Resource Diversity & Immobility Simplified

I wanted to take some time to simplify my discussion of Resource Diversity and Resource Immobility from my post titled “Competitive Advantage and the Resource Based View of the Firm.”

If you’ll recall, Resource Diversity:

pertains to whether a firm owns a resource or capability that is also owned by numerous other competing firms, then that resource cannot provide a competitive advantage.

and Resource Immobility is:

The concept that if a resource is easy to obtain by competitors because the cost of developing, acquiring or using that resource is relatively low, then that resource cannot provide a competitive advantage.

Now…why do we need diversity and immobility? According to the Resource Based View (RBV) of the firm, achieving diversity and/or immobility allows an organization to create competitive advantage. The theory put forth by RBV is that if you can create an organization full of people, technologies and processes that can’t be reproduced elsewhere by assuring that your resources are diverse and immobile, you can create an advantage in the marketplace.

If you’ll remember from my posted titled “Competitive Advantage – The Human Capital approach” I talked about a football team owner trying to create a real competitive advantage. How would you, as the football team owner, create resource diversity and/or resource immobility?

As I’ve already mentioned here, you hire the best coaching staff and players that you can and then allow the coaches and players to build their game strategy to ensure that the strengths are accentuated and the weaknesses are hidden. You then create an environment that makes your players want to stay as part of your team for the long-run, which means that you have to find creative ways to keep your players and coaches engaged and interested in remaining a part of your team.

Let’s look at another example:

You are the owner of an IT consulting firm and you want to differentiate your firm from the hundreds of others out there. What do you do?

If you are like most people, you probably spend a considerable amount of time thinking about your ‘go-to-market’ strategy, building a marketing plan, building a business plan, etc etc. These are all good things and things that are relevant.

But…what about the delivery of services? How will you staff your projects? Which of the following will you do:

(a) hire the best people with the most experience and expertise.
(b) hire junior level staff with a few years experience and train them to do the job.
(c) call the local IT staffing company and bring in contractors

None of the answers are ‘wrong’ but there are better options from a competitive advantage standpoint. Let’s look at the three options:

  • If you do option “a” and hire the best people and provide them with what they need to do their job and keep them engaged and interested in remaining a part of your organization, you are attempting to create resource diversity and resource immobility.
  • If you do option “b” and hire junior level staff with some experience and then provide them with the training and tools to do their job, then you are also attempting to create resource diversity and resource immobility…but you have to be careful here. These junior level folks have to be good at what they do and training and tools don’t make people want to stay with you…there has to be something that makes these employees want to stay. You must find a way to keep them engaged.
  • If you do option “c” and call the local staffing company and hire some contractors, I’d have to say you aren’t creating any advantage with your human capital. You can’t create advantage this way because you are drawing from the same talent pool as the rest of your competition. A contractor in your office today can easily walk away tomorrow and work for your competitor. You don’t create resource diversity or resource immobility using this option.

You’ll notice that of the three options given above, option “a” and option “b” will provide you with similar results if you approach them with the right strategy. Hiring the best and most experience will more than likely cost a lot of money while hiring more junior level folks will be a bit cheaper. Perhaps you pick from both options and hire people of both types and let the junior level folks learn from the senior level folks. Either way, you have to hire the best people you can and keep them engaged in the organization.

I’m sure there are some of you that are saying “wait a minute…what about…” and you might be right. There might be some options where you would want to use contractors for project-based work but you should expect anything more from them than what any of your competitors do.

If you are truly trying to differentiate your firm from your competitors you won’t do it by using contractors. You do it by having a distinct delivery strategy while finding and keeping the best people you can.

In order to truly create sustainable competitive advantage, an organization must have the right strategy, technology and people in place. In today’s world, it isn’t enough to have only one or two of these; an organization must obtain and maintain the mix of the right strategy, the right technology and the right people.

Using Resource Immobility and Resource Diversity concepts can help with attracting and keeping the right people…which will in turn help with crafting the right strategy and developing and deploying the right technology.

[tags] competitive advantage, organization, resource based view of the firm, technology, strategy, people [/tags]

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[…] white paper was the inspiration for the the topics discussed in my previous posts titled “Resource Diversity & Immobility Simplified“, “Competitive Advantage and the Resource Based View of the Firm“, and […]

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Fantastic post. Thanks for sharing this!