Click here for Part I of this VRIO Framework Discussion
If the firms and companies you compete against operate with the advantages of VRIO you are interested in the course of action which limits or corrodes those VRIO advantages. To counteract VRIO advantages, competitors break the issue back into the components and evaluate each in isolation first. Completing the analysis involves summing the parts.
Value: counteracting VRIO is moot if the item or service isn’t valuable. Value isn’t limited to money or monetary value. But the investigation of value is fundamental to return on investment. Will effort, investment of time, money, or all three result in something you want? If not, the effort isn’t worthwhile, and the analysis stops here.
Rarity: If an organization chooses to limit production to keep something rare, the following question is “can we make those (or do that) and earn money too?”
— if yes: Satiating market demand, while making a profit, is good business. The advantage may not be sustainable, but you may have identified a business opportunity. If your current business can expand into distributing this something you should consider doing so. Expanding into complimentary products and services that are under supplied is a wise business investment.
— if not: why not? For how long? And what will you do when the time comes? This is where expiring patent information comes into play.
Inimitability: Expiring patents represent the end of inimitability. Once a patent expires the invention becomes a public good, in the public domain, and royalty free. An expired patent means you can “make those too.” Be careful using expired utility patents less than 20 years old. Law Firms buy patents that inventors abandon prior to the 20 year expiration and quietly keep them in force. The opportunity tempts unknowing users. The new patent owners then file lawsuits and win, gaining with litigious outcomes instead of supplying goods or services. Until expiration, 20 years on Utility Patents and 14 years on Design Patents, there is a danger and legal liability. Please consult a licensed attorney prior to any patent related investment decisions. Corroborating discussion on Justia.com
Organization: Finally, we look at the organization and it’s ability to capitalize on the opportunity. Is their firm optimized to gain? Is yours? This step helps users identify how to capitalize, how much that will cost, and whether the investment is worth the trouble.
Many organizations’ value chain is dependent on the number of optimized linkages. An example of such linkages might be FedEx’s airplanes (overnight service), Small Truck Fleets (door-to-door delivery), and Kinko’s locations (distributed offices). Each part works together to make FedEx more formidable and harder to copy. True, maximizing the number of linkages makes your organization more complex. Managing the efficiency of each linkage, though, is often inimitable. Each linkage also makes the organization harder to copy. Inimitability isn’t limited to legal protections. Each product or service a firm efficiently provides, the harder they are to compete against. Incorporating competitors’ best practices, products, and services as they exit patent protection and enter the public domain is one way to do so.
Expired Patents, and the associated intellectual property in the public domain, represent value that is often under-utilized. Between 5% and 10% of patents are commercially exploited while protected. When limited negative effects (legal liability) or limited costs (R&D and implementation) are associated with expanding firm offerings, they should consider doing so. If expansion will result in value capture the considerations are validated. The final step is to measure the costs against the capturable value. (Measure costs against the value, rarity, inimitability and organizational ability to capture those profits). As patents expire, businesses dependent upon their protection are rarely ready for the competition that ensues.