Strategic planning is critical if organizations are to stay relevant in their markets – or expand into new ones in the AI age of disruption. A recent Forbes survey found that 90% of entrepreneurs and executives agreed that strategic planning was necessary for success.
Of that 90%, however, only half said they had actually created a strategic plan, and only half of those had come close to meeting their targets.The disconnect may result from lack of reflection or a failure to consider the threats and opportunities of a changing environment.
To do better, leaders need a strategic framework: A method of asking the right questions and applying the right metrics to maximize growth.
In this article we will consider VRIO, an inward-looking model, and the Blue Ocean strategy, which looks out into the marketplace. Later we will examine different strategic frameworks leaders can use to plan for growth.
VRIO is an acronym standing for Value, Rarity, Imitability, and Organization. VRIO was developed by Jay Barney and first published in the paper “Firm Resources and Sustained Competitive Advantage.” In essence, VRIO forces organizations to ask what makes them special. What does the organization have, or what can it do, that others cannot?
VRIO examines four factors to determine whether a resource or capability can provide a competitive advantage, and whether that advantage is likely to be temporary or sustained.
Value: Does the resource or capability add value for customers? If so, can it increase the organization’s efficiency or market reach?
Rarity: Is control of the resource or capability limited? Rarity isn’t limited to resource scarcity but includes the skills, relationships, reputation, and other unique attributes of the organization.
Imitability: Is the resource or capability difficult or costly to duplicate? If it is, the organization may enjoy at least a temporary competitive advantage.
Organization: Is the organization positioned to take advantage of the resource or capability? This element can include strong leadership, flexible management, clear communication, company culture, and more.
When all four VRIO elements align, the organization will have identified an area where it may enjoy a sustained advantage that competitors will find difficult to overcome.
The main limitation of the VRIO framework is that it is inward-looking. VRIO is less useful in gauging external pressures. To gain that perspective, leaders need another strategic framework.
The Blue Ocean strategy is named after a series of books by W. Chan Kim and Renee Mauborgne. The authors’ message, in a nutshell, is that competition is not the optimal strategic framework for business growth.
The Red Ocean. Competition leads to a “race to the bottom,” the authors argue, as markets become saturated and goods and services are commoditized. The result is a “Red Ocean” where competitors ply the same waters, offering similar products and services that are only differentiated by price. In the Red Ocean, fierce competition bloodies the water while reducing the prospects for profits and growth.
The Blue Ocean. “Blue oceans denote all the industries not in existence today – the unknown market space untainted by competition,” the authors write. There are two ways to create a Blue Ocean: The first is to create a brand-new industry with its own market – a rare occurrence. The second, much more common, is to change the boundaries of an existing market.
Break the Value / Cost Paradigm. The key to the Blue Ocean strategy is to reject the idea that value and cost must be strictly aligned. Doing so results either in (1) high-cost offerings with “extra” features, or (2) low-cost “bargain” offerings. That paradigm, a trade-off between differentiation and cost leadership, plays into the Red Ocean way of thinking.
Blue Ocean thinkers find ways to add value for customers while lowering costs at the same time, creating a “leap in value” for both sides.
The authors point to Cirque du Soleil as a prime example. The Cirque’s founders identified three crucial elements for a successful circus: Tents, acrobats, and clowns. Notably absent are “star” performers and trained animals, which add cost (and ethical concerns) without creating value.
Instead of those high-cost elements, the Cirque added a mixture of theater, opera, and other performing arts. The result was a unique offering with a lower cost structure than the competition. Cirque du Soleil became – and remains – the largest circus in the world. It’s a classic Blue Ocean story.
Focus on the market, not the competition. To create a Blue Ocean in any market, organizations should stop focusing on what the competition is doing and ask what their customers want and value. In aligning customers needs with the solutions an organization provides in the forms of products and services, an organization has created a unique brand in the process. In many cases, it won’t be the high-cost “extras” or low-cost “bargains” the competition is offering.
The process has been dubbed “ERRC” (Eliminate, Reduce, Raise, Create) in a Forbes article. To begin, “Eliminate and Reduce” those features that don’t add real value to the customer experience, regardless of what the competition is doing. Next, “Raise and Create” those elements that deliver value or provide benefits the competition does not.
Creating a Blue Ocean is not dependent on a technological revolution or a brand-new industry. The Blue Ocean strategy simply requires organizations to identify and respond to their customers’ needs and wants. By keeping that focus, businesses can make the competition irrelevant.
When organizations combine the VRIO framework with the Blue Ocean strategy, they may create optimal conditions where internal strengths and market demands overlap to produce areas of sustained competitive advantage. These specially tailored Blue Oceans can be engines of long-term growth and development.
If you would like to learn more about VRIO, the Blue Ocean strategy, and other strategic frameworks for growth, please contact us.
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Copyright ©️ 2025 by Stephen Wullschleger. All rights reserved.
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