Google VRIO

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About VRIN/VRIO

The tool was originally developed by Barney, J. B. (1991) in his work


‘Firm Resources and Sustained Competitive Advantage’, where the
author identified four attributes that firm’s resources must possess in
order to become a source of sustained competitive advantage.
According to him, the resources must be valuable, rare, imperfectly
imitable and non-substitutable. His original framework was called
VRIN. In 1995, in his later work ‘Looking Inside for Competitive
Advantage’ Barney has introduced VRIO framework, which was the
improvement of VRIN (Valuable, Rare, Imperfectly Imitable, Non-
Substitutable )model. VRIO analysis stands for four questions that ask
if a resource is: valuable? rare? costly to imitate? And is a firm
organized to capture the value of the resources? A resource or
capability that meets all four requirements can bring sustained
competitive advantage for the company.
About google
Google’s ability to manage their people effectively is a source of both
differentiation and cost advantages. Unlike other companies, which
rely on trust and relationship in people management, Google uses data
about its employees to manage them. This capability allows making
correct (data based) decisions about which people to hire and the best
way to use their skills. As a result, Google is able to hire innovative
employees that are also very productive ($1 million in revenue per
employee). Besides being valuable, it is also a rare capability because
no other company uses data based employee management so
extensively. Is it costly to imitate? It is costly to imitate, at least, in
the near future. First, companies should build the highly sophisticated
software, which is both costly and hard to do. Second, HR managers
should be trained to make data based decisions and forget their old
management methods. Is Google organized to capture value from this
capability? Certainly, it has trained HR managers that know how to
use the data and manage people accordingly. It also has the needed IT
skills to collect and manage the data about its employees.
There’s no doubt that Google is one of the most powerful companies
in the world, and its success arguably stems from a sustained
competitive advantage in human capital management. If we were to
break down Google’s VRIO framework from the HR perspective, it
might look something like this:

 Value: Use human capital management data to hire and retain


innovative, productive employees. These employees consistently
create some of the most popular consumer products and services in
the world.

 Rarity: No other companies are using data-based employee


management so extensively.

 Imitability: Data-based human capital management is both costly and


difficult to imitate, at least for the near future. Companies have to
build the software and invest in training their HR staff on the new
technology and strategy.

 Organization: Google is organized to capture value from this


capability. The IT department has the skills to collect and maintain
the data, while HR and team leaders are trained on how to use the data
to hire, promote, manage, and improve performance of employees.

Having a VRIO framework in place allowed Google to take a


completely different approach to human capital management and
make decisions using massive amounts of objective data. For
example, Google’s People Operations team set out to identify which
characteristics make a great manager. The data used to determine this
included surveys, performance evaluations, and great-manager
nominations. Google also conducted double-blind interviews with the
company's highest- and lowest-rated managers. By determining what
qualifies as a great manager, Google strengthens its internal team and
the foundation of its sustained competitive advantage.

(Source: Strategic Management Insight, “VRIO Framework.”)

Google's VRIO capability

Excellent employee management

Valuable? Rare? Costly to Is a company organized to


Imitate? exploit it?

Yes Yes Yes Yes


Result: sustained competitive advantage

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