What is Essential to Your Competitive Advantage?

In times of crises companies often cut “nonessential” programs, services, or resources. But sometimes “nonessential” is really just what is easiest to cut or put on hold – and what is cut may really be essential to stability and recovery, not to mention competitive advantage. How do you develop a critical awareness of what is truly essential versus nonessential? You can start with a VRIO analysis.

What is VRIO Analysis?

VRIO stands for Valuable, Rare, Imitable, and Organization. A VRIO analysis is essentially a process of analyzing the internal environment to determine whether the organization’s resources or capabilities (products, services, workflows, locations, field of membership, etc.) form a competitive advantage, or have the potential to do so.

The analysis is conducted by asking questions about resources and capabilities in the context of each section of the VRIO framework. The basic question structure is as follows:

  • Valuable: Is the resource or capability valuable, allowing us to capitalize on opportunities, and/or mitigate risk?
  • Rare: Is the resource or capability rare, available only to us and/or a very small band of market competitors?
  • Imitable: Is the resource or capability costly or hard for others to imitate or copy?
  • Organization: Does our organizational structure allow us to capture the full advantages of the resource or capability as defined by its value, rarity, and non-imitability?

Note: from here on out we’ll use “resources” to mean both resources and capabilities.

Conducting the VRIO Analysis

If you’re trying to determine contingency plans for the coming months, we recommend you include a VRIO analysis. The analysis will help you completely identify all of your “resources,” truly define or identify which resources contribute to your competitive advantage, and help you avoid decisions that might negatively impact the very reasons why members turn to you in the first place.

You can take a page from our general approach. When called to aid clients in conducting a VRIO analysis, we first work to determine the client’s discrete (individually separate and distinct) resources.

The first column in Table 1 below contains a simplified example of a list of resources common to credit unions. (This is a brief example, not an exhaustive list.)

-Field of Membership
Member Experience
-Call center
Table 1

In your effort to complete a VRIO analysis, you need to create your own exhaustive resource list. And make use of this tip: once done, try to organize resources along common themes like we did in the table. Also… go a little deeper than the example.

To illustrate what we mean, consider “member experience.” It can be defined specific to certain contexts. In the table we divide experience into three contextual areas: branch, online, and call center. Each of these can be divided further still. For the “online” member experience context a critical sub-context is mobile – and an important resource is the software or mobile app.

When you evaluate the “Member Experience>Online>Mobile” resource against the VRIO questions, you may find that the online mobile experience is extremely valuable (members love it), but not rare. It may also be highly imitable if purchased from a vendor – lots of other organizations may have the same system. It comes down to organization, in this example, and to this question:

Does our organizational structure allow us to capture the full advantages of mobile banking as defined by its value to members?

If the answer is yes, then even if hundreds of other organizations also offer the same basic experience through shared software, how you deliver and support that experience gives you an advantage over the competition, and maybe even contribute to the loyalty of your members.

Now let’s return to using VRIO for contingency planning. If in your planning you find that you might have to cut 20% from your budget if loan growth stalls and rates stay consistently low, you may not want to cut funds specific to any part of the organization that supports mobile, because to do so would undermine a competitive advantage. In fact, if you have identified resources that are not valuable, you could cut there but shift some portion of “savings” into investment in mobile organization resources.

Working from Home?

While many of our clients have not yet determined their work from home strategies in the face of the COVID-19 virus threat, it is likely that some form of “work from home” strategy will be implemented by many credit unions over the coming weeks. The VRIO analysis is one of those critical management exercises that is very easy to do remotely, and can be completed through independent and collaborative effort.

Here are the steps to take to get your VRIO analysis started:

  1. Task individual team members to brainstorm resources and capabilities. Have them save/store their output to a shared document.
  2. Task a team member to combine or synthesize like ideas, and organize into resource categories in a table format similar to our example.
  3. Convene a video conference or conference call for the team to “gather” to review, discuss, and fine-tune. It is likely that the initial brainstorming effort missed critical resources. This is an opportunity to add missing resources, and also to ensure shared understanding of the depth/scope of the resource pool.
  4. Task individual team members to assess each resource using the VRIO questions. This is easy to do with an online form set up to capture yes/no answers for each resource and question asked (note that you can use a 1-10 scale in response to VRIO questions rather than yes/no if you desire greater response nuance).
  5. Convene a video conference or conference call for the team to gather to review, discuss, and fine-tune.

Follow these straightforward steps and you will have a VRIO analysis of your credit union’s resources, and a clearer sense of your competitive advantages. The last action, of course, is to use the data in your strategic and contingency planning.

We Can Help

While we know that credit union leaders are competent and equipped to complete their own assessments, sometimes it’s helpful to have external assistance. The external voice is one unattached to the organization’s day-to-day and therefore can offer thoughts on resources, push team members deeper into resource identification, and challenge VRIO assessment assumptions and results.

In addition, this outside voice – Glatt Consulting Group – is well-versed in remote work, a valuable skill-set in today’s environment. If your team is working from home, we’re able to create processes for online deployment accessible to team members no matter their physical location.

If you’d like some assistance completing a VRIO analysis for your credit union, we have a standard virtual process you can order right away. The process can be completed in as little as one week, giving you immediate, actionable information and insight to use for critical contingency planning. Here’s what we do:

  1. Facilitate the online collection of resource/capabilities brainstorming using online forms;
  2. Draft a brainstorming results document;
  3. Facilitate an online/virtual team review and discussion of brainstorming results (video or audio conference);
  4. Develop a VRIO analysis form specific to the final collection of resources/capabilities and VRIO assessment questions;
  5. Facilitate the online collection of VRIO assessment results;
  6. Draft the VRIO analysis results report;
  7. Facilitate an online/virtual team review and discussion of VRIO results, and creation of relevant “next action” strategies (video or audio conference).

The VRIO analysis is $2,250 and can be ordered online here.

If you’d like to discuss the process, or have questions, please give us a call at (888) 217-5988, or complete our proposal/contact request form.

Image by Mudassar Iqbal from Pixabay

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