Key ideas from the Harvard Business Review article By David J. Collis, Cynthia A. Montgomery
The Idea in Brief
What gives your company a competitive edge? Your strategically valuable resources -- the ones enabling your enterprise to perform activities better or more cheaply than rivals. These can be physical assets (a prime location), intangible assets (a strong brand), or capabilities (a brilliant manufacturing process). For example, Japanese auto companies have consistently excelled through their capabilities in lean manufacturing. Strategically valuable resources have five characteristics, say Collis and Montgomery: 1) They're difficult for rivals to copy. 2) They depreciate slowly. 3) Your company--not employees, suppliers, or customers--controls their value. 4) They can't be easily substituted for. 5) They're superior to similar resources your competitors own. To keep your edge sharp, build your strategies on resources that pass these five tests. Regularly invest in those resources. And acquire new ones as needed, as Intel did by adding a brand name--Intel Inside--to its technological resource base.
The Idea in Practice
Collis and Montgomery recommend these practices for managing your strategically valuable resources:
Put Your Resources to the Test
A resource is strategically valuable if it passes five tests: It's hard to copy. Some resources are hard for rivals to copy because they're physically unique; for example, a desirable real estate location. Others must be built over time, such as Gerber's brand name for baby food. It depreciates slowly. Disney's brand name was so strong that it survived almost two decades of benign neglect between Walt Disney's death in 1966 and the installation of Michael D. Eisner and his management team in 1984. Its value is controlled by your company. Your firm--not individual employees, suppliers, distributors, or customers--keeps the lion's share of profits generated by the resource. Your...