m not going to edit any other Wikipedia page to link to it, I DON’T have the time – but if you are a Wikipedia editor and would like to link the VRIO framework to the larger page on Strategic Management and to the entry on the resource-based view of the firm and would like me to publicize that you did it, I’d be more than happy to do so).

I’m of course not a scholar of strategic management myself (at least, at the moment) but as I mentioned, I’m intrigued (and Lisa shares this same curiosity) to know why the VRIO framework isn’t more popularly disseminated. I have found at least 6,300 articles on the resource based view of the firm, but definitely many less on the VRIO framework. I’m probably going to use it again at some point (I used it for my Masters’ thesis on a game-theoretic model of strategic alliances between biotech firms and large pharmaceuticals).

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Comments (1)

LisaFebruary 26th, 2009 at 9:49 am

It’s true — the VRIO framework has been much more useful in real life on a strategic planning level for my work with clients than SWOT or PFF. It helps focus the conversation on what we have and what we can do with what we have, rather than developing a mindset focussed around external conditions about which we can do nothing (threats/suppliers/competitors). It is possible to examine these external factors instead as resources from which we can draw (or not) and how the company itself can leverage its own abilities.

Perhaps I am also biased because I too studied with the fantastic Tom Ross, but having used all of these tools with my clients — including VPs at Sony, Toyota and the Bank of Montreal — I know that VRIO stands out.

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