What is Strategy Diamond?
Strategy Diamond is defined as a business and growth planning tool that utilizes 5 components – arenas (business competition areas), vehicles (key business drivers), staging/ pacing (speed of goal achievement), differentiators (business strengths) and economic logic (investment returns).
Strategy Diamond was developed by business strategy researchers – Don Hambrick and Jim Fredickson with the goal of improving strategic business planning. Today, Strategy Diamond serves as a key tool for company leaders when evaluating and formulating their enterprise strategy plan.
The uniqueness of Strategy Diamond comes from its holistic approach, which includes internal as well as external assessment in a comprehensive 5 components model.
Strategy Diamond Model: The 5 Assessment Components
Let’s dig into the 5 components that make up the assessments:
Arenas, metaphorically refers to the various areas of competition where the business is involved. There are all the layers of competitiveness such as geographic, product/ service specific, channels of marketing and sales, market segment, demographics etc.
For example, for a hypothetical SaaS company, the arenas of competing may be:
Geography: United States and Canada
Product: Survey software, Customer experience software
Channels of acquisition: Organic online marketing
Target audience: Research analyst, research managers and CX leaders in small and medium sized businesses.
Demography: 19 to 60 years of age, not gender specific.
Vehicles are reference to the key business drivers that will propel growth. These may include improving cost competitiveness, feature competitiveness, organic growth through marketing and sales strategies, inorganic growth through mergers and acquisitions etc.
The goal here is to identify the vehicles/ business drivers that will help achieve growth targets for the company.
Differentiators refer to key factors that differentiates the business from competitors and helps drive business growth in the market. These may be better input-price control, better employee training models, unique features, sales strategies etc.
- Staging/ pacing
Staging, or more accurately, pacing, refers to the speed at which the business objectives should be ideally met.
For example, how quickly can a company acquire a competition and assimilate its products and customers. Or how quickly website traffic can be doubled to meet sales lead requirements. Or how quickly can a new line of products be developed internally.
Depending on the nature of business, pacing is a sub-tool that helps layout a reasonable time-frame to achieve certain goals.
- Economic logic
Economic logic refers to how the company plans to break-even and grow. In other words, how to achieve return-on-investment (ROI) and how much that return should be, which will in turn define profit margins and overall profits.
For example, the outcomes of economic logic may be final product prices, ranges of product features and pricing brackets targeting different segments of buyers, product-upselling to existing customers, expansion to new markets, deeper marketing penetration into existing markets etc.
Top 4 Best Practices for Implementing Strategy Diamond
- Take inputs from team leaders
Internal stakeholders such as department heads and senior managers have key insights into the daily working of the company and have a key stake in the company’s future. The management team needs to ensure their inclusion during the early stages of formulating the Strategy Diamond. This also prevents miscalculation from lack of understanding of ground realities and improves enployee-management communications.
Given that the outcomes of Strategy Diamond will form the pillars of enterprise planning and further company-wide actions, this process should include as much internal consultancy as needed to be effective and error-free.
- Consult existing customers
Existing customers are the best judge of your product/ services, and are an excellent source of knowledge when identifing product differentiators, as well as economic logic. Needless to mention, it is also a free source of research where most customers are usually happy to provide feedback when asked proactively, which also helps improve customer relations.
- Repeat the process periodically
Strategy Diamond, like any strategic planning method, is not a static process which ends in a single round. Just as the market, economic and threat landscape is constantly changing, this strategy must also be revisited at periodic time periods that make sense for the business/ industry.
- Include risk assessment and management
Any strategy needs a risk assessment plan to ensure that the risks associated with the plan are accounted for and managed.