Leveraging Organizational Identity for Competitive Advantage

1. Introduction

Organization leaders have turned to various approaches to achieve competitive advantage in today’s turbulent global marketplace.[1] Some approaches, like the resource-based view (RBV) of the firm and Barney’s VRIO framework,[2] look inside the organization for sources of advantage, while other approaches look outside the organization to identify advantages. Both these models assume that industries are relatively stable,[3] firms are diverse, and resources (e.g., products, processes, people) do not easily move from one firm to another.

The problem with these assumptions is that today’s business landscape is marked by accelerating change and technological advancement. For example, although it took about 50 years to get from the first military walkie talkie in 1938 to a barely affordable mobile phone in 1988, it was only 5 years later that the first rudimentary “smartphone” (the IBM Simon) was introduced, and 14 years after that until the iPhone completely revolutionized the mobile industry.[4]

What this means for organizational leaders is that their coveted resources, approaches, and technological advances quickly become outdated as industry-wide changes accelerate and ideas and resources move fluidly around the globe. Therefore, leaders need to look inside and outside their own firms to identify less tangible and less mobile resources, and then consider how these assets may be leveraged for competitive advantage.

One such resource is organizational identity, which refers to “who” an organization “is” and which is reflected in identity claims (explicit or implicit messages) about what is central, distinctive, and enduring about the firm.[5] This article outlines a new Strategic Identity Management Framework for creating sustainable competitive advantage. The framework is based on Rockwell’s 5R Model of Organizational Identity Processes that examines and evaluates organizational identity[6] and the VRIO framework, which identifies and evaluates firms’ resources.[7]

2. Sustainable Competitive Advantage

Sustainable competitive advantage occurs when a company consistently achieves superior performance compared to its competitors.[8] One example is Amazon’s ability to squash retail competition around the globe, driving retailer after retailer out of business. Toys “R” Us, created in 1948 and once the self-described “leading toy store for all toys, video games, dolls, action figures, learning games, building blocks, and more,” is but one of the latest casualties of Amazon’s dominance. The demise of Toys “R” Us also illustrates how the advantages created through innovation,[9] intellectual capital,[10] and human capital[11] subside over time in the wake of disruptive technological advancement, hyper-competition, and product lifecycles.[12]

As suggested earlier, the classic example of technological disruption is the introduction of the iPhone in 2007 and how it disrupted the mobile communications market, forever changing the concept of the smartphone and sending competitors scrambling to introduce their own versions.[13] Hypercompetitive industries feature frequent new entrants, product and service imitation, and rapid introduction of substitutes, creating an ongoing competitive jockeying among industry players.[14] One such example is Orbitz’s challenges in the online travel booking industry. Despite $11 billion in annual bookings as of 2010, it failed to establish leadership in any single category and continued to struggle with competition from Expedia and Priceline.[15] Meanwhile, industries with short product lifecycles require competitors to continually innovate to sustain an advantage. In such cases, only the leading firm tends to gain a temporary technology advantage and then loses any advantages over time due to the pressures produced from lower unit costs and long-term production.[16] For example, the packaged food products industry in Japan features very short product lifecycles, where new products are launched nearly every week—and new chocolate and ice cream products are launched even more frequently.[17]

What we can learn from these examples is competitive advantage is important; yet, all too often, it is tenuous and fleeting—particularly when based on resources that can be quickly emulated by competitors. Therefore, it is necessary to look at those aspects of the firm that are more distinct and less easily replicable. Identity is one such organizational aspect.

3. 5R Model of Organizational Identity Processes

Organizational identity refers to “who” we are as an organization. This idea of who we are is reflected in identity claims about what is central, distinctive, and enduring about the organization.[18] Such claims are evident in Nike’s swoosh and “Just Do It” mentality, McDonald’s golden arches, or the universal happiness of sharing a Coke.

