Ever since I wrote a series of articles on how clinics and small hospitals in India can survive against fast-growing corporate hospitals, there has been a high demand for more such content. Now that my colleagues and I have started a business advisory and healthcare consultancy service to support small hospitals and private medical colleges, these articles have become even more important.

With corporate hospitals mushrooming all over India, it is tough for a small hospital to stand out and enjoy a competitive advantage. One of the numerous tools that are really helpful in the strategic planning for health care is the VRIO framework: an analytical technique by which organizations are enabled to assess their resources in a systematic way. By performing the VRIO analysis, it will be possible to identify how small hospitals can highlight their strong points and strategically use them to be able to achieve continued growth. This article, therefore, makes an attempt to discuss how small hospitals can apply VRIO analysis-a concept I was introduced to, during my postgraduate coursework at IIM Lucknow-to derive an understanding of their capabilities, locate competitive advantages, and make strategic decisions resulting in enhanced operational performance.

Understanding VRIO Analysis 

A suitable framework to analyze such resources of a hospital would be VRIO, developed by Jay Barney in 1991. In this regard, VRIO gives a prism in which one can analyze the potential of a hospital’s resources on four broad criteria:

Value: Does it meet patient’s needs or solve problems? 

Rarity: How scarce or unique is the resource compared to competitors’ resources? 

Imitability: Just how easily can this resource be imitated or acquired? 

Organization: If the hospital is organized and equipped to make full use of the resource. 

These questions will help small hospitals identify their respective strengths and work at mending those gaps to remain viable in the market.

Step 1: Identification and Evaluation of Valuable Resources: In the VRIO analysis, resources need not be physical but also intangible assets such as reputation, specialized expertise, and patient loyalty. In this respect, the small hospitals would possess the following valued resources:

Specialized services involve offering a kind of service or treatment highly in demand in the locality, such as a specific surgical specialty or advanced diagnostic services. Reputation and Trust: It was a reason for trust and satisfaction on the part of patients that the healthcare industry needed. If your hospital provides quality care, compassionate service, or successful patient outcomes, that reputation is a significant asset. 

Competent Staff: Experienced doctors, nurses, and support staff can create a differential advantage. For instance, a hospital having a good reputation amongst ENT specialists may attract patients from beyond the immediate local area.

In other words, small hospitals should look at how such resources serve to meet the particular needs of the patients or solve some unique health challenges. The resources that create direct value for the patients can eventually help in differentiating the hospital from its competitors and help in patient loyalty.

Step 2: Exploiting Rarity: refers to an explanation of resources that distinguish competitors and that cannot be imitated, which allows a hospital to differ from other competitors. Small hospitals can identify rare resources by doing the following:

Unique Treatments or Facilities: In cases where the hospital offers an extremely rare treatment or procedure in the locality, such as advanced imaging technology or minimally invasive surgery techniques, it gains a comparative advantage and, thus, attracts patients. Where personal care is concerned, the large size and scaling make it hard for corporate hospitals to have genuine patient interaction. Small hospitals might therefore offer high-touch, personalized care that their larger competitors are not in an easy position to emulate.

Understanding and developing these rare resources can be the source of the hospital’s strategic advantage. Marketing such unique assets in an appropriate manner-for example, with patient testimonials or stories about state-of-the-art procedures in the hospital newsletter-can even enhance these assets’ rarity as perceived by the local community.

Step 3: Imitability:  For certain resources to stand out in health care, their costs may be high, the required knowledge could be special, or the process might be proprietary. Small hospitals can protect market position by focusing on hard-to-replicate resources. 

Skilled and Dedicated Care Team: A well-skilled and dedicated team cannot be developed overnight; it requires some great period of time and is generally hard to copy by competitors. Small hospitals can have a healthy work-group culture that promotes staff retention and attracts highly qualified professionals. This may include training programs, recognition, and a supportive work environment. 

Patient Loyalty Programs: For example, a hospital may develop loyalty programs whereby it awards points for returning patients or provides specialized after-care. This forms a strong bond between the patient and provider, which your competition will find very hard to break. Unique Brand Identity: Large corporate hospitals have a standard branding strategy. A small hospital can create a brand identity with community affiliation, trust, and dependability much more than a large hospital. Only truly hard-to-imitate resources should be the focus and emphasize for any hospital trying to maintain their uniqueness and advantage in the marketplace.

Step 4: Strengthening the Organization and Structure:  Valuable, rare, and imitable resources under conditions are advantageous only if the organization is set up to exploit them. Organizational structure, processes, and culture determine how well a hospital is able to leverage its resources. Operational Efficiency: Smooth operation and implementation of proper processes can multiply the resources a hospital has. An efficient patient management system, for example, can increase the quality of service, decrease waiting time, and enhance patient satisfaction. 

Employee Training and Engagement: Small hospitals do need motivated and skilled workforces. Regular training sessions, feedback mechanisms, and recognition programs align employees towards the aim of the hospital and establish motivation for providing quality care.

Leadership and Governance: Strong value-driven leadership helps nurture a culture of excellence. The leaders should have explicit goals in mind and inspire the commitment of the staff to the mission and values of the hospital. An organized structure that enables a small hospital fully to leverage its resources creates a formidable competitive advantage, enabling superior patient outcomes and fostering long-term growth.

Implementing VRIO Analysis in Strategy Formulation

This would allow the small hospital, by incorporating VRIO analysis into strategy formulation, to make informed decisions that maximize its resources and capabilities. 

Here’s a suggested approach: 

Conduct a Resource Inventory: List all valuable resources—both tangible and intangible—that contribute to the hospital’s success. 

Apply VRIO criteria to each resource: evaluate the value of the resource, rarity, imitability, and organizational support that exists for a resource. 

Prioritize Resources: Based on the VRIO Outcome After resources meeting all four conditions have been located, it is time for prioritizing the most robust competitive advantages. 

Develop Action Plans: For resources that exhibit any potential, develop plans to increase their value, either by enhancing rarity or making them difficult to imitate. 

Monitor and adjust: The VRIO analysis is interactive. Regular reassessment of resources will keep the hospital agile to respond to changes in the market. 

Conclusion: VRIO as a Guide toward Sustainable Growth 

The VRIO analysis provides a road map to achieve sustainable growth for small hospitals in India. Small hospitals would be able to identify resources that are valuable, rare, hard to imitate, and have support with regard to the way of organization so as to build a hard-to-emulate strategy with which to come out obsessed amidst intense competition. The latter approach not only operationalizes strengthening of performance but also assures small hospitals of much closer interaction with their patients, reinforcing their role in the community by cementing their position as community-centered and trusted healthcare service providers. Thus, incorporating VRIO analysis into your hospital’s strategy is nothing short of transformational grounding, finally allowing you to tap your resources meaningfully toward meeting patient requirements and cementing a place in the competitive environment of today’s healthcare.

Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh). 
MBA (BITS, Pilani), MHA, 
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru). 

Senior Professor and former Head, 
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery. 
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India. 

My Vision: I don’t want to be a genius.  I want to be a person with a bundle of experience. 

My Mission: Help others achieve their life’s objectives in my presence or absence!

My Values:  Creating value for others. 

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