Introduction:

Business success takes continuous effort.

But it needn't be a slog.

In fact, it can be quick and easy with VRIO analysis!

VRIO analysis makes use of the 4-step VRIO framework (value, rarity, imitability, and organization) to look at your company's resources and capabilities

Once the resource or capability has been analyzed, you'll know if it's providing your business with a competitive disadvantage, competitive parity, a temporary competitive advantage, an unused competitive advantage, or a sustained competitive advantage

To make analysis even simpler for you, we've created this VRIO analysis checklist.

It's been built with conditional logic, so if the resource or capability doesn't make it past the value, rarity, imitability, or organization dimension, the checklist will act accordingly.

This means you can run all of your business' important resources and capabilities through this process, and understand exactly how they're impacting your business - for better or worse.

Now, let's achieve sustained competitive advantage with this checklist made by the team at Process Street - which is, if you don't already, state-of-the-art BPM software!

Define the resource/capability

Define the resource/capability you're performing VRIO analysis on.

The first step of VRIO analysis is to define what resource/capability you'll be analyzing in the text box below.

Whatever single resource/capability you choose is down to you - for instance, it could be the most important resource or the latest capability.

Keep in mind that, while it's possible to run (and rerun) multiple resources/capabilities through this process, do launch a new checklist for each resource/capability.

Value:

The task in this section will help you analyze the resource/capability's value for customers and consumers.

In addition to conditional logic, many tasks in this process have stop tasks attached. This means you can't skip important tasks without doing what's required of you first.

To learn more about stop tasks, watch the video below.

Evaluate your resource/capability's value

Evaluate your resource/capability's value.

The first dimension of VRIO is value - and it's what will be analyzed first.

To analyze the value of a resource/capability (as well as its rarity, imitability, and organization), you'll ask yourself one integral question.

There may be additional, supplementary questions - like numbers 2 and 3 in the list below - to help you answer the integral question better.

Read the bolded (integral) question below to evaluate the resource/capability's rarity and answer the dropdown below.

Once you've done that, explain why you chose that answer.

Value-related questions:

  1. "Is the resource or capability valuable to consumers/customers?"

  2. "Can the business exploit an opportunity such as technological change or cultural change with the resource or capability (thereby increasing revenues)?"

  3. "Can an external threat – such as the threat of rivalry, substitutes, or entry – be neutralized with the resource or capability (thereby decreasing costs)?"

Learn what competitive disadvantage is

Learn what competitive disadvantage is.

The VRIO analysis has established that your resource/capability provides your business with a competitive disadvantage.

As explained in the post What is VRIO? The 4-Step Framework for Continuous Business Success:

"If the answer to the question of value is “no”, then the framework determines that the business has a competitive disadvantage.

Why?

Because your business’ resources or capabilities are lacking value, while other businesses are leveraging valuable resources and capabilities for success.

Instead of value, there’s weakness.

Now, that’s not what any business wants to hear. In fact, it’s rather painful. But it could be the catalyst for change – improvements could be made to the value chain, for instance – so your resources and capabilities have their value bolstered." - Thom James Carter, What is VRIO? The 4-Step Framework for Continuous Business Success

Once understood, move onto the next task where you'll figure out your business' next steps.

Rarity:

In the next step of this VRIO analysis, you'll be looking at VRIO's second dimension - rarity.

Assess your resource/capability's rarity

Assess your resource/capability's rarity.

Here you'll be assessing your resource/capability's rarity. This means looking to see if it's hard to come by and in demand.

Let's take Starbucks as an example. They provide specialty coffee, but that capability isn't rare as there are a ton of other coffee chains that make specialty coffee. Therefore, that capability would fail this step.

To assess how your resource/capability fares, answer the bolded (integral) question, and choose an option from the dropdown.

Then, explain why you chose that option.

Rarity-related questions:

  1. "Is the resource or capability in demand and hard to come by?"
  2. "Is the demand for the resource or capability persistent over time?"
  3. "Is the resource or capability’s control in the hands of a relative few?"

Understand your competitive parity

Understand your business' competitive parity.