Organizations have a strategic interest in establishing and maintaining a positive identity that its important stakeholders (leaders, employees, suppliers, customers) agree on because identity can help attract others[19] and increase the organization’s ability to survive and thrive.[20] Deliberate identity claims,[21] organization members’ sensemaking,[22] organizational language,[23] and embodied cognition[24] all work to dynamically form and sustain identity.[25]

Based on a review of literature and case studies, The author[26] created what he called the 5R Model of Organizational Identity Processes (see Figure 1). Although the model was originally created as a framework for helping organizations avoid stagnation and death during times of decline, the model also applies to other situations when organizations want to leverage their identity to enhance performance. The model utilizes two axes: Attribute Strength (how active the identity attribute is within the organization) and Alignment Effort Needed (how much attention and resources are required to align the identity attribute with the organization’s future). These axes lead to five social processes for negotiating identity in times of change.

Figure 1: 5R Model of Organizational Identity Processes

The five social processes are:

1. Retiring: removing identity attributes that are active in the organization but misaligned with the organization’s future. For example, Blockbuster may have avoided its demise in 2010 had it retired its primary focus on brick-and-mortar traditional DVD and video rentals and taken up alternative rental models such as streaming on-demand videos.
2. Reclaiming: restating forgotten identity attributes that are intact and aligned with the organization’s future. For example, a 2013 study of the Foursquare Church revealed moderate support that “inclusion of ethnicities and diverse cultures” was central, distinctive, and enduring for the organization’s identity. Organizational leaders decided to reclaim this attribute through pastoral education and other efforts to amplify it within its local churches.[27]
3. Reaffirming: reasserting active identity attributes that are aligned with the organization’s future. For example, when Pennsylvania Governor Rendell dramatically cut Pennsylvania State University’s budget in 2008-2009, arguing these schools were nonpublic universities,[28] stakeholders initiated a range of efforts and actions designed to reaffirm the University as a public institution reliant on and deserving of public funding.[29] State support ultimately was restored in December 2009.
4. Regenerating: reasserting atrophied identity attributes that remain vital for the organization’s future. Following the failure of New Coke in the mid-1980s, Coca-Cola regenerated its original formula under the branding of Coca-Cola Classic, triggering a significant gain in sales.[30] Ultimately, New Coke was on the market only a short time and the public outcry against the new formula was fierce. The original formula was reintroduced less than three months later.
5. Reimagining: creating identity attributes in the new form needed for alignment with the organization’s future. Reimagination, ushered in by new strategic beliefs and accompanying identity attributes, arguably would have helped Polaroid Corporation compete effectively in a digital imaging market.[31]

These five social processes are combined with an integrative effort of sensemaking, sense-giving, and sense-exchanging among leaders and members within an organizational environment consistent with and supportive of identity claims that support the intended direction.

Organizational identity is an intangible company resource that could be used to create strategic advantage, but tools and frameworks are needed to examine the link between identity and strategy.[32] Rockwell’s 5R Model[33] is a good start by illustrating how to tune up or tone down specific identity claims; however, it needs to be integrated with strategy frameworks if identity is to be evaluated and optimized for strategic advantage. The next section describes the resource-based view of the firm and the VRIO framework, which—when combined with the 5R framework—provides an approach for the strategic management of identity.

4. Resource Based View of the firm

The Resource Based View (RBV) of the firm emerged in the 1980s and 1990s as a way to find the keys to competitive advantage inside the organization.[34] According to RBV, financial, physical, human, and organizational resources (e.g., buildings, equipment, brand reputation, intellectual property) act as inputs into the firm’s production process[35] [36] and differentiate its offerings.

Barney’s VRIO model[37] is one of the most popular RBV tools. According to Barney’s framework, once a firm’s resources are identified, each is then evaluated based on whether:

(a) the resource is valuable, allowing organizations to exploit opportunities and/or neutralize threats in the environment;

(b) the resource is rare, possessed or capable of being acquired by only one or a few companies;

(c) the resource is costly to imitate by competitors;

(d) the firm is organized to capture the resource’s value.

Four outcomes are possible from this analysis:

• Competitive disadvantage: the resource is not valuable. An example is a restaurant’s location, if it is positioned at the corner of two heavily trafficked roads but lacks parking or ease of access to pedestrians.
• Competitive parity: the resource is valuable but not rare. An example is a pizza restaurant’s sauce, if it is purchased from a producer of pizza sauce rather than being made according to a custom in-house recipe.
• Temporary competitive advantage: the resource is valuable and rare but easily imitable. An example is the newest microprocessors in smartphones.
• Sustainable competitive advantage: the resource satisfies all four criteria. An example may be Netflix’s organizational culture, which promotes freedom (e.g., unlimited vacation time) blended with accountability (e.g., a focus on retaining only the very top performers).

