1. No category

Competing With
Ordinary
Resources
One classic approach to strategy revolves around gaining
competitive advantage through valuable, scarce and
distinctive resources — such as a strong brand or innovative
technology. But there’s also a case to be made for building
your company’s strategy around the innovative use of quite
ordinary resources.
Frédéric Fréry
Xavier Lecocq
Vanessa Warnier
Reprint #56310
http://mitsmr.com/1El0ba0
S T R AT E G Y
Competing With
Ordinary Resources
One classic approach to strategy revolves around gaining
competitive advantage through valuable, scarce and distinctive
resources — such as a strong brand or innovative technology.
But there’s also a case to be made for building your company’s
strategy around the innovative use of quite ordinary resources.
BY FRÉDÉRIC FRÉRY, XAVIER LECOCQ AND VANESSA WARNIER
THE LEADING
QUESTION
Should
companies
always build
their strategies around
rare, valuable
resources?
FINDINGS
Competing on the
IN JULY 2007, TomTom, a European personal navigation device manufacturer based in Amsterdam, launched a takeover bid for Tele Atlas, a Dutch provider of cartographic data. The initial
offering was 21.25 euros per share, which represented a premium over the stock price at the time,
and the supervisory and management boards of Tele Atlas announced their support of the offer.1
But in autumn of that year, Nokia, which at that point was a leading cellphone manufacturer, announced an agreement to acquire Chicago-based Navteq, Tele Atlas’ main competitor, for an
astounding price of approximately $8.1 billion — a move that indicated that smartphones would
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THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED.
basis of rare and
valuable strategic
resources can be
costly.
The desire to protect
such resources can
inhibit innovation.
Today’s platform
business models
can harness the
hidden value of
ordinary resources.
SPRING 2015 MIT SLOAN MANAGEMENT REVIEW 69
S T R AT E G Y
include navigation services in the future. The control of cartographic databases suddenly became a
strategic imperative in the GPS industry. In reaction, TomTom’s main competitor, Garmin, tried to
secure its access to what was now considered as a
strategic resource by announcing an offer for Tele
Atlas in October 2007 at a higher price of 24.50
euros per share. TomTom raised the stakes to 30
euros per share and eventually acquired Tele Atlas
for 2.9 billion euros.
However, the Tele Atlas acquisition proved to be
an example of the “winner’s curse” — the idea that
winners in auctions tend to overpay. TomTom had to
borrow 1.6 billion euros to complete the acquisition
of Tele Atlas and subsequently had to write down the
value of the acquisition.2 Moreover, TomTom’s sales
declined as the company faced increasing competition from GPS-enabled smartphones; during the
period from fiscal 2008 through fiscal 2013, TomTom’s revenues fell more than 40%.
Meanwhile, the Israeli startup Waze launched its
community-driven navigation smartphone application. Waze’s business model was quite different
from TomTom’s: Waze’s cartographic data was directly collected from the users, at little cost, and
Google acquired Waze in 2013 for a price in the
neighborhood of $1 billion. Seven years after the
takeover of Tele Atlas, it is clear that TomTom paid
too much for a resource that seemed strategic and
rare at the time.
The Trouble With
Strategic Resources
During the last three decades, research on resources
has concluded that a sound strategy should rely on the
exclusive control of valuable and rare resources —
such as a distinctive brand name, an unparalleled
set of talents or an incomparable technology.
ABOUT THE RESEARCH
This article draws on a research program carried
out in the last seven years. We have conducted
in-depth case study research on German Internet
platform company Rocket Internet, French
citizen journalism website AgoraVox, popup
discount store company Chronostock, Irish clothing retailer Primark, French hotel group Accor,
Yahoo!, French multinational retailer Carrefour,
Italy-based fashion company Benetton, Dell,
Extraordinary assets, the theory goes, are needed to
reach extraordinary goals. In this view, the essential
pillars of strategic success are nonsubstitutable resources and inimitable capabilities, and competitive
advantage stems from unique and scarce resources.3
However, TomTom’s example suggests that
competing on unique, rare and inimitable
resources can be risky, because acquiring and protecting such resources can be costly; after all, most
companies in an industry are seeking to obtain
them. While strategic resources can yield superior
competitive advantage, their cost can sometimes
outweigh their benefits. In this article, we contend
that ordinary resources may play an overlooked but
important role in successful strategies — and competing with ordinary resources can be a valuable
complement to competing with strategic resources.
