VRIO Framework Analysis Strategy Matrix Template

Description
The VRIO Framework originally stems from a 1991 paper by Professor Jay Barney (University of Utah, David Eccles School of Business, Strategic Management) called "Firm Resources and Sustained Competitive Advantage" (available here: https://journals.sagepub.com/doi/10.1177/014920639101700108 ). He origninally called it VRIN and renamed it VRIO in a subsequent 1995 work ("Looking Inside for Competitive Advantage").

While many other more analytical and quantitative Resource Based View (RBV) models exists, the VRIO Analysis Framework is appreciated for its clarity and simplicity. Note: Complementary to IO (Industry Organization) models, RVB models aim at linking a given organisation's performance to some of it's internal characteristics. 

Starting Point -> Definition of a "resource/feature": Tangible or Intanglible, they are "all assets, capabilities, organizational processes, firm attributes, information and knowledge controlled by a firm that enables it to improve its efficiency and effectiveness" (Think Insights). Examples: people, patents, equipment, certifications, buildings, leaders, primary goods, knowledge, know-how...

The principle of the VRIO framework is to analyse each resource via a 4 step process:1/ V -> Is it Valuable?
2/ R -> Is it Rare?
3/ I -> Is it hard to Imitate?
4/ O -> Is the firm Organized around it?

Detailed Meaning of the V R I O letters:

💰V -> Is it Valuable?

Does the resource/ feature add value to the firm to either give it additional ways to: enable strategies, exploit business opportunites, defend itself agains threats, increase the perceived value of the product/service from the customer standpoint (increase in differentiation or lowering prices), increase effectiveness or improve efficiency. Owning resources or having features which provide no value can actually lead to competitive disadvantage.
The Net Present Value (NPV) formula can be used to assess objectively the value of a resource / feature. Are the discounted future expected cash-flows from the use of this resource/ feature greater than the initial + ongoing investments?
If a resource/ feature does not meet the test of "Value", the VRIO Anlysis stops here. If it does, it is now possible to move to the next step : "Is it Rare"?


💎R -> Is it Rare?

This answers the question of: how easy is it for competitors to have access to it the resource? When you have a "rare" feature or "resource", you'll be able to put a high hurdle to competitors.

If the feature/ ressource isn't rare, this leads to a state of competitive result of "Competitive Parity" (or competitive equality), and no organisation can achieve a superior performance compared to another. However, an organisation should try to maintain competitive parity as to still play on market and have the capability to free financial ressources that can be invested to gain temporary or sustainable competitive advantage. Only "Valuable", but not "Rare", resources have a role to play.

Example: Coca Cola's Brand Name. Valuable, but not rare given that a brand like Pepsi or 7UP is also a strong brand and can easily compete and put on the market a similar sucessful product.

Generally, Rarity is relatively "binary". Indeed, on the one hand, if a firm posseses a resource than no other competitor can use, it incredibly dominates the market. On the other hand, if a resource is availble to all competitors, it will not be an element of differentiation. However, a resource can be rare and possesed by a small number of competitors providing them a global advantage. Example: Toyota and Honda can build both cheaper and better cars in Japan than their competitors, because of their nationality, and therefore can beat competition on the short term and long-run. Research tends to show an increasingly stronger correlation between exclusive access to the resource and performance (i.e. the fewer the number of competitors have access to the resource, the increasingly higher their market share).

If a resource/ feature meets the "Rarity" test, it leads to a "Temporary Competitive Advantage" and we can now move to "Imitation: is it hard to imitate?", to see if the competitive advantage has a sustainable component to it.

🎭I -> Is it hard to Imitate? 

This one answers the question of: How expensive / possible is it for competitors to replicate the or substitute the resource, capability or feature?

A hard to imitate resource is "inimitable". Chances are that if a firm possesses such a resource, other competitors will invest heavily (financially or in innovation) to have an equivalent or a substitute, leading to the natural exclusion of certain actors, not in a position to make such a move.

