Rethinking Resource-Based Strategies

 

Last week, I traveled to Chicago to deliver a keynote speech on strategy and innovation to an inspiring group of leading executives and suppliers in packaging at the AmericaPack Summit. In preparing for the speech, it became clearer to me that packaging is going to be an important source of competitive advantage going forward.

The Resource-Based View of Strategy

Having preferential access to resources, what academics call the resource-based view (RBV), has always been an important source of competitive advantage, the driver of success for many of the world’s most successful companies.

For example, Disney owns key character brands. Coca-Cola has its secret recipe. Pharmaceutical companies like Pfizer have exclusive patents. Tesla owns advanced battery technology. Nike has exclusive athlete endorsements. Apple has its design expertise. The list could go on… The RBV strategy is powerful.

While these examples showcase how large, established companies leverage RBV, the strategy can be equally effective for smaller, innovative firms looking to carve out their niche in the market. One particularly compelling illustration of this comes from the personal care industry in the 1980s.

The Softsoap Story: An RBV Case Study

In my first book from way back in 2004, The Art of the Advantage, I wrote about how a relatively small company, Minnetonka, introduced Softsoap as the first liquid hand soap. The small company knew if it were successful, big competitors like Procter & Gamble or Colgate-Palmolive would copy. So, in a risky bet, Minnetonka borrowed a bunch of money and purchased more pumps than they needed.

The hand soap proved successful, and, as predicted, competitors tried to copy it. They could make the soap, the labels, the bottles, but they couldn’t find enough manufacturers ready to quickly produce the kinds of pumps needed to dispense a product like Softsoap. That gave Minnetonka just enough time during that critical launch window to capture customers, establish a brand, and secure shelf space.

The brand became the number one in its category.

Three Reasons Why RBV Strategies Are Changing

This pattern – securing preferential access to resources – has always been an important source of competitive advantage. But the world is changing. The way we should be looking for these kinds of advantages is shifting, and there are three reasons for this.

1. Proximity leads to easier replication 
It’s easier to copy things today. For an RBV strategy to work, the resource that you get preferential access to has to be valuable, rare, hard to emulate, and hard to substitute. Today, because of proximity technologies such as robotics and 3D printing, Softsoap’s strategy probably wouldn’t have worked. Procter & Gamble and other competitors could today find companies like Quickparts, for example, which operates 3D printing facilities around the world that can rapidly produce parts like pumps in small quantities, and it does this for over 4,000 customers in the medical, automotive, industrial equipment and other sectors.

2. Deglobalization is a growing trend 
We are seeing clear signs of deglobalization. In an Outthinker Networks session we ran recently with economist Pierre Yared of Columbia Business School and a group of chief strategy officers, we talked about the trend of deglobalization. In 1970, global trade as a percentage of global gross domestic product (GDP) was 25%. For the next 37 years, from 1970 to 2007, it rose steadily from 25% to 60%. But around 2007, the trend hit a ceiling and even declined slightly. Today it sits at 55%. The risk of global uncertainty is driving companies to put a higher premium on short supply lines, making it more appealing to find your inputs closer to home.

3. The rising cost of climate change 
The cost of climate change is starting to impact companies’ bottom lines. Chris Marquis, who I interviewed recently on the Outthinkers Podcast, talks about this in his new book, Profiteers. In the recent past, a sustainable offering was a nice-to-have. Customers would say they would like companies to adopt sustainable practices, but they weren’t willing to pay a premium for that.

In the past, it cost much less to make plastic with virgin materials than with recycled materials. That was because the cost of dealing with plastic waste was not paid by the company but by oceans, fish, and government-funded efforts to clean up the environment. This is starting to change. Insurance losses from natural catastrophes have been surging. This is driving an increase in insurance premiums, real estate, and raw material prices. This is happening at the same time that the costs of sustainable and regenerative options are coming down. According to the investment bank Lazard, the cost of wind energy has dropped by 60% and solar energy by over 80%.

The Shift to Local and Sustainable Resources

How we look for advantages of preferential access to resources is shifting to local and sustainable. Let’s look at some examples of this in packaging.

Why packaging? When we think about controlling inputs, we typically think of the core product, but in many industries, the packaging can be a significant and underrated factor. For example, 40% of the price you pay for perfumes and cosmetics can be attributed to packaging. In pharmaceuticals, bottles, blister packs, and labeling can make up 10-40%. High-end teas and coffees, 20-30%. Luxury chocolates and confections, 25-50%. Premium spirits and wines, bottles, labels, and seals can make up 30-70% of the total cost.

Innovative Packaging Solutions 

  • Notpla: Notpla is a London-based startup that has developed an innovative packaging solution made from seaweed and plants. The biodegradable packaging is designed for liquids, and it can biodegrade in four to six weeks. It can even be eaten. Notpla’s approach does two things: 1) It reduces environmental impact compared to traditional plastics, and 2) It allows for local sourcing – the seaweed can be grown in offshore farms nearby. It’s not just sustainable; it can be regenerative because growing seaweed improves the ocean and the environment. Their bottles are being used at the Olympics and by consumer-product companies around the world.
  • Ecovative: Ecovative makes packaging from mushrooms that dissolves easily and is biodegradable but behaves like plastic.
  • Shellworks: Shellworks makes compostable packaging from upcycled food waste.
  • Ston2Pack: Ston2Pack in India converts stones into rigid, cardboard-like packaging for cosmetics or takeaway food. Both use local supply chains and are more sustainable than traditional packaging.

Conclusion: New Opportunities in Resourced-Based Advantages

Resources have always been a critical source of advantage. But with global shifts in economics, specifically deglobalization, environmental costs starting to hit the bottom line, and sustainable options getting more competitive, we are starting to open up exciting, unexplored opportunities for where to look for such advantages.

Outthinker Networks is a global peer group of heads of strategy, innovation, and transformation at $1B+ companies who are determined to move their organizations to the next level. Members engage in curated learning, practical conversations, and networking opportunities to be more successful in performing their roles, solving their top challenges, and keeping their organizations ahead of the pace of disruption.

Authors

Kaihan Krippendorff
Kaihan KrippendorffFounder & CEO - Outthinker Networks
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Cori Dombroski
Cori DombroskiContent Director - Outthinker Networks
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