(See “About the Research.”)
In particular, the emergence of new business
models 4 that leverage a vast array of ordinary
resources — particularly multisided platform business models 5 — raises questions about the
relevance of the traditional strategic focus on scarcity-based approaches and unique resources.6
For example, Airbnb connects an abundant
number of people who want to source out their
empty rooms to hirers who are looking for a space
for a couple of nights. Airbnb’s user-friendly website, plain and simple business model and
24/7 customer care service allow people to make
use of empty rooms in their homes, a resource once
considered as relatively useless or trivial. Airbnb is
expanding its global reach, with a presence in
34,000 cities and more than 190 countries. Its
growth rate is astounding: In 2012 alone, the number of listings on the site grew by about 250%. 7
Hotel chains are now lobbying governmental authorities to force Airbnb to comply with hospitality
Renault-Nissan Alliance, Renault subsidiary
Dacia, French apparel and accessories company
Kering, French telecommunications provider
Iliad, English Premier League team Arsenal
Football Club and Danish consulting company
Specialisterne. Our goal was to identify processes related to resources in various kinds of
business models. To do so, we used both primary
and secondary sources. We also supervised a
series of in-the-field strategic analyses with par-
70 MIT SLOAN MANAGEMENT REVIEW SPRING 2015
ticipants in an executive MBA program, focusing
on the resource base of their organizations.
Then we questioned a sample of 768 CEOs
about their strategy development processes in
order to identify the actual role of the different
types of resources in gaining and sustaining competitive advantage. We complemented our
empirical research on ordinary resources with a
systematic literature review of peer-reviewed articles dedicated to resources and business models.
SLOANREVIEW.MIT.EDU
THE ARGUMENT FOR ORDINARY RESOURCES
While there is no question that possessing valuable strategic resources can benefit a company, strategic resources
also can have drawbacks — and the benefits of ordinary resources can offset those drawbacks.
POTENTIAL DRAWBACKS OF STRATEGIC RESOURCES
POTENTIAL BENEFITS OF ORDINARY RESOURCES
Top talents can capture the value they create.
Ordinary talents are easily substitutable.
Competing on the basis of rare resources is costly.
Ordinary resources are inexpensive.
Day-to-day business performance does not rely on uniqueness.
Ordinary assets are readily available.
Excessive persistence in exploiting rare resources can
restrain innovation.
“Frugal innovation” stems from mundane resources, and
“simple rules” are compatible with ordinary assets.
Fascination with “crown jewels” can limit executives’ perspectives.
Platform-based business models leverage ‘crowd jewels.’
regulations, which suggests they consider it a credible rival. Airbnb’s rapid growth indicates that the
hospitality industry — an archetypal capital-intensive business — can be disrupted with a totally
different approach, one involving leveraging underutilized ordinary assets. Given the growth of
Internet-enabled platform business models such as
Airbnb’s, it seems time to highlight the strategic
value of ordinary resources.
The theory behind competing on strategic resources argues that performance differentials
between competitors are a direct consequence of
their resources. Businesses that hold higher-value
resources (people, technologies, reputation, partnerships and so on) should benefit from a
competitive advantage if they can manage their
resources portfolio properly. As a consequence, in
order to keep their strategic value, resources must
be neither perfectly imitable nor substitutable, and
businesses must carefully defend them. This approach explains many successful strategies, and its
theoretical significance is unquestionable.8 However, under certain conditions, relying too heavily
on strategic resources may lead to several risks —
such as the bidding war TomTom experienced.
Considering the potential of ordinary resources is a
way to mitigate these limitations.
