The RPV Framework
Resources, Processes, and Values determine what an organization can and cannot do
When innovations fail, it is often not because the idea was bad or the technology flawed, but because the organization tasked with building the business lacked the right capabilities. The RPV framework unpacks the elastic concept of organizational capability into three distinct categories that together determine what an organization can and cannot accomplish.
Resources are the most visible and flexible component. They include people, technology, products, equipment, cash, brands, information, and relationships with suppliers and customers. Resources can be hired, fired, bought, and sold. They are the inputs that managers most readily think about when assessing capability.
Processes are the patterns of interaction, coordination, communication, and decision making through which organizations transform resources into products and services. They include formal processes like product development, manufacturing, budgeting, and market research, as well as informal processes and cultural norms. Processes are designed to perform specific tasks repeatably, which makes them inherently inflexible. A process that is a capability for one task becomes a disability for a different task.
Values are the criteria by which employees make prioritization decisions. They define what the organization can and cannot prioritize. A company's cost structure and required profit margins are the most powerful values because they determine which customers and opportunities appear attractive. As companies grow, values increasingly drive capability because they determine what resources get allocated to which problems.
The framework reveals why organizations that excel at sustaining innovations systematically fail at disruptive ones. Their processes were designed for sustaining work, and their values filter out small, low-margin disruptive opportunities.
- Capabilities reside in resources, processes, and values. All three must be assessed to understand what an organization can and cannot do.
- Resources are the most tangible and flexible component. They can be bought, hired, and reassigned. But resources alone do not determine capability.
- Processes are patterns designed to perform specific tasks consistently. Their consistency is their strength for familiar tasks and their weakness for unfamiliar ones.
- Values are the criteria by which employees prioritize. The most powerful values are embedded in the cost structure and required margins, because these determine which opportunities look attractive.
- As companies mature, capability shifts from residing in resources toward residing in processes and values. This makes established organizations increasingly inflexible.
- An organization's capabilities in sustaining innovation systematically become disabilities in disruptive innovation because the processes and values were designed for different circumstances.
- When acquiring capabilities, you can transplant resources into your organization, but processes and values can only be preserved within the acquired organization's original structure.
- Inventory the Required ResourcesIdentify the people, technology, products, equipment, cash, brands, information, and relationships needed to succeed in the new venture. Assess whether these resources exist within the organization or need to be acquired. Resources are the most flexible capability component and can be bought, hired, or reassigned.Pro tipWhen evaluating managers, look at their experiences rather than their credentials. The right experiences are those that have schooled the manager in the challenges they will face in the new venture, not necessarily those from the most prestigious organizations.WarningHaving the right resources is necessary but not sufficient. Many organizations with superior resources fail at disruptive innovation because their processes and values are misaligned.
- Assess Process FitExamine whether the organization's existing processes for product development, budgeting, market research, resource allocation, and decision making are suited to the demands of the new venture. Processes designed for large-scale sustaining innovation will likely be incompatible with the needs of small-scale disruptive ventures that require rapid iteration and flexibility.Pro tipProcesses are neither good nor bad in the abstract. They are suited or unsuited to particular tasks. The same product development process that makes a company dominant in its core market may systematically kill disruptive ideas.WarningInformal processes and cultural norms are just as important as formal ones, and much harder to change. Do not underestimate the influence of unwritten rules about how things get done.
- Evaluate Values AlignmentDetermine whether the organization's values, particularly its cost structure and margin requirements, will cause the new venture's target customers and initial revenues to be prioritized or filtered out. If the new venture's initial markets are too small or too low-margin to excite the resource allocation process, the values are misaligned.Pro tipThe size of market opportunity that a company needs to sustain its growth rate rises as the company grows. A billion-dollar company needs $100 million in new revenue to grow 10 percent. Small disruptive opportunities that could have powered early growth get filtered out as the company scales.WarningYou cannot simply tell employees to prioritize differently. Values are embedded in cost structures, incentive systems, career paths, and customer relationships. Memos from the executive office do not override these structural forces.
- Decide the Structural ApproachBased on the RPV assessment, determine whether to pursue the new venture within the existing organization, within an autonomous business unit, or through acquisition. If the venture requires different resources, they can be integrated. If it requires different processes and values, the venture needs structural autonomy to develop its own processes and cost structure.Pro tipWhen acquiring a company for its processes and values rather than its resources, keep the acquired company as a standalone unit. Integrating it into the parent organization will destroy the very processes and values you acquired it for.WarningThe most common mistake is to acquire a company for its capabilities and then integrate it into the parent, stripping away the processes and values that created those capabilities while merely adding resources.
When companies acquire others primarily for their resources, integration into the parent makes sense. When the target was acquired for its processes and values, keeping it separate is essential. Many acquisitions fail because the acquirer buys a company for its distinctive capabilities and then integrates it, stripping away the organizational context that produced those capabilities.
Intel's production schedulers allocated manufacturing capacity by gross margin per wafer start. When Japanese competition drove DRAM margins below microprocessor margins, the resource allocation process systematically shifted capacity from DRAMs to microprocessors without any explicit strategic decision. Senior management continued investing R&D in DRAMs even as the values-driven allocation process was executing an exit.
Christensen developed the RPV framework to explain a persistent puzzle: why do organizations with superior resources consistently fail at certain types of innovation? The answer could not lie in resources alone, because the failing companies often had more money, better people, and stronger technology. The framework emerged from observing that two other categories of capability, processes and values, often became disabilities when the organization faced a fundamentally different type of challenge. The RPV framework was first introduced in The Innovator's Dilemma and refined in The Innovator's Solution as a practical tool for determining how to structure new-growth ventures.