Great Business Ideas: Resource building

Great Small Business Ideas to Start: Resource building

The key to success lies in viewing the essentials of business (such as people, customers, cash, ideas, skills, reputation, and others) as resources that accumulate or decline. By taking a resource-based view you will make decisions that are dynamic and forward-focused, rather than historically based.

The idea

Resources interact and interconnect. This simple fact holds the key to growing and developing a business, as plans and decisions are more likely to succeed. In The Critical Path and Competitive Strategy Dynamics, Professor Kim Warren of London Business School explains that the greatest challenge facing managers is understanding and driving performance into the future. “When the causes of performance through time are not understood, companies tend to make poor choices about their future . . .

The ‘critical path’ is the journey the business takes as it builds resources and tackles the strategic challenge of developing future performance.” Japanese technology firm Canon recognized the importance of resource building in the 1970s. To overcome the formidable advantages of Xerox, the market leader, Canon focused on building tangible and direct resources (such as customers, products, distributors, and cash) and intangible, indirect resources (such as brand reputation).

Canon designed copiers for maximum reliability, made replacement parts modular so that end-use customers could replace them, and ensured designs were so simple that dealers could be trained to make repairs. Canon’s approach meant Xerox failed to sustain its competitive advantage.

Business success is determined by whether resources strengthen or decline, complement or undermine each other, take from or are eroded by competitors.

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In practice

Three basic issues need to be addressed: why performance is following its current path, where current policies and strategy will lead, and how the future can be altered for the better.

Several steps will help address these issues:

  1. Identify resources and understand how they behave. You do not have to possess a resource for it to be useful. Consider the following questions: – What are the most significant resources in your organization? – How many of these resources do you have? – How do they interact and affect each other? In particular, how do they affect the quantity and quality of other resources?
  2. Consider the impact that people have on this system: – Do you use people to build, develop, retain, and use resources?– Do you ensure that people enhance the quality of your resources?
  3. Understand how resources affect performance.
  4. Develop new resources in your business.
  5. Recognize the outside forces driving resource flows.
  6. Understand and leverage interdependence between resources.
  7. Upgrade your resources. Check you are not approaching any quality problems, by identifying resources in danger of running out, declining in quality, or having the potential to damage other resources.