An ordinary resource is a common resource on
the market, generally perceived as neutral in terms
of performance. Such a resource is considered, at
best, as ensuring competitive parity. While ordinary resources are not, in and of themselves, a
source of competitive advantage and greater performance, they are generally required for the
business to function properly. Examples of
SLOANREVIEW.MIT.EDU
ordinary resources include compliance with ISO
standards in the automobile industry; stores and
salespeople in retailing; and websites and logistics
competencies in e-commerce.
There is a strategic trade-off between the highrisk/high-gain combination of strategic resources
and the low-risk/low-gain pattern associated with
ordinary resources. When designing their strategies, executives should not neglect this trade-off. In
particular, there are five notable drawbacks to strategic resources. (See “The Argument for Ordinary
Resources.”)
1. Strategic resources can capture their own
value. In some circumstances, the value of a strategic resource can be captured by the resource itself,
at the expense of the company using it: For example, highly talented “stars” can use their bargaining
power to demand higher compensation. This is notably the case in global industries where the value
generated by top talent is readily visible and a profusion of online rankings keeps raising the bar;
examples include entertainment, professional
sports leagues and CEOs of large, publicly traded
global companies. Talented individuals, once they
realize they are strategic resources, may capture a
significant part of the value they are producing.
This phenomenon was already noticeable some
years ago,9 but the broad diffusion of professional
databases and the ubiquitous use of social networks
exacerbate its competitive impact.
For instance, consider the compensation of top
British professional soccer players. Between 1990
and 2010, the average pay for a soccer player in the
English Premier League rose from 1,500 pounds to
33,868 pounds per week, whereas the average
SPRING 2015 MIT SLOAN MANAGEMENT REVIEW 71
S T R AT E G Y
weekly wage in the U.K. scarcely doubled during
that period (from 295 pounds to 656 pounds).10
However, in the meantime, many of the top clubs in
the English Premier League experienced financial
losses and/or debt. More than 10 years ago, Gary
Lineker, the former captain of England’s national
soccer team, was already observing, “Of course,
players are taking too much money out of the game,
but they don’t dictate market forces.”11
Cases of value capture by rare or unique resources can be found in other settings as well. For
instance, a French film producer recently brought
to the fore the idea that French actors were paid too
much compared to the revenues generated by movies, even in the case of blockbusters.12 Indeed, given
the pay earned by top French actors, only a few, if
any, French movies turn a profit. This situation results from the organization of the heavily
subsidized French film industry. It also stems from
the fact that actors — and their agents — know
their value and eventually consider that they are
worth more than the expected revenues of the
movies they star in.
In contrast, ordinary talents are by definition
easily substitutable. As a consequence, they do not
boast enough bargaining power to capture value at
the expense of their employers. Many management
techniques, from Frederick Taylor’s scientific
72 MIT SLOAN MANAGEMENT REVIEW SPRING 2015
management13 to modern knowledge management
approaches, specifically aim at codifying knowhow in order to avoid the pitfall of excessive
dependence on the specialized knowledge and
skills of particular employees. Management scholars Sumantra Ghoshal and Christopher Bartlett
once wrote that “the key function of management
is to help ordinary people produce extraordinary
results.” 14 Creating extraordinary results with
unique talents may be great, but it is not the general
rule in management.
2. Competing on rare resources is costly. The
TomTom case demonstrates that once a resource is
collectively considered as strategic in an industry,
access to it becomes a vital challenge, and rivals compete to obtain it. If you view a resource as strategic,
you may raise its cost up to the point that the cost
outweighs the resource’s value. Companies whose
business models are built around strategic resources
are prone to allocate a significant part of their efforts
to controlling and securing higher-value assets, as
exemplified by numerous patent wars in the electronics or the pharmaceutical industries. So-called
“patent trolls” thrive on this dynamic.
In contrast, ordinary resources are inexpensive,
and since most businesses overlook their strategic influence, their cost usually has no reason to rise. They
can be acquired and secured at a comparatively low
PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED.
THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED.
If you are convinced your company possesses unique
resources and core competencies, you will very probably
try to defend and leverage them -- and hesitate to implement
any disruptive innovation that could jeopardize your
strategic commitment.
price, and even if they do not provide competitive
advantage on their own, they may contribute to it.
