Posts Tagged ‘VRIO’
Using VRIO analysis for IT Project Selection
The fact that information technology departments are swamped by requests for services on a daily basis is well known. Many of these requests are for projects. These requests are often not put through a filter to determine the relative value of one project over the next. The larger your projects, the more time and effort should be put into the selection of the projects. Oftentimes the tool sets for selection are lacking. Some organizations use SWOT analysis to select projects or an SCP model. There may also be a generic multi-criteria model utilized. I will talk about product selection using such a model in a later post. One analysis that is oftentimes overlooked is VRIO (aka “VIRO” for easier pronunciation). All of the previous serve as good starting points for filtering projects. However, VRIO can assist further. VRIO stands for the following:
Valuable – Is the project valuable to the organization? Can the value be quantified in any way? For example, you might identify projects tied to the balanced scorecard metrics, or they may be tied to a particular department or sales region success metric. If the project helps move that metric in a positive manner it is valuable. This may also be tied to process improvement and/or automation. Of course, to determine this value, the organization has to know which metrics are important and has to be able to measure them with some level of accuracy. If your company has the ability to do this, then definitely focus on aligning your IT projects with improving those metrics!
Rare – Rarity has to do with whether or not the competition has a similar resource. Rarity might be tied (probably briefly) to a unique software or technology stack, particular experts within the organization, contractual arrangements with suppliers, etc. In the context of project selection, is it something everyone else is doing or has done, or will this lead to an outcome that provides a unique capability.
Imitable (or “Inimitable” depending on context) – This deals with resources that are difficult or impossible to imitate or substitute. A concept known as “path dependence” sometimes plays a role here because even a direct duplicate of processes and resources may not produce similar effects across companies. This is the most difficult in IT project selection because almost any IT technology stack can be reproduced by a competitor. Installing the latest OS or the most popular DMS does not make you competitive. It may be a baseline for competition, but it is easily imitable. Full systems, people, processes, software, hardware and data, are harder to copy completely. For this case, it might be helpful to attach a time component. For example, can it be imitable within a year or two? If not, then by all practical assessments, it is inimitable because of the technology product lifecycles and the unique processes and people put in place during the development of the system.
Organization Ready – Is the organization ready to capitalize on the project? Projects can be suggested for a variety of reasons, but the organization has to be ready to grasp the opportunity if it meets the three previous requirements.
So, for the purpose of IT project selection, consider filtering projects first by whether they are valuable and rare, then by whether they are inimitable within the context of the time horizon selected. If the answer to these three is yes, it is obvious the organization should be ready to sign off on such a project.