Resource Management: the Next Key Strategy Discipline?

Some resources are increasingly rare. It means that their cost will continuously increase. Have companies taken account of the fact resources will always cost more? Some of them are already thinking about it, like Total awarded about the fact that there will be not more oil in 2050. Other resources like gold, tin and copper will continuously price increased. How companies should dealing with it?

At first, resources need to be considered as an essential production factor. Usually when we read economics books and researchers, the two most important inputs are Capital and Labor. Of course they take in account the others such as Laws and Raw of Material but most of theories considered they are equivalent for every companies of a country. If it’s true for laws, it’s not true anymore for resources. Adam Smith and the early economics considered theses resources as inexhaustible. Nowadays, many economics such as Solow and Stiglitz developed a natural resource economics.

             Resources considered as continuously increasing cost means that production costs will ever-increasing even if some solutions are found to decrease others' costs. On the long term, continuous increasing resource cost will have an impact on the company structure and can be the occasion for companies to take competitive advantages on their competitors.

             We have already seen this situation in our contemporary history. Michel Thiry _ author of Value Management Practice_ gives us the example of industries during the World War II. Shortages of critical resources, such as steel and aluminum, forced manufacturers to use available, seemingly inferior materials and alternate design. He says that “creativity became key”. When the inexpensive products performed better than the originals, value engineering was born.

              So, Innovation can do two simple things:

              1)      Doing more with less

              2)      Doing better with another resource: technology and creativity can be a way to find substitution resources for a company.

        In any case, resource management becomes a key strategy discipline. Focusing on how creating value and risk management is not enough. On this model, we see that basically, the business model is based on these two dimensions.

Resource management will be for many companies the way to create value (profit) or at least to minimize the lost of value.

How dealing with this ever-increasing resource cost? Companies should think about it on two levels:

1)      Short term: doing a serious and rigorous resource audit to avoid any resources wastes.

2)      Long term: re-thinking the product and changing their resources need using R&D and technology.

              Obviously, resource management will become a key strategy discipline and will be considered as important as risk management or supply chain.