3. Day-to-day business performance does not
rely on uniqueness. If all competitors in an industry
attempt to be unique and to possess nonsubstitutable resources and inimitable competencies, most of
them will fail in that attempt. In truth, very few businesses possess unique resources and distinctive
competencies that fit the environment’s threats and
opportunities. Focusing exclusively on strategic resources does not explain the everyday performance
of the vast majority of businesses, which remain
profitable and competitive, even if they only possess
relatively ordinary assets.
Gathering a group of executives in order to help
them identify the core competencies of their own
business — even with the assistance of a series of
practical tools such as an activity mapping or a
benchmarking process — can be a disappointing
exercise. If some companies do possess valuable
brands, highly talented people, deep pockets or patented technologies, it does not necessarily provide
them with a true competitive advantage, for some
of their rivals often boast a similar resource portfolio. For instance, in the pharmaceutical industry,
dominant players such as Pfizer, Sanofi or Roche
possess comparable assets: Little is truly unique in
their R&D capacity or in their marketing approach.
However, this does not prevent those companies
from reaching excellent levels of profitability.
4. Excessive persistence in exploiting rare resources can restrain innovation. If the possession of
specific resources is the ultimate explanation for success, innovation poses a problem: Breakthrough
ideas and groundbreaking processes can threaten
years of patient accumulation of talents and assets. As
a consequence, a by-the-book implementation of a
strategic resource-based approach can lead to inertia.
If you are convinced your company possesses unique
resources and core competencies, you will very probably try to defend and leverage them — and hesitate
SLOANREVIEW.MIT.EDU
to implement any disruptive innovation that could
jeopardize your strategic commitment. By protecting carefully accumulated rare resources, businesses
may repel innovation and change. In a continuously evolving digital environment, such inertia
can rapidly prove lethal.
Kodak, Sony and Nokia each fell into this resource trap. In 1985, Leo J. Thomas, senior vice
president and Kodak’s director of research, famously
told The Wall Street Journal: “It is very hard to find
anything [with profit margins] like color photography that is legal.”15 Of course, in order to protect
those profits, Kodak preferred not to switch to digital
cameras. As regards Sony, why is it not an absolute
winner in the MP3 industry? Sony literally invented
portable music devices and pioneered digital music.
However, in order to protect its unique resources
provision, it also vertically integrated by acquiring
what became Sony Music Entertainment, a global
leader in the music industry. This bold strategic
move had a drawback: Once it owned a large music
company, Sony became very reluctant to enter the
MP3 business in the early 2000s, for this industry —
a least at that time — was heavily relying on
peer-to-peer piracy. Nokia made a similar mistake:
By preserving its unique competencies in design and
logistics, it refused to admit that with the launch of
the iPhone, Apple had changed the game from a battle between devices to a war between ecosystems.
On the other hand, there is growing interest in
“frugal innovations”16 such as the low-cost ChotuKool fridge, a tiny refrigerator using thermoelectric
cooling. Such “frugal innovation” demonstrates that
it is possible to design and develop convincing solutions by leveraging low-cost technologies and largely
available assets. Moreover, leveraging ordinary resources is consistent with the implementation of
simple rules that facilitate the execution of strategies,
even in rapidly changing circumstances.17
5. Fascination with “crown jewels” can lead to
competitive mimicry. The belief in the superiority
SPRING 2015 MIT SLOAN MANAGEMENT REVIEW 73
S T R AT E G Y
of key resources may lead competitors to focus too
much on a small part of the spectrum of available
resources, which may restrain their differentiation
capability. Harvard Business School professor
Cynthia A. Montgomery already observed this phenomenon of fascination with resources considered
“crown jewels” and called for the inclusion of the
complete range of resources — including the good,
the bad and the boring.18 To be useful, the typology
of resources cannot be limited to a binary opposition: strategic resources (in other words, rare and
very valuable ones) on the one hand, and all the
negligible rest on the other.