Intangible resources, which are built over time and cannot be bought, are considered rare and not easily imitable (if at all) by rivals. Therefore, intangible resources are considered the main source of sustainable competitive advantage.[38]

Figure 2: VRIO

Source: Business2You. Retrieved from https://www.business-to-you.com/vrio-from-firm-resources-to-competitive-advantage/

Although the framework of evaluating each resource is helpful for figuring out if it is contributing to the firm’s competitive advantage, the challenge is that most resources are mobile and accessible by many firms—especially in the current business landscape of accelerating technological change, globalization, transorganizational collaboration, and the availability of highly skilled labor.[39] Consequently, it will be necessary to identify key intangible resources and dynamically reconfigure them over time[40] [41] to achieve sustained competitive advantage.

The next section presents the Strategic Identity Management Framework. This framework blends the 5R Model of Organizational Identity Processes and the VRIO model to offer a tool for evaluating and dynamically reconfiguring identity (an intangible resource) for competitive advantage.

5. Strategic Identity Management Framework

The Strategic Identity Management Framework consists of three steps: ascertain identity, assess identity, and adjust identity (see Figure 3). It is important to understand that strategic identity management is an ongoing process: That is, once an organization’s identity is ascertained, assessed, and adjusted, strategic identity management means that this cycle is repeated to continually monitor, evaluate, and tweak identity for the purpose of sustaining an identity that can deliver competitive advantage.

Figure 3: 3A Strategic Identity Management Framework

Step 1: Ascertain Identity

In the first step, the focus is on uncovering the organization’s identity. To do so, it is important to find expressions of what is central, enduring, and distinctive to the organization. This may be accomplished by (a) examining identity claims made by members and agents of the company;[42] (b) analyzing crises and pivotal choices;[43] (c) reviewing externally produced documents such as media coverage; (d) conducting interviews with organizational stakeholders; and (e) capturing observable manifestations of identity within the organizational environment. Examples include Visa’s slogan that “it’s everywhere you want to be” or the business press descriptions, corporate communications, and hiring processes at Campbell’s that converge in portraying the company “as a leanly staffed producer of healthy, nutritious food that acted responsibly toward stakeholders.”[44] The result of this activity tends to be a rather lengthy list of clearly stated claims and less obvious, implicit claims that vary in strength.

Step 2: Assess Identity

Identity attributes are then evaluated using a combination of (a) assessing the strength and (b) competitive contribution of each attribute. First, the competitive contribution of each identity attribute is assessed as being valuable, rare, inimitable, and organizationally leveraged using Barney’s VRIO framework.[45] Through this analysis, each attribute can be classified as a source of competitive disadvantage, competitive parity, temporary competitive advantage, or sustainable competitive advantage.

Second, the strength of each identity attribute is evaluated using the data collected in Step 1, with attributes expressed in only one data source generally being considered weaker than attributes that surface across various data sources. (In some cases, however, an attribute expressed very strongly in one or only a few data sources may still be considered strong).

Step 3: Adjust Identity

Combining the outputs of Steps 1 and 2 with Rockwell’s 5R model,[46] identity attributes can be organized into the following buckets based on their competitive contribution and the subsequent effort needed to align them with the organization’s competitive strategy: (a) identity disadvantages to retire, (b) identity parities to reimagine, (c) temporary identity advantages to reimagine, and (d) sustainable identity advantages to reaffirm, reclaim, or regenerate (based on their current strength).

Table 1: Advised Identity Actions Based on Attributes’ Competitive Contribution and Needed Alignment Effort

*Note: Attribute strength influences the nature and extent of intervention needed to retire or reimagine the existing identity attribute

Using this framework, organization leaders and practitioners may gain clarity regarding how each identity attribute supports or detracts from competitive advantage, along with an action plan for adapting identity for the purpose of enhanced competitive performance.

