25 Sep How Well Do You Stack Up Against Your Competitors?
Using the VRIO model to compare your firm’s resources with those of your competitors
Competition is all about, well, comparing. Customers compare different attorney options for filing bankruptcy and choose the one they feel is best for them. This creates a brutal, intense race of sorts for bankruptcy attorneys to out-compete each other to gain market share.
The bad news is you can’t change how many competitors are in the race, how strong your competitors are, or how they market themselves. The good news is that you can draw incredible insights that will lead you to improve your firm’s competitive advantage simply by comparing your law firm with other law firms and responding appropriately.
By using the popular VRIO model to compare and contrast your own firm’s resources and marketing with those of your competitors, you can gain valuable insights that will help you eliminate your relative weaknesses, establish competitive parity or even create lasting competitive advantage.
The concept of resources
A business resource is anything that allows you offer value to your customers and outperform your competitors. Examples of such resources could include the following:
- Your logo
- Your website
- Your marketing strategy
- Your experience and skills as an attorney
- The location and quality of your office
- The size of your law firm
- Your marketing budget
- Your secretary and staff
- Your marketing materials
- Your education
- Your prices
This list isn’t comprehensive. Anything that you own or do that creates value for customers or sets you apart from other competitors is a resource.
As you look around at other law firms, you will notice that there are 3 possibilities as you compare your resources with theirs.
- Your resources are of lower quality or worse than theirs, which results in a competitive disadvantage for you
- Your resources are roughly equal with theirs, which establishes competitive parity
- Your resources are of higher quality or better than theirs, which results in temporary or lasting competitive advantage, depending on how your competition reacts
To determine where you stand in comparison with your competitors, pay attention to four specific qualities of the VRIO model as you analyze your resources: Value, Rarity, Imitability, and Organization.
A resource is valuable if it allows you to take advantage of an opportunity or mitigate a threat with customers and competitors. For example, a quality website allows you to take advantage of the opportunity of those searching online for legal help. It also allows you to mitigate the threat of individuals using phone books less and the Internet more to find legal help. In this case, a website would be a resource of value to you. You should strive to develop new resources and strengthen current resources to offer high value to your customers.
A resource is rare if it is unique. For example, a website that has a custom, high-quality, modern design would be rare in the fact that no other websites are like it. On the other hand, a templated website with generic content would not be a rare resource. Resources that are rare offer competitive advantage. Whether or not the advantage is sustained depends on whether or not the resource is imitable. You should strive to develop resources that are not only valuable, but that are also unique from those of your competitors.
Competitors can often copy what you do, and vice versa. However, there is always a cost associated with developing or improving resources. A resource, then, is imitable when the cost associated with copying it is low, which results in the competitive advantage of the resource being lost as it is easily or quickly imitated by others in the market. If the cost or difficulty of copying it is high, then the resource will likely remain rare and a competitive advantage will persist in the long run. You should strive to develop and establish unique resources that are difficult to imitate by your competitors.
Just because a resource is rare and not easily imitable doesn’t mean it will lead to high profits. A firm must be organized and ready to utilize its unique, valuable resources to the maximum in order to benefit from them. For example, a firm that has an amazing website but has no plan for generating traffic to the website will not generate leads or business from it. On the other hand, a firm that has a robust marketing strategy for increasing its website traffic will find that its site produces leads and paying clients. You should strive to create a robust plan to effectively utilize all unique, valuable resources that your firm has to generate the most profit from them.
Putting it all together
In summary, you should strive to develop resources that offer value, are rare and unique, and are not easy for your competitors to imitate. You should then organize all members of your law firm to use these unique, valuable resources to their maximum potential. As you do, you will eliminate most or all competitive disadvantages in some areas, establish competitive parity in some instances, and establish temporary or even lasting competitive advantage in other areas.
What can you do to apply the VRIO framework?
To apply these principles, you can do the following tasks:
- Brainstorm a list of all resources that you or your competitors have. Start with broad topics like “marketing” or “website” or “office location” and break those down into smaller topics like “marketing budget”, “direct mail”, “chat functionality”, etc.
- Create a table that compares your firm’s resources with those of your competitors
- Determine where you have a competitive disadvantage, competitive parity, short-term competitive advantage, and long-term competitive advantage.
- Create a plan for improving areas where you have a competitive disadvantage until you establish parity. On areas where you have parity, determine how you can improve to create a competitive advantage. Lastly, create a plan for sustaining (if possible) and maximizing any competitive advantages that you have.