Ordinary resources can play an important role
in creating a competitive advantage in at least two
situations:
1. Unless ordinary resources are leveraged, strategic
resources cannot always deliver their full-fledged
competitive potential.
2. The mobilization of massive amounts of ordinary resources through platform business
models19 can outweigh the value of a few unique
strategic assets: ‘Crowd jewels’ can be a valuable
substitute for “crown jewels.”
We will now explore these two scenarios.
Ordinary Resources as
Strategic Enablers
Strategic resources offer limited benefits if you cannot gain value from them. Business models
focusing on strategic resources usually underestimate the necessity of ordinary assets, day-to-day
TWO APPROACHES TO BUSINESS MODELS
Like strategic resources, ordinary resources can be used to build profitable business
models. But a business model leveraging many ordinary resources will often take a
different approach than one focused on scarce strategic resources.
BUSINESS MODELS
FOCUSED ON
STRATEGIC RESOURCES
BUSINESS MODELS
FOCUSED ON
ORDINARY RESOURCES
Availability of
resources
Scarcity
(unique and protected)
Abundance
(available or discarded)
Relationship to
resources
Ownership/Protection
Sharing/Access
Value perception of
resources by most
companies
High value
Lower value
Cost of acquisition
High cost
Lower cost
74 MIT SLOAN MANAGEMENT REVIEW SPRING 2015
activities and common talents you must leverage in
order to achieve the full-fledged potential of the
few strategic resources you master. Moreover, companies are usually unable to develop or gather
strategic resources in every domain of their business. In many respects, it would be pointlessly
costly in terms of search costs or internal development to seek unique resources for every task
involved in an entire value chain. Ordinary resources are a cheap and necessary way to leverage
unique assets — and thus allow replication and
scalability.
In particular, the use of ordinary resources enables the duplication of a business model in many
business units and/or in many countries. If such
replication is a key success factor, as it is in industries
such as retailing,20 extending a business model
through the acquisition of ordinary resources is
much easier — and much cheaper — than implementing a business model relying on unique assets.
By definition, strategic resources are rare, expensive
and difficult to replicate.
For instance McDonald’s Corporation is the
world’s largest chain of fast-food restaurants, with
more than 36,000 restaurants in more than
100 countries. It has achieved this impressive
growth in only 60 years. While a top brand, efficient
processes and premium locations for restaurants
are often seen as the main strategic resources of the
company, the replication of McDonald’s business
model is only possible because the model leverages
relatively ordinary resources, in the form of more
than 1.8 million employees worldwide. Millions of
young adults worldwide got their first entry-level
job with the company, helping to keep wage bills
down. Far from being the talented human resources
described in human resource management books,
most entry-level McDonald’s employees are not
highly qualified, are part-time workers and can be
easily replaced. However, the McDonald’s brand
can only be leveraged thanks to these ordinary resources. While scalability (the ability of a business
to grow and develop without major organizational
barriers) may be related to cultural and cognitive
dimensions,21 it also depends on the type of resources on which the business builds. When they
are used to leverage strategic resources, ordinary
resources allow scalability.
SLOANREVIEW.MIT.EDU
Leveraging the Ordinary
Ordinary resources — not just unique ones — can
yield strategic benefits and eventually become the
basis of competitive advantage.22 They can play a
central role in the emergence of new business
models. (See “Two Approaches to Business Models.”)
This evolution may give rise to drastic changes in
the competitive landscape in a given industry and
eventually lead to the emergence of new markets.
For instance, the creation of the low-cost business
model in the airline industry by Southwest Airlines
in the early 1970s is sometimes explained by a
unique blend of operational constraints and entrepreneurial ingenuity. However, it also derived from
the fact that Southwest Airlines was endowed with
relatively ordinary resources (access to small regional airports, old airplanes and a comparatively
inexperienced workforce) while it was lacking
what were perceived at that time as strategic assets
(hub airports, connections, diversified fleet of
airplanes, etc.). 23 As the example of Southwest
illustrates, it is possible to develop extraordinary
performance and to gain competitive advantage by
combining and leveraging ordinary resources in
new ways.