6. Application of the Strategic Identity Management Framework

This section applies the Strategic Identity Management Framework to “Wally’s” a company founded in 1925 that warehouses and distributes frozen and refrigerated food products and whose identity was documented in research by Tompkins.[47]

Step 1: Ascertain Identity

Tompkins conducted a process of identity discovery that involved (a) interviews with 11 organizational stakeholders about critical events and defining moments for the company, how these events were navigated, and what is central, distinct, and enduring about the company; (b) review of company documents (e.g., company website, employee handbook, presentation on company branding initiative, employee survey responses); and (c) her own observations made during a 5-day training event and visits to company headquarters and two warehouse facilities. Wally’s identity claims were as follows:[48]

• Claim 1: Family owned and operated, “based on a familial philosophy of integrity, dependability, and respectful behavior toward all stakeholders” [p. 92];
• Claim 2: Passionately adding value, through “innovative technology, customized distribution, accuracy, and timely response in crisis” [p. 97];
• Claim 3: Unique in industry, “providing a continuum of cold storage, distribution, and logistical services to our customers” [p. 100];
• Claim 4: Commitment to ethical values and to uncompromising customer service; and
• Claim 5: A Christian company and “stewards for the Lord’s work” [p. 109].

Step 2: Assess Identity

Evaluating the strength and competitive contribution of Wally’s five identity attributes yields the following results:

Claim 1, family owned and operated, appears to be:

• (V)aluable, based on organization members’ reports that this quality “endeared employees and customers” (p. 93), suggesting that it enabled the company to take advantage of market opportunities.
• (R)are, as one nonfamily board member noted, “There truly is ‘a [Wally’s] personality, a [Wally’s] entity’ that I’ve never seen anywhere” (p. 93).
• Costly to (I)mitate or substitute, as several organization members noted that being a family-owned company allows them to focus on long-term gains even at the expense of short-term profits.
• (O)rganizationally leveraged, as described in a story of the CEO writing a letter from the point-of-view of his 2-year-old grandson when bidding for a customer contract.[49]

Because Claim 1 is valuable, rare, inimitable, and organizationally leveraged, it appears to offer sustainable competitive advantage. The evaluation of the remaining identity claims is depicted in Table 2. In total, three claims were assessed as offering sustainable competitive advantage and one claim offering temporary competitive advantage.

Claim 5, a Christian company, suggests some value (i.e., treating customers and employees well, delivering excellent service), but undermined organizational effectiveness because the current CEO, inspired by his beliefs, persistently and secretively diverted funds toward pet charitable projects over years, resulting in disruption and discord among the leaders and owners. Although the CEO ultimately resolved his debt to the company and arranged a company charitable giving program where the company matches his personal giving, this remains an area of tension in the family.

Table 2: Evaluation of Identity Claims: Value

The next step in the process is evaluating the strength of each identity claim. The data collected in Step 1 will be helpful for determining the strength of each. For example, a claim exhibited in only one data source examined might be considered to be weaker than a claim that surfaces across various data sources. In the case of Wally’s (see Table 3), Claims 1 through 4 were strong, as they were observable within the company and evident throughout company history, documents, and member interviews. Claim 5 was moderate because, although the CEO strongly exhibited it, board members and other owners and leaders did not share the same sentiment.

Table 3: Evaluation of Identity Claims: Strength

Step 3: Adjust Identity

Evaluating the competitive contribute and alignment effort needed for each identity attribute yields a plan of action for the organization. In the case of Wally’s, Claims 1, 2, and 4 require protection, while Claim 3 needs to be reimagined, and Claim 5 needs to be retired (see Table 4).

Table 4: Needed Identity Actions

Researchers, leaders, and consultants are encouraged to apply the framework and document its usability and outcomes. Through their concerted efforts, continued insights about identity’s role in strategy are anticipated.

7. Conclusion

Increasingly challenging, rapidly changing market conditions have pressed organizations to continually seek ways to create and sustain competitive advantage. This article presented a way to do so through the Strategic Identity Management Framework, based on Rockwell’s 5R Model of Organizational Identity Processes[6] and Barney’s VRIO framework[2]. The intention of the framework is to help organizations uncover, analyze, and optimize their identity as a resource for creating sustainable competitive advantage. Importantly, the framework is primarily theoretical at this point and requires application and research to validate, confirm, and extend its uses and applications within organizations.