Strategy Diamond

This is a very effective strategy framework which is unfortunately not very frequently used in the real world. It is based on a 2001 Journal article in the “Academy of Management Executive” called “Are You Sure You Have a Strategy?” by Donald Hambrick and James Frederickson (then both professors, at Columbia and University of Texas, respectively).
What I personally like about the framework is that it puts the concept of economic logic squarely at the center of the entire thought process. Also, it elegantly incorporates M&A, alliances and JVs in the concept of “Vehicles.” In most other frameworks the worlds of organic growth and M&A are (too) clearly separated.

The five key elements of the framework:
Arenas: Where will we be active, and with how much emphasis? Which market categories, which market segments, which geographic areas, which core technologies, at which value creation stage? This element of the diamond relates to the fundamental choices strategists and executives make. The authors emphasize here that companies should be as specific as possible. “Being the leader in IT consulting” is more of a vision statement than an in-depth definition of which arenas you want to play in. The additional question of how much emphasis should be placed where is also important. Do we compete in three product areas equally, or is one of them at the core of what we do? As always, strategy is as much about what not to do, than it is about what to do.
Vehicles: This is all about how to get there. How can a firm achieve international expansion, how can it get to a strong position in a new product/market segment? Organic growth, internal product development, JVs, alliances, mergers & acquisitions? Often,, the selection of vehicles is a bit of an afterthought, with most attention focused on which arenas to compete in. Managing these vehicles well is not easy. Some company have developed very strong capabilities in M&A, while others have much less of a track record. So again, thinking carefully through these options is critical.
Differentiators: A strategy should be specific not only about where to compete and how to get there, but also how to win. Differentiators don’t just happened – they also require careful planning. This is where some of the other strategy literature ties in: Exceptional service, low prices, unique technologies, image and brand, styling, etc. can all be unique differentiators. As always, trying to be all things to all people is not going to work.
Staging: With the “substance” of the strategy defined above, the question becomes how to implement a given strategy. The sequence and speed of various initiatives also requires careful consideration. Not everything is equally important. And some of the more recent strategy literature has shown that timing is a critical element in strategy, particularly in some of the “winner takes all” markets. The authors here use a building analogy: What is the foundation, what are the walls, what is the roof? Other references that tie into this idea of staging: the three growth horizons, or the step-by-step approach to growth.
Economic Logic: Underlying all of the above, a given strategy has to be based on a clear understanding of how a firm will make profits. This is also where it is critical that things tie together: If the strategy is based on an assumption of providing low prices to customers, it also has to be grounded in a number of factors that allow the firm to have a unique low cost base, and if possible build in elements to make sure these advantages reinforce each other, and are built on enduring capabilities.