Resource-based view (RBV)

Written by Johan Fourie on Wednesday, 26 June 2013. Posted in Articles

resource-based-view-rbvA resource-based view is a basis for competitive advantage which weighs the importance of an organisation’s internal versus external resources. The theory states that internal resources are more important for achieving and maintaining a competitive advantage than external resources. Resources are important business assets and constitute an organisation’s human capital.

The theory of resource-based view originated with Coase in 1937 (updated every couple of years) and gained traction in the early 90’s. It remains popular and is still extremely valuable today.

So what are the key points (empirical indicators) of this theory?

1.    Identify potential key resources in the organisation according to the following criteria:

  1. Location – At which client and in which city does the resource perform best?
  2. Position – What kind of resource is it, e.g. Project Manager, Business Analyst?
  3. Skills – What are the company’s core competency skills? Select resources accordingly.
  4. Situational analysis – Does the resource work well under pressure, or in the normal operational environment?
  5. Client recognition – What is the client’s opinion around performance and value addition?
  6. “Blue-eyed boys/girls” – In any organisation these resources should only be evaluated last – and an objective opinion around their performance should be captured.
  7. Good as your last project – This maxim should be disregarded and the resource’s average performance of the last five projects should be weighted and scored (disregarding the highest and the lowest scores).

2.    Evaluate potential key resources against:

  1. Value – What is the resource’s key competency? What is the resource’s business and client value?
  2. Rarity – The skill, drive and motivation of the resource must be exceptional. This will generate a high level of competency of knowledge transfer to other employees, which in turn will derive greater profits for the organisation.
  3. Inimitable – A unique employee (which could not be easily imitated by competitors) offers a great competitive advantage.
  4. Non-substitutable – Herein lies the conundrum: due to the fast pace of economic, technological and organisational changes a resource can only be non-substitutable for a short period.

3.    Protect these resources

  1. Ensure that these identified key resources are protected by providing adequate motivation, remuneration and adequate job goals and objectives. This can be enabled by mapping the correct skills of the resource against the correct project, by either job enlargement or job rotation.
  2. Recognize these resources’ key achievements – via email, rewards or in person (BUT according to individual motivation theories, different people are motivated by different needs).

Organisations must maintain their competitive advantage by ensuring that their resources are managed according to their strengths and weaknesses. By identifying these key resources an organisation can institute proper mentorship and knowledge transfer initiatives to enable easy access to information for other resources to become key resources as well. By enabling more key resources and moving away from a “golden boys/girls” environment, an organisation can achieve greater competitive advantage over its rivals.

Not the last word

I’ve taken the principles of the resource-based view and adapted them to the modern business environment. The purpose of this blog is to start discussing RBV to see how we can modernize an age-old valid concept. You are invited to join the discussion so that we can re-evaluate and update this entry.

About the Author

 Johan Fourie

Johan Fourie

Senior Consultant - Programme Manager at EON Consulting