Crowdsourcing and crowdfunding strategies
are two new types of business models based on the
development of a mass of ordinary resources. The
ability to leverage massive amounts of comparatively ordinary talents and trivial assets through a
platform and its ecosystem is not only a game
changer, it questions the very principles of by-thebook strategies.24 For example, the sharing of small
units of available resources by the crowd is a successful business model for the crowdfunding
company Kickstarter. The concept of Kickstarter,
where potential investors can invest as little as
$1 to finance innovative projects, has created an
industry of its own, and many competitors are
jumping on the bandwagon. In this model, it is a
crowd of people, their abundant little pennies and
an ample number of competing projects that yield
success — not unique assets, high fixed costs and
unparalleled talents.
Similarly, the use of the collective intelligence of a
mass of ordinary people is at the heart of New York
City-based Quirky. This collaborative platform has
developed a unique value proposition: to transform
SLOANREVIEW.MIT.EDU
CAN YOU LEVERAGE ORDINARY RESOURCES?
Could your company better exploit the hidden value of ordinary resources?
Consider these three questions.
1. In many countries, the Uber platform and its equivalents leverage ordinary
resources — individual drivers and their personal vehicles — to disrupt the taxi
business through crowdsourcing-based business models. Some call this the
“uberization” of the economy. Do you think your industry could also be “uberized” by ordinary resources? How? How could you react?
2. Could you weaken the competitive position of your most powerful competitors by jeopardizing the value of their strategic resources (what they consider as
key people, key assets, key technologies and so on)? What kind of strategic
move could make your competitors’ strategic resources less relevant?
3. Are you sure your strategic resources (what you consider as key people, key
assets, key technologies, and so on) yield a higher return than their cost? Considering the whole array of costs these resources involve (acquisition, management
and protection), what could increase their return and reduce their cost?
good ideas into ready-to-market products. Anyone
can submit ideas for new products on Quirky’s website. Then Quirky staff members and the Quirky
online community evaluate the ideas. If Quirky
brings a product to market, the inventor of the idea
and the community members who contributed to its
development — called influencers — receive royalties based on product sales. Quirky’s best-selling
product is the Pivot Power, a flexible power strip
invented by Jake Zien with the help of 708 influencers.25 Quirky receives thousands of ideas a week, and,
since the creation of the website, members of the
community have enabled the development of hundreds of products.
Examples like Kickstarter and Quirky indicate
that strategic success can derive from a platform
that draws on an abundance of ordinary resources.
This suggests that, instead of only focusing on
unique resources, executives should also focus on
leveraging a vast supply of more mundane talents.
(See “Can You Leverage Ordinary Resources?”) As
physicist and Nobel laureate Philip Anderson wrote
in 1972, “More is different”: Beyond a certain size, a
system is endowed with new capabilities that significantly differ from what its various constituents
can offer.26 In business, the traditional strategic
paradigm, based on the tight ownership of competitive-advantage generating assets, loses its
significance when the wisdom of millions of people
are involved, when ordinary resources are combined to achieve extraordinary performance. Here
are the critical points of the “more is different” pattern in business:
SPRING 2015 MIT SLOAN MANAGEMENT REVIEW 75
S T R AT E G Y
1. Platform business models harness the hidden value of ordinary resources. Traditionally,
executives overlook and underemphasize ordinary
resources. As a consequence, ordinary resources
often stay under the radar of strategic plans. In
their benchmarking processes, companies focus on
new capabilities and new resources, but they do not
investigate the potential value creation from ordinary resources, existing knowledge and ordinary
talents. However, our examples show that innovative entrepreneurs can develop new services from a
mass of ordinary resources.
2. The strategic resource is the platform, not
the assets it leverages. The main challenge consists in developing and growing an attractive
platform — which in that case is a true strategic
resource — in order to capture scattered ordinary
assets and talents. Indeed, while strategic resources are concentrated, ordinary resources can
be highly distributed among different companies
and individuals. However, without the ordinary
resources to fuel it, the platform has limited strategic value. It is the combination of the platform
and the mass of ordinary resources that create
sustained competitive advantage.
