ZACH DE GREGORIO, CPA
www.WolvesAndFinance.com

The problem with business strategy is that it is very difficult to implement. When you take an idea like competitive advantage, it seems very simple. You just have to identify the attribute where you earn the most profit. But when you try to implement this, you realize it is much more complex. For example, if you are the leader of an organization, you are looking at the future and trying to identify what you can focus on. You have almost unlimited options of different opportunities you can pursue. When you have unlimited options, how do you decide which one thing to choose? That is why business strategy is so difficult.
The way to solve this problem is to approach business strategy in a very structured way. When you look at all the different tools that are out there for business strategy, they all are doing the same thing. They are evaluating your options in a structured way, so you can make better decisions.
I am going to give you my favorite tool to analyze business strategy and sustainable competitive advantage. If you have not figured it out yet, I am an accounting nerd. I think I have different heroes than most people. One of my personal heroes is a business professor called J.B. Barney. This guy is a genius when it comes to business strategy. He was a professor at Ohio State, but I think he is now at University of Utah. He developed a tool called the VRIO framework. I love this tool and I use it all the time. It is very simple and easy to communicate to other people.
Let me explain how it works. You start by performing your SWOT analysis where you list out your company’s strengths, weaknesses, opportunities, and threats. You generate all these lists, and you run into the famous problem, where you have all these options and you have to decide which one gives you a sustainable competitive advantage. For instance, your business might have a long list of strengths. There might be a lot of things you are good at. But not all of them are going to generate the same amount of profit.
This is where the VRIO framework comes in. You can take your list of strengths and apply the VRIO framework. VRIO is an acronym for four different questions.
1) Is it Valuable?
2) Is it Rare?
3) Is it difficult to Imitate?
4) Is it exploited by the Organization?
You can ask these four questions for each item on your list, and the answers will show you areas of sustainable competitive advantage.

Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.