Family Enterprises have resources at their availability. These resources do not just comprise material wealth, but also “softer” types of capital, like the education of the family members, the contacts and influence of a family, etc.
A successful Family Enterprise will try to map and organize its resources in such a way that it can create an advantage for itself.
What are resources?
The resource-based view (RBV) is rooted in strategic business management. The RBV is a framework for analyzing a firm’s internal resources and capabilities as the basis for strategic management. The RBV posits that a firm’s unique combination of resources and capabilities can be a source of sustained competitive advantage. These resources and capabilities can include tangible assets such as physical facilities and equipment, intangible assets such as patents and brands, and organizational capabilities such as a strong corporate culture or efficient supply chain management.
According to the RBV, a firm’s resources, and capabilities are valuable when they are rare, inimitable, and non-substitutable. That is when a firm possesses resources or capabilities that are difficult for competitors to acquire or imitate, and that cannot be replaced by readily available alternatives, they are more likely to provide a sustained competitive advantage.
This framework is often used by managers and strategic consultants to identify a company’s internal strengths and weaknesses and to devise strategies to leverage those strengths while addressing or overcoming any weaknesses.
Another important aspect of the RBV is the concept of “resource heterogeneity”. This refers to the idea that different firms have different resources and capabilities, which can vary in value, rarity, inimitability, and non-substitutability. A firm’s resources and capabilities that meet these criteria are more likely to provide a sustained competitive advantage.
A key implication of the RBV is that a firm’s resources and capabilities should be managed strategically to leverage them for sustained competitive advantage. This might include efforts to improve a firm’s resource endowments, such as through investment in R&D or new capabilities, or to protect existing resources and capabilities, such as through patents or trademarks.
It’s also important to note that, a company’s resources and capabilities can be valuable, but not sufficient to have a sustainable competitive advantage. There is a need for dynamic capabilities that allow the firm to reconfigure its resources and capabilities to respond to changing environmental demands and opportunities and to create new resources and capabilities.
Overall, the resource-based view is a useful framework for understanding how a firm’s internal resources and capabilities can be a source of sustained competitive advantage. It can be used by managers and strategic consultants to identify a company’s internal strengths and weaknesses and to devise strategies to leverage those strengths while addressing or overcoming any weaknesses.
How the resource-based view fits into the Family Enterprise
The resource-based view (RBV) can be applied to family enterprises to help understand how their unique resources and capabilities can be a source of competitive advantage. Family Enterprises often have a distinct set of resources and capabilities compared to non-family Enterprises, such as a strong sense of family culture and values, a long-term orientation, and a high level of trust and loyalty among family members.
Family culture and values can be a valuable resource for a family enterprise, as they can help create a strong sense of identity and purpose among employees and other stakeholders, leading to greater engagement and commitment. In addition, the long-term orientation of many family enterprises can help them make strategic decisions that are not always driven by short-term financial considerations. Trust and loyalty among family members can also be an important resource, as they can create a sense of cohesion and commitment among family members, which can be beneficial for the business.
However, it’s important to keep in mind that family resources and capabilities can also be liabilities if they are not managed properly. Family conflicts, nepotism, agency and stewardship issues, and lack of clear roles and responsibilities can be detrimental to business performance.
To leverage their resources and capabilities for sustained competitive advantage, family enterprises can focus on developing dynamic capabilities that allow them to reconfigure their resources and capabilities in response to changing environmental demands and opportunities. For example, a family enterprise might focus on building a strong governance structure that allows it to make strategic decisions effectively, while also addressing potential conflicts of interest among family members. Additionally, family enterprises might invest in developing a more robust succession plan, to ensure that future leaders of the business have the necessary skills and experience to continue to grow and thrive.
Overall, the resource-based view can be a useful framework for family enterprises, as it can help them understand how their unique resources and capabilities can be a source of sustained competitive advantage and provide them with a way to strategically manage those resources and capabilities to create a sustainable future for the Family Enterprise.
One challenge facing families is starting to map these resources and creating a strategy around them to form and align them toward the achievement of a value-based vision.