3. Make sure the cost of the platform does not
outweigh its value. The Internet has significantly
reduced the cost of harnessing collective and distributed ordinary resources. However, as a strategic
resource, the platform bears all the risks we highlight: Exploiting a vast amount of data, people or
initiatives can be costly; rare talents can capture
value; protecting the platform can hinder innovation; and a focus on the platform as an asset can
limit executives’ perspectives. As a consequence, the
platform must remain open, frugal and scalable.
Implications for Strategy
According to author Chris Anderson’s famous
“long tail” concept, it is time companies stop focusing so much of their marketing efforts on flagship
products to the detriment of more ordinary ones.27
We make a similar observation about the resources
portfolio: Businesses should consider the “long tail
of resources” and stop analyzing their resources
portfolio primarily through the prism of uniqueness and scarcity. Many executives dedicate a
disproportionate amount of attention to strategic
76 MIT SLOAN MANAGEMENT REVIEW SPRING 2015
resources and neglect the rest of the resources
spectrum. When properly exploited, overlooked
ordinary resources unveil untapped profit pools.
What’s more, taking into account the implications
of ordinar y resources opens new business
perspectives.
Our key message is that a strategic value proposition does not necessarily derive from unique
resources and core competencies. Acquiring and
mastering unique resources undoubtedly yields
competitive advantage, but it can be extremely
costly, and building barriers to imitation can erode
your future competitive advantage. Focusing on
unique strengths implies specialization, and if you
try to become a one-trick pony, sooner or later the
trick will be matched by competitors. Innovations
can undermine the market value of a portfolio of
superior assets. By focusing on securing unique resources, executives may jeopardize the agility of
their business and their ability to sustain a competitive advantage. For instance, consider how the
Wikipedia anonymous crowd, with its improvised
bricolage, outperformed Microsoft Encarta and its
deliberately crafted strategy.
By eroding established barriers to imitation,
ordinary resource-based business models may
disrupt the business landscape. In a whole array of
industries (retail, manufacturing, banking, automobile, hospitality, higher education, etc.),
enabling the power of strategic resources requires
mundane assets, and leveraging massive amounts
of ordinary resources through platforms and ecosystems could be as profitable as securing unique
possessions and talents. Instead of promoting secrecy and defending industrial property rights at
all costs, powerful incumbents should reconsider
the advantages their distinctive assets provide and
contest the taken-for-granted assumptions that
underlie their success. Overconfidence and inertia
lurk in the blind spot of some resource-based
strategies, whereas frugal innovation and crowdsourcing-based approaches are gaining increasing
attention. Ordinary resources were once overlooked and considered as negligible strategic
assets. Rapidly expanding platform business
models raise questions about this bias, and it is
time executives start exploiting the “long tail” of
resources.
SLOANREVIEW.MIT.EDU
Frédéric Fréry is a professor of strategic management at ESCP Europe Business School in Paris as
well as dean of the school’s Executive MBA program. Xavier Lecocq is a professor of strategic
management at the University of Lille and at
IESEG School of Management, both in France.
Vanessa Warnier is an associate professor in
strategic management at the University of
Lille in France. Comment on this article at
http://sloanreview.mit.edu/x/56310, or contact
the authors at [email protected].
11. M. Bentham, “Even Football Stars Agree — They
Are Paid Too Much,” The Telegraph, October 6, 2002,
www.telegraph.co.uk.
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2012, www.knowledge.wharton.upenn.edu.
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2. “TomTom Lost $1.3 Bn in Fourth Quarter,” Financial
Times, February 24, 2009, www.ft.com.
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4. R. Casadesus-Masanell and J.E. Ricart, “How to Design a Winning Business Model,” Harvard Business
Review 89, no. 1 (January-February 2011): 100-107.
5. K.J. Boudreau and K.R. Lakhani, “How to Manage Outside Innovation,” MIT Sloan Management Review 50,
no. 4 (summer 2009): 69-76.
12. R. Brody, “The Future of French Cinema,” The New
Yorker, January 2, 2013, www.newyorker.com.
