STEP 4: State Your Value Proposition and Determine Your VRIO

What makes you different is what also makes you valuable. Once you've captured enough feedback about your idea, it is time to use that difference to help find your competitive edge in the marketplace. That comes from knowing your value proposition, and positioning statement, and finding your company's VRIO.

A value proposition summarizes a product's or service's unique benefits and value to its target customers. It is a brief statement justifying the reason a customer should select an offering instead of those by other competitors. A value proposition should, therefore, be crafted from the needs, desires, and pain points of the target audience alongside the distinctive features and benefits of the product or service that would address those needs.

Typically a good value proposition statement is structured in something similar to the following template:

For (target customers) who (need something, want something or are not satisfied with something), (your brand name) offers (a service or solution) that provides (key benefits). Unlike (other competitors or solutions), that lack (pain points), (your brand name) offers (unique reason to buy or use it)

Here are some examples of value proposition statements.

The acronym "VRIO" stands for Valuable, Rare, Inimitable, and Organized. Keep going if you can't immediately find something your business does or has that fits each point. DO NOT LET THAT STOP YOU. Instead, use these points and examples to help shape your long-term business strategy and how you respond to competition.

Here's how you can determine if your business aligns with the VRIO criteria:

Valuable (V)

You've already determined that your differentiator makes you valuable. Now, do you have or can your business obtain the resources or capabilities that allow it to exploit opportunities or neutralize threats in its environment (meaning your target market as it stands today with the current competitors and any new companies entering the market)?

Can these resources help create customer value, increase revenue, or decrease costs?

Rare (R)

Are these resources available in limited supply, or are they unique to your company?

If any other companies possess the same resource or capability, then it's not considered rare.

Inimitable (I)

Is it hard for competitors to duplicate or imitate this resource or capability?

Factors making resources inimitable could be historical conditions, causal ambiguity (when competitors can't figure out why a resource adds value), social complexity (relationships, culture), or physical uniqueness.

Organized (O)

Are processes and systems already in place to support, manage, and leverage these resources or capabilities to realize their potential?

More than simply possessing the previous three attributes is required. The organization must be aligned and organized to capture value.

Here are some examples of Amazon, Tesla, Netflix, and Starbucks VRIO analysis

To determine if your business is VRIO:

List out your business's key resources and capabilities. This could include tangible assets, intangible assets, human resources, and organizational capabilities.

Evaluate each resource or capability based on the VRIO criteria. For each one, ask if it is valuable, rare, inimitable, and if your organization is structured to capture its value.

Determine competitive potential.

If a resource or capability is Valuable but not Rare, it can lead to competitive parity.

If it's Valuable and Rare but not Inimitable, it can lead to a temporary competitive advantage.

If it's Valuable, Rare, and Inimitable but not Organized, it can be a potential competitive advantage.

It can lead to a sustained competitive advantage if it meets all four criteria (VRIO).

If you need to use a template that many well-known organizations also use, one can be found here

Remember that as a new firm, your resources and competition will change, and the competitive landscape will continue to change. So, what may be a competitive advantage today may not always be an advantage in the future. Make sure to regularly keep revisiting and reassessing your business's resources and capabilities using the VRIO framework. Before you move to the next step, write down what will make your offer and your company VRIO and use this in your brand messaging and as the anchor of your sales strategy.

HELPFUL TOOLS TO COMPLETE STEP 4:

For a thorough video explanation of VRIO, you can find one here.

For a useable template with a tutorial on how to use it, you can go here

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