How do you align your resources and capabilities with your strategic goals using VRIO?

2 What is VRIO?

VRIO is a tool that helps you assess the strategic value of your resources and capabilities. It stands for value, rarity, inimitability, and organization. These are the four criteria that determine whether your resources and capabilities can create and sustain a competitive advantage. Value means that your resources and capabilities can help you meet customer needs and preferences, or reduce costs. Rarity means that your resources and capabilities are scarce or unique, and not widely shared by other firms. Inimitability means that your resources and capabilities are hard to copy, replicate, or substitute by other firms. Organization means that your resources and capabilities are supported by your structure, policies, procedures, and culture.

3 How to use VRIO?

To use VRIO, you need to ask four questions for each of your resources and capabilities: is it valuable, rare, inimitable, and organized? Depending on your answers, you can classify your resources and capabilities into four categories: VRIO, VRI, VR, and V. VRIO resources are your core competencies that give you a sustained competitive advantage, so you should protect and exploit them. VRI resources are temporary competitive advantages that can be eroded by imitation or substitution, so you should invest in them to make them more inimitable or organized. VR resources are competitive parity resources and capabilities that can help you match your competitors, but not surpass them, so you should maintain them at an adequate level, but not overinvest in them. V resources are competitive disadvantages that can harm your performance or position, so you should improve, divest, or outsource them.

4 How to align VRIO with your strategic goals?

To align your VRIO resources and capabilities with your strategic goals, you need to consider two aspects: fit and leverage. Fit means that your VRIO resources and capabilities are aligned with your vision, mission, values, and objectives. They should support your chosen strategy, whether it is cost leadership, differentiation, or focus. Leverage means that your VRIO resources and capabilities are deployed and coordinated across your activities, functions, and units. They should create synergies, complementarities, and efficiencies that enhance your overall performance and value creation.

5 How to improve your VRIO resources and capabilities?

To improve your VRIO resources and capabilities, you need to adopt a dynamic and proactive approach. You should not take your VRIO resources and capabilities for granted, as they can change over time due to internal and external factors. You should monitor and evaluate your VRIO resources and capabilities regularly, and look for opportunities to enhance, acquire, or develop new ones. You should also anticipate and respond to the changes in your environment, such as customer preferences, competitor actions, technological innovations, and regulatory shifts. You should be flexible and adaptable, and willing to modify or abandon your VRIO resources and capabilities if they become obsolete or irrelevant.