Jay Barney

Yesterday I wrote about competence and capability and the VRIO framework that was originated by Jay Barney who wrote Gaining and Sustaining Competitive Advantage now in its third edition. He also wrote an excellent article first published in the Academy of Management Review, 1986, Vol 11, No. 3 pp. 656 – 665 on Organizational Culture: Can It Be a Source of Sustained Competitive Advantage? He applies the VRIO thinking to this and is firm in his statements that:

A firm's culture can be a source of sustainable competitive advantage if that culture is valuable, rare, and imperfectly imitable. The sustained superior performance of firms like IBM, Hewlett-Packard, Proctor and Gamble, and McDonald's may be, at least partly, a reflection of their organizational cultures (Peters & Waterman, 1982). Firms with valuable, rare, and imperfectly imitable cultures should nurture these cultures.

Firms without valuable, rare, or imperfectly imitable cultures cannot expect their cultures to be the source of sustained competitive advantages. Nor can such firms expect that efforts to change their cultures, though they may successfully incorporate new valuable attributes, will generate sustained superior performance. For such efforts are typically imitable, and thus, at best, only the source of temporary superior performance. These firms must look elsewhere if they
are to find ways to generate expected sustained superior financial performance.

A firm's culture is one of several attributes that differentiate firms one from another (Alchian, 1950; Alchian & Demsetz, 1972). …. Precisely because an organization's culture is hard to describe; because the common sense of managers is taken for granted; and because even if the culture can be described, it is difficult to change; a firm's culture can hold promise for sustained superior financial performance for some firms.

What the article does not tackle is exactly how to make the organizational culture a source of sustainable competitive advantage (and keep it in that category).

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