After analyzing your resource/capability's rarity, the analysis has suggested that there's competitive parity

This means that the resource/capability provides your business with an average or standard competitive potential. This certainly beats having a competitive disadvantage, but it's also not as good as having a competitive advantage.

To figure out your business' next steps, move onto the next task.

Imitability:

Now you'll be looking at - and analyzing - the third dimension of VRIO: Imitability.

Analyze your resource/capability's imitability

Analyze your resource/capability's imitability.

Next up is analyzing the imitability of your resource/capability.

This means figuring out if the resource/capability is easy (inexpensive) to replicate or reproduce.

To do so, ask yourself the question below, then answer the dropdown.

Write down why you chose that answer in the text box below.

Imitability-related question:

  1. "Will it be expensive for other companies to replicate or imitate your resource or capability?"

Apprehend your temporary competitive advantage

Apprehend your temporary competitive advantage.

VRIO analysis has determined that the resource/capability in question provides you with a temporary competitive advantage.

To understand what this means, read this quote from the post What is VRIO? The 4-Step Framework for Continuous Business Success:

"If a business’ resource or capability does indeed fail this dimension, there’s a temporary competitive advantage, meaning it will take the business extra effort to ensure consumers and customers are using their business’ resources and capabilities, rather than a competitor’s.

Although I used the word “fail” in the above paragraph, it doesn’t mean – by any stretch of the imagination – that the business in question is doomed to fail if their resource or capability can’t move onto the next dimension. It simply means that the company has to be on their toes to ensure they’re always one-step-ahead of their competition, never falling behind." - Thom James Carter, What is VRIO? The 4-Step Framework for Continuous Business Success

To figure out what your business should do now, move onto the next task.

Organization:

The last dimension to analyze is organization. The next task will tell you exactly how to do that - and why.

Gauge the organization behind the resource/capability

Gauge the organization behind the resource/capability.

If the resource/capability has made it to this stage, that means it's providing some kind of competitive advantage for your business.

However, for your business to capitalize on the resource/capability's competitive advantage, your business needs to be organized in facilitating the appropriate systems, structures, and processes to exploit that advantage.

Ask yourself the below question, then choose an appropriate answer from the dropdown.

Make sure to explain why you chose that answer in the text box.

Organization-related questions:

  1. "Does your business have solid systems, structures, and processes (i.e. the organization) to exploit the advantage the resource or capability has?"

Reevaluate your unused competitive advantage

Reevaluate your unused competitive advantage.

It's been suggested that your resource/capability has an unused competitive advantage

This means:

"Without solid internal organization, the resource or capability is unsupported, meaning there’s an unused competitive advantage. You’ll have to then go back to the drawing board, think about what internal elements can be bettered and, going forward, how that will happen and what that will look like." - Thom James Carter, What is VRIO? The 4-Step Framework for Continuous Business Success

To help you go back to the drawing board and figure out what can be bettered, move onto the next task.

Recognize your sustained competitive advantage

Recognize your sustained competitive advantage.

After completing all four steps of the VRIO analysis, it's been determined that your resource/capability in question provides your business with a sustained competitive advantage.

"Simply put, this means the resource or capability is set up for continuous long-term business success; the best possible result of undergoing VRIO analysis! Congratulations! " - Thom James Carter, What is VRIO? The 4-Step Framework for Continuous Business Success

However, to ensure that the advantage does remain sustained, there will be work to do on your business' part.

The next step - "Note down your plans for the resource/capability" - will help with that. Move onto the next and final step.

Going forward:

Now that your resource/capability has been analyzed, it's time to figure out the plans for the resource/capability in question.

The next task - "Note down your plans for the resource/capability" - will give you some food for thought, in addition to a text box where you can pen those ideas down.

Note down your plans for the resource/capability

Note down your plans for the resource/capability.

Now that you understand how your resource/capability is impacting your business, the next step on this todo list is to note down your plans for the resource/capability in question.

If you didn't achieve sustained competitive advantage, will you change anything about the resource/capability to achieve sustained advantage? If so, how?

Similarly, if you achieved a sustained competitive advantage, what will you do to ensure that the advantage remains sustained?

Write your plans down in the box below.

Then make those plans a reality.

Sources:

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