Chasing the Advantage

Last week I stood outside the walls. Porter’s Five Forces showed JPMorgan Chase as a fortress — well protected from new banks, but exposed to fintech substitutes that walk around the wall and chip away at the customer relationship one product at a time. One line from that post stuck with me: size alone won’t keep customers. If that’s true, it raises a question Porter can’t answer, because Porter only looks outward — what does JPMorgan have on the inside that the substitutes can’t copy?

This week’s chapter on the internal environment gave me the tool to answer it. The resource-based view turns the camera inward, to the resources and capabilities a firm owns that rivals can’t easily replicate. Looked at that way, the thing that stood out about JPMorgan wasn’t its branches or its balance sheet. It was its data.

The test a real advantage has to pass

Not all resources are equal. The chapter’s VRIN test says a resource only yields a sustainable advantage if it’s Valuable, Rare, costly to Imitate, and Non-substitutable. Plenty of things fail it — cash isn’t rare, and a branch network is copyable given enough money. The question is what ticks all four boxes at once. For JPMorgan, I’d argue it’s the accumulated customer data.

Why the data passes VRIN

This clicked when I read recent comments from Marianne Lake, who runs JPMorgan’s consumer and community banking division. She described how the bank constantly mines its store of customer data to spot where rivals are pulling customers away and fix it before the damage spreads — framing the bank’s job as interrogating that data to read what customers signal through their behavior.

Run that through VRIN and it holds up where the branch network doesn’t:

• Valuable — it shows what customers actually do, not what they say, exactly what’s needed to defend the relationship the fintechs are attacking.
• Rare — few institutions have a comparable base. JPMorgan sits on roughly $4.9 trillion in assets, and that behavioral history can’t be bought off a shelf.
• Costly to imitate — the strongest leg: a rival can’t replicate decades of transactions by spending money this year. Time is the barrier.
• Hard to substitute — there’s no shortcut that gives a competitor the same insight into JPMorgan’s own customers.

JPMorgan’s customer data clears all four VRIN criteria — which is what separates a genuine advantage from a resource a rival can simply go out and buy.

So the thing protecting JPMorgan may not be the regulatory wall at all. It may be that it knows its customers better than the companies trying to peel them away.

Turning the resource into a capability

But owning a resource and using it aren’t the same thing. Chapter 4 splits a firm’s intangible value into human capital — the talent inside the firm — and social capital — the value in its network of relationships. A data trove nobody can analyze is just storage.

Human capital: the people who read the data

JPMorgan reports around 65,000 technologists behind a $19.8 billion annual technology investment. The chapter frames human capital as attracting, developing, and retaining talent — and the data advantage depends on all three, because the data only means something if the bank keeps people who can interrogate it. The data is hard to imitate, but the people who read it are mobile, so that spend isn’t just hardware; it’s also a retention strategy for the talent that makes the data useful.

Social capital: borrowing what it can’t build

The sharper Chapter 4 move is what JPMorgan does outside its walls. This month it joined the chipmaker AMD and the British quantum firm Oxford Quantum Circuits in a quantum-AI research partnership in London, as the first dedicated user. That looks like technology, but it’s really social capital: JPMorgan doesn’t build quantum hardware or chips and doesn’t need to. Through this network it gains bridging ties to outside knowledge — OQC’s quantum systems, AMD’s computing power — and aims them at its own problems, like portfolio optimization on its data. That’s social capital extending the firm’s reach beyond the people it employs.

My view

This is the inside answer to last week’s outside problem. Porter explained why JPMorgan is vulnerable at the edges; the resource-based view explains why it isn’t losing the war — it owns a resource the substitutes can’t replicate, and uses both in-house talent and outside partners to exploit it. As its global CIO, Lori Beer, put it, the aim is managing complexity and risk with confidence.

One caution, though — the same tension from last week in a new form. A VRIN resource only matters if the firm can act on it faster than rivals act on their strengths. Fintechs are smaller and quicker; JPMorgan’s data is rarer than anything they have, but rare isn’t the same as fast. The real question isn’t whether JPMorgan has the better resource — it clearly does — but whether a company this size can turn it into a better customer experience before the nimble competitors next door make the question moot.

Sources

Banking Dive — JPMorgan’s Lake sees longer road to agentic commerce adoption: bankingdive.com

JPMorganChase Technology Blog — OQC, JPMorganChase and AMD commence research collaboration on a quantum-AI platform in London: jpmorganchase.com

AMD Newsroom — OQC, JPMorganChase and AMD commence research collaboration to develop new quantum-AI platform in London: amd.com