The VRIO concept was introduced by Jay Barney in 1991. It is now the cornerstone of corporate strategy development. We apply it in our strategy work, and it is also the foundation for how we think about adding value to clients.
A resource like management consultants has to be valuable, rare, inimitable, and organized.
Only when the full VRIO condition is satisfied will a consultant add to the sustainable competitive advantage of the client. All too often, this is not the case. In particular, having the client-consultant interface organized so that our clients derive the maximum benefits from projects is difficult.
Here are a few observations on the VRIO concept:
- Valuable: It may be obvious, but a project should be of material value to the client. The best way to assure this is to calculate the expected payback of the project. While this by necessity is approximate, it is nevertheless good to make the payback explicit.
- Rare: We strive to work on projects where what we have to offer is rare. If many can do it, the project is a commodity and our contribution is of limited value added.
- Inimitable: Even if what we have to offer is rare, others may be able to imitate it at a lower cost. This means that we always have to innovate to be on the leading edge.
- Organized: This is where we pay most attention. Studies have shown that knowledge senders (consultants) often neglect receivers’ (clients) ability to absorb the deliverables.
In particular, the client organization should receive the deliverables as an institution rather than as individuals.
This means that we work together with client executives to ensure that the right parts of their organization receives the deliverables with a proper hand-off, be it through workshops, training sessions, or systems integration.
We are increasingly making the organized part of the project an explicit part of our proposals, with time allocated to the hand-off.
We also strive to work with clients in a long-term partnership, rather than doing one-off projects. E.g., we have done more than 130 projects for one client since 2009. This continuous relationship makes the sender/receiver transfer much more productive.
At Canback, we review every project against the checklist below to make sure we are VRIO in the eyes of the client.
Finally, a common way to look at VRIO’s impact on competitive advantage is shown below.