What is a VRIO analysis?
A VRIO analysis is a tool to help organizations uncover the competitive nature of their resources and capabilities to determine if they can provide a long term competitive advantage. This analysis looks at whether a company's resources and capabilities are valuable, rare, inimitable, and organized in a way that allows the company to achieve a sustainable competitive advantage over time. The implementation of this strategy assists companies with achieving their vision, long-term goals, and objectives. The strategic framework has been written using information from our VRIO guide.
Four dimensions of VRIO analysis:
- Value: This dimension assesses whether a resource or capability is valuable to the firm in creating a competitive advantage.
- Rarity: This dimension evaluates whether a resource or capability is rare among competitors. A resource or capability that is rare is more likely to provide a sustainable competitive advantage.
- Inimitability: This dimension assesses whether a resource or capability can be easily imitated by competitors. A resource or capability that is difficult to imitate is more likely to provide a sustainable competitive advantage.
- Organization: This dimension evaluates whether a firm has the internal structure and systems in place to effectively utilize its resources and capabilities to create a competitive advantage.
By focusing on these 4 dimensions, the goal of a VRIO analysis is to identify the resources and capabilities that will help a company achieve a competitive advantage over its rivals in the long term.
What's included in this VRIO analysis strategy template?
- 4x VRIO Focus Areas
- 12x VRIO Objectives
- 14x VRIO Projects
- 19x VRIO KPIs
Who is this VRIO analysis strategy template for?
This template has been designed to incorporate 4 key elements of a good VRIO strategic analysis: value, rarity, imitation, and organization. This template can be used by a range of professionals, some of whom are in HR and finance. Additionally, the VRIO analysis framework template can be downsized to retail stores like supermarkets to identify the value in their resources and seek a competitive advantage.
How is this VRIO analysis template relevant to your organization?
Implementation of the VRIO framework includes a range of examples of projects and ways of achieving high levels of performance through an analysis of the company’s internal characteristics.
1. Define clear examples of your focus areas
Begin by asking yourself: What is it that I am trying to achieve? Why would this area be an important area to focus on?
The next step would be to brainstorm some focus areas and narrow them down to 4-5 important ones. For example, the focus areas for a VRIO strategy could be divided into the four sectors of the acronym: value, rarity, imitation, and organization. But it could also be divided into different areas within an organization i.e. monetary value, people, performance.
2. Think about the objectives that could fall under that focus area
A Strategic Objective is a high-level statement that outlines what exactly you want to achieve, with a clearly stated deadline. The importance of an objective is to set a measurable goal that you and other members of your team can strive to accomplish. The objectives should be relevant to the focus area of choice.
For example, 'Create a USP through marketing tactics for the organization' is an objective that could be used under the focus area: create value.
3. Set yourself measurable targets (KPIs) to tackle the objective
A KPI is a key performance indicator that is measurable and evaluates the success rate of an organization in relation to the task at hand. KPIs can be very specific to the industry they are focused on (read more about KPIs and their relevance to the strategy/ industry of choice). With reference to the VRIO strategy template, the KPI’s have to tie to achieving sustained competitive advantage to drive the company performance.
An example of a KPI to achieve the above USP objectives is: Grow Brand Recall by 20% by 3rd March 2022.
The above KPI is one of the many that can be used to specifically target the given objective at hand.
4. Implement related projects to achieve the KPIs
Projects fall under objectives too but are more closely related to KPIs. A project's main function is to achieve the measurable target. It is important when looking at the VRIO strategy to be narrow and well defined with projects that specifically relate to the objective and KPI at hand.
For example, a project to address the brand recall KPI would be the use of above-the-line marketing to develop a stronger brand image.
This KPI is specific to a VRIO strategy for the retail industry as it can be defined as achieving the focus area of creating value through marketing and sales-driven projects. However, if focused on a financial institute i.e. a bank, the project associated with the brand recall KPI could drastically change as a bank may want to increase its brand recall for a more global presence and thus focus on a survey as a tactical project instead.
5. Utilize Cascade tools to track and visualize performance
Under Cascade, the creation of dashboards and snapshots are available. These tools assist in providing visual and graphical ways of tracking the progress of set KPIs and projects. It is important to bear in mind that the display of a VRIO dashboard can use widgets that reflect set KPIs as means of progress markers and performance indicators.
Under tracking → dashboards, you have the option to visualize and compare KPIs as well as clearly see who is assigned to that target and how far off they are from achieving it.