13. F.W. Taylor, “The Principles of Scientific Management” (New York and London: Harper & Brothers, 1911).
14. S. Ghoshal and C.A. Bartlett, “The Individualized
Corporation: A Fundamentally New Approach to
Management” (New York: HarperBusiness, 1999).
16. N. Radjou, J. Prabhu and S. Ahuja, “Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough
Growth” (San Francisco, California: Jossey-Bass, 2012).
17. D. Sull and K.M. Eisenhardt, “Simple Rules for a
Complex World,” Harvard Business Review 90, no. 9
(September 2012): 68-74.
18. C.A. Montgomery, “Of Diamonds and Rust: A New
Look at Resources,” in “Resource-Based and Evolutionary Theories of the Firm: Towards a Synthesis,” ed. C.A.
Montgomery (Norwell, Massachusetts: Kluwer Academic
Publishers, 1995), 251-268.
6. Previous research has studied processes related to
resources. Notable examples include R. Adner and
C.E. Helfat, “Corporate Effects and Dynamic Managerial
Capabilities,” Strategic Management. Journal 24, no. 10
(October 2003): 1011-1025; and D.G. Sirmon, M.A. Hitt
and R.D. Ireland, “Managing Firm Resources in Dynamic
Environments to Create Value: Looking Inside the Black
Box,” Academy of Management Review 32, no. 1 (January 2007): 273-292. For a detailed account of this
approach, see D.G. Sirmon, M.A. Hitt, R.D. Ireland and
B.A. Gilbert, “Resource Orchestration to Create Competitive Advantage: Breadth, Depth, and Life Cycle
Effects,” Journal of Management 37, no. 5 (September
2011): 1390-1412. In this paper we follow a similar path,
while distinguishing between strategic and ordinary
resources through a business model perspective.
19. A. Gawer and M.A. Cusumano, “Platform Leadership:
How Intel, Microsoft and Cisco Drive Industry Innovation”
(Boston, Massachusetts: Harvard Business Review
Press, 2002).
7. S. Chudgar, “Airbnb’s Annual Report: We’re Still Growing,” February 8, 2013, www.inc.com; and R. Lawler,
“Airbnb Tops 10 Million Guest Stays Since Launch, Now
Has 550,000 Properties Listed Worldwide,” December 9,
2013, www.techcrunch.com.
23. Ibid.
8. J.B. Barney, “Gaining and Sustaining Competitive
Advantage,” 4th ed. (Upper Saddle River, New Jersey:
Prentice Hall, 2010).
9. R.W. Coff, “When Competitive Advantage Doesn’t
Lead to Performance: The Resource-Based View and
Stakeholder Bargaining Power,” Organization Science 10,
no. 2 (March-April 1999): 119-133.
10. J. Bernstein, “Too Many Average Footballers
Are Millionaires … They Drive Ferraris but They
Deserve a Reliant Robin,” Daily Mail, January 9, 2011,
www.dailymail.co.uk.
SLOANREVIEW.MIT.EDU
20. S.G. Winter and G. Szulanski, “Replication as
Strategy,” Organization Science 12, no. 6 (NovemberDecember 2001): 730-743.
21. R.I. Sutton and H. Rao, “Scaling Up Excellence:
Getting to More Without Settling for Less” (New York:
Crown Publishing, 2014).
22. V. Warnier, X. Weppe, and X. Lecocq, “Extending
Resource-Based Theory: Considering Strategic, Ordinary
and Junk Resources,” Management Decision 51, no. 7
(2013): 1359-1379.
24. A. Hagiu, “Strategic Decisions for Multisided Platforms,” MIT Sloan Management Review 55, no. 2
(winter 2014): 71-80.
25. K. Gittleson, “Ben Kaufman’s Quirky Quest to Transform Innovation,” September 1, 2013, www.bbc.com.
26. P.W. Anderson, “More Is Different,” Science 177,
no. 4047 (August 4, 1972): 393-396.
27. C. Anderson, “The Long Tail: Why the Future of
Business Is Selling Less of More” (New York: Hyperion,
2006).
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