Having both a valuable and rare asset is great as a competitive advantage, but to sustain over-time you have to be in a position to defend it. 

According to Barney, there are 3 main causes of owning inimitable resources:
1/ Historical Conditions: resources that stem from specific events in history or that have been built over a very long time period.
2/ Causal Ambiguity: a difficulty to identify specific resources that lead to a competitive advantage, and therefore ways to imitate or substitute it.
3/ Social Complexity: unique resources stem from company culture, personal relationships, communities or deep intertwined social networks (ex: LinkedIn.com).

Global example: launch of the Apple iPad, iPod and MacBook products and the difficulty for competition to build or offer a substitute produt.

🏛O -> Is the firm Organized around it?

A great strategy has no value until fully realised by the organisation and put into orchestration. To guarantee any competitive advantage (temporary or sustainable), the organisation must adjust management systems, policies, organisation structure, management teams, team and Business Unit objectives, the leadership's communicated vision, tactics... around V + R + I  or V + R resources or features. In essence, this asks the question of an organisation's specific capacity to successfully exploit these resources. Indeed, in some cases, this entails heavy financial investments, organisational turnarounds, change management, replacing key leaders with more adapted ones etc. Having a great idea, invention is wonderful, but having  the ability to transform it into innovation, products/services and to sucessfully market it all the more essential. Otherwise it is "organizational constipation" 😂 (according to Eric Schmidt, former CEO of Sun Microsystems).

Possible competitive results:
👎- Competitive Disadvantage - None
🤜🤛- Competitive Parity: Only "V"
⏱👍- Temporary Competitive Advantage -  V + R
⏱👍✅- Realized Temporary Competitive Advantage - V + R + O
🤩💪🤔- Unused Competitive Advantage - V + R + I
🤩💪✅- Sustainable Competitive Advantage - V + R + I + O

Of course, the VRIO aspects of a given feature/resource can evolve over time. It is therefore parmount to closely put in place systems that monitor the current state to anticipate potential adjustments or radical changes in strategy.

The attached PowerPoint Template is used following a simple methodology outlined hereafter:
1️⃣ - Study the Structure & Theory of the VRIO Analysis Framework
2️⃣ - List the key features / resources for your organization
3️⃣ - For each letter in “VRIO”, qualify each feature/resource (with a different level of detail according to your choice of the binary (yes/no) or quantitative (0 to 4) templates)
4️⃣ - Based on the combinations of ✅ and ❌ , and compared to the Theory (i.e. original template framework), infer the “Competitive Result”.
5️⃣ - Change “Company X” to your Company’s Name
6️⃣ - Change your Slide Title, Logo, Footer & Sources based on your analysis

Given the pertinence of this RBV Framework, I decided to create a hands-on VRIO Analysis PowerPoint Template for any organisation to use.

The Best Practice is:
- 2 editable Microsoft PowerPoint Template Slide (Binary, Quantitative)
- with an online & offline 12 step-by-step methodology, with pedagogical illustrations for each step.

Sources:
- VRIO by "Strategic Management Insights": https://strategicmanagementinsight.com/tools/vrio/
- VRIO Framework by Think Insights: https://thinkinsights.net/strategy/vrio-framework/
- 4 VRIO Analysis examples, by Oregon State: https://open.oregonstate.education/strategicmanagement/chapter/4-vrio-analysis/
VRIO Analysis by the Power MBA: https://www.thepowermba.com/en/blog/vrio-analysis

Should you have any questions about this top tier competitive advantage VRIO analysis strategy framework template, you're welcome to reach out to me via Private Message.

Good Luck!
- Tim

⭐️ Bundle of 19 Strategy Consulting Frameworks (including this one): https://www.eloquens.com/tool/a7rgt4Bb/strategy/management-consulting-templates-and-frameworks/classic-strategy-frameworks-template-slides-bundle