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Step 4: Find your secret weapon Your foundation for getting fit for the future So you’re ready to innovate and disrupt. But you’re not starting from square one: you have infrastructure, processes, relationships, business models — much of which may be valid despite the chaos around you. It can be hard to work out what’s still relevant and important, and what’s weighing you down. The Valuable Rare Inimitable Non-substitutable (VRIN) model 9 (Figure 2) can help you impartially assess which assets will be useful in the future. In some instances, the resources that brought you success in the past may provide little strategic value in the future. The VRIN model helps diagnose sustainable competitive advantage V Valuable Figure 2 No matter how much it cost to acquire, an asset is strategically worthless if it doesn’t support your objectives. And even critical assets can lose their value — Blockbuster’s extensive network of stores was vital when physical media was too big to fit through letterboxes and streaming was too slow — no more. I Inimitable To be strategically valuable in the long term, a resource must be hard to imitate perfectly. Reputations (like that built by the BBC or La Monde), patents, contracts (with authors, movie stars or charismatic executives), and licenses to operate can be extremely hard to challenge. Is data your most powerful VRIN tool? Resources only drive advantage when R scarce. When evaluating the rarity of a resource, it is essential to include Rare not only current competitors but also companies that could enter the industry. Many common resources are important — you cannot transact without them — however, don’t confuse these “table stakes” with truly rare sources. N Non-substitutable for the same listeners. Even if competitors can’t imitate your resources, assets that seem unrelated can serve as a strategic substitute. For instance, while none of the online music services have broadcast licenses, they compete with traditional radio stations Rebuild around VRIN assets and activities We recommend you evolve or rebuild your strategy around the VRIN core you identify (along with essential support functions). You can shed many of the other business functions to create a leaner operation, or outsource to a strategic partner that can be more efficient at them. Plan to reduce your dependence on resources that are currently VRIN but that are declining in value. For instance, as digitisation continues, print-related skills, infrastructure and facilities will decline in value. For directory services like Yell and Pages Jaunes, it may not be long before paper directories disappear entirely. The VRIN part of these businesses will be the trusted brand, processes and relationships for categorising and dealing with thousands of local businesses nationwide. Amazon can track exactly how long Kindle users spend reading each page, when they give up on a book, or which kinds of sections they find most interesting. In aggregate, this data is incredibly valuable to commissioning editors and authors trying to find an audience. Detailed analytics about a book’s impact takes away some of the guesswork involved in publishing. 10 COGNIZANT September 2012
Leverage VRIN to grow your business VRIN resources don’t just support primary operations: they can create secondary revenue. For instance, media providers often have exclusive and detailed data about their subscribers’ consumption habits, gathered during service delivery. As well as using this to improve their service, they may choose to sell the data to advertisers, to help them target viewers better. Media providers can give advertisers granular data about advert results, and even correlate viewing habits with the sites that logged-in users chose to visit on their tablets or smartphones — Brightcove announced just such a dual-screen solution based around Apple’s AirPlay. For advertisers trying to get closer to consumers in a multi-screen home, this kind of data is incredibly valuable. While offering such capabilities may require new investments in data warehousing, master data management, identity-management and analytics capabilities, they provide an opportunity to leverage a VRIN asset and make the move away from non-VRIN activities less painful. Step 5: Focus on your core role VRIN is a great tool for assessing the value of assets. But what about assessing your overall strategic position in the market? The PSD framework lets you look past existing structures to diagnose how you really provide value. What is PSD? Organisations do not exist in isolation, but as a node in an industry value chain or network, performing one or more functional roles. Profit ultimately comes from reducing inefficiencies — friction — during these transactions. And doing that adds value for customers and creates a competitive differentiation. There are three basic roles in these industries. (Figure 3): The PSD model PRODUCTION The act of creating content (a novel, album or TV show) and the manufacture of physical or digital media. Figure 3 SEARCH Matching different parties together so they can trade 10 : including consumers with the right product, advertisers with media, and information goods with distribution channels and platforms. These are the basic ways that you create value, and you’ve probably tried to optimise them to reduce friction: perhaps through vertical integration, where your company handles as many activities as possible in the value chain; joint ventures, consortia or alliances; or simply getting better at coordinating with other players in the value chain. PSD changes affect competitiveness DELIVERY Even if you continually improve your effectiveness at managing a given type of transaction cost, your role can come under threat. Technological innovation may allow a radical new way of performing your specialist function much more The movement of goods: whether paper or bits and bytes. We also include physical and digital storage here. September 2012 COGNIZANT 11
Page 1 and 2: In association with Fit for the Fut
Page 3 and 4: Contents 4. Step 1: Scan for change
Page 5 and 6: Globalisation Thanks to advances in
Page 7 and 8: The real disruption is that platfor
Page 9: Step 3: Co-opt threats You can’t
Page 13 and 14: Step 6: Build virtual value network
Page 15 and 16: Alternatively, you can create or sp
Page 17 and 18: Building demand To take users away
Page 19 and 20: About Cognizant Cognizant knows you

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