{"id":117,"date":"2017-08-07T16:08:40","date_gmt":"2017-08-07T16:08:40","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/atd-tc3-management\/?post_type=chapter&p=117"},"modified":"2017-08-07T16:08:51","modified_gmt":"2017-08-07T16:08:51","slug":"formulating-organizational-and-personal-strategy-with-the-strategy-diamond","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/atd-tc3-management\/chapter\/formulating-organizational-and-personal-strategy-with-the-strategy-diamond\/","title":{"raw":"Formulating Organizational and Personal Strategy With the Strategy Diamond","rendered":"Formulating Organizational and Personal Strategy With the Strategy Diamond"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Learn about the strategy diamond.<\/li>\r\n \t
  2. See how you can add staging, pacing, and vehicles to the strategy.<\/li>\r\n \t
  3. Use the diamond to formulate your personal strategy.<\/li>\r\n<\/ol>\r\n<\/div>\r\nThis section introduces you to the strategy diamond, a tool that will help you understand how clearly and completely you have crafted a strategy. The diamond relates to both business and corporate strategy, and regardless of whether you are a proponent of design or emergent schools of\u00a0strategizing, it provides you with a good checklist of what your strategy should cover. The section concludes by walking you through the application of the strategy diamond to the task of developing your personal strategy.\r\n
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    The Strategy Diamond<\/h2>\r\nAll organizations have strategies. The real question for a business is not whether it has a strategy but rather whether its strategy is effective or ineffective, and whether the elements of the strategy are chosen by managers, luck, or by default. You have probably heard the saying, \u201cluck is a matter of being in the right place at the right time\u201d\u2014well, the key to making sure you are in the right place at the right time is preparation, and in many ways,\u00a0strategizing\u00a0provides that type of preparation. Luck is not a bad thing. The challenge is to recognize luck when you see it, capitalize on luck, and put the organization repeatedly in luck\u2019s path.\r\n\r\nThe\u00a0<\/span>strategy diamond<\/span><\/span>\u00a0<\/span>was developed by strategy researchers Don\u00a0Hambrick\u00a0and Jim Fredrickson as a framework for checking and communicating a strategy.\u00a0<\/span>You have already learned in this chapter about the need for focus and choice with strategy, but you might also have noticed that generic strategies and value disciplines do not spell out a strategy\u2019s ingredients. In critiquing the field of strategy, these researchers noted that \u201cafter more than 30 years of hard thinking about strategy, consultants and scholars have provided executives with an abundance of frameworks for analyzing strategic situations.\u2026Missing, however, has been any guidance as to what the product of these tools should\u00a0be\u2014or\u00a0what actually constitutes a strategy.\u201d\r\n
    \r\n\r\nFigure 5.20<\/span>\u00a0<\/span>The Strategy Diamond\r\n\r\n\"\"<\/a>\r\n
    \r\n\r\nAdapted from\u00a0Hambrick, D. C., & Fredrickson, J. W. (2001). Are you sure you have a strategy?\u00a0<\/span>Academy of Management Executive, 19<\/em>\u00a0<\/span>(4), 51\u201362.\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nBecause of their critique and analysis, they concluded that if an organization must have a strategy, then the strategy must necessarily have parts. The figure summarizes the parts of their diamond model, its facets, and some examples of the different ways that you can think about each facet. The diamond model does not presuppose that any particular theory should dictate the contents of each facet. Instead, a strategy consists of an integrated set of choices, but it\u00a0isn\u2019t\u00a0a catchall for every important choice a manager faces. In this section, we will tell you a bit about each facet, addressing first the traditional strategy facets of\u00a0<\/span>arenas<\/em>,\u00a0<\/span>differentiators<\/em>, and\u00a0<\/span>economic logic<\/em>; then we will discuss\u00a0<\/span>vehicles<\/em>\u00a0<\/span>and finally the\u00a0<\/span>staging and pacing<\/em>\u00a0<\/span>facet.\r\n
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    Arenas, Differentiators, and Economic Logic<\/h2>\r\nWe refer to the first three facets of the strategy\u00a0diamond\u2014arenas, differentiators, and economic\u00a0logic\u2014as\u00a0traditional in the sense that they address three longstanding hallmarks of\u00a0strategizing. Specifically, strategy matches up market needs and opportunities (located in arenas) with unique features of the firm (shown by its differentiators) to yield positive performance (economic logic). While performance is typically viewed in financial terms, it can have social or environmental components as well.\r\n\r\nLet\u2019s start with\u00a0<\/span>arenas<\/em>. Answers to strategy questions about arenas tell managers and employees\u00a0<\/span>where<\/em>\u00a0<\/span>the firm will be active. For instance, Nike is headquartered in Washington County, on the outskirts of Beaverton, Oregon. Today, Nike\u2019s geographic market arenas are most major markets around the globe, but in the early 1960s, Nike\u2019s arenas were limited to Pacific Northwest track meets accessible by founder Phil Knight\u2019s car. In terms of product markets (another part of\u00a0<\/span>where<\/em>), the young Nike company (previously Blue Ribbon Sports) sold only track shoes and not even shoes it manufactured.\r\n\r\nBeyond geographic-market and product-market arenas, an organization can also make choices about the value-chain arenas in its strategy. To emphasize the\u00a0<\/span>choice<\/em>\u00a0<\/span>part of this value-chain arena, Nike\u2019s competitor New Balance manufactures nearly all the athletic shoes that it sells in the United States. Thus, these two sports-shoe companies compete in similar geographic- and product-market arenas but differ greatly in terms of their choice of value-chain arenas.\r\n\r\nWhat about\u00a0<\/span>differentiators<\/em>? Differentiators are the things that are supposedly unique to the firm such that they give it a competitive advantage in its current and future arenas. A differentiator could be asset based, that is, it could be something related to an organization\u2019s tangible or intangible assets. A\u00a0<\/span>tangible asset<\/span><\/span>\u00a0<\/span>has a value and physically exists. Land, machines, equipment, automobiles, and even currencies, are examples of tangible assets. For instance, the oceanfront land on California\u2019s Monterey Peninsula, where the Pebble Beach Golf Course and Resort is located, is a differentiator for it in the premium golf-course market. An\u00a0<\/span>intangible asset<\/span><\/span>\u00a0<\/span>is a nonphysical resource that provides gainful advantages in the marketplace. Brands, copyrights, software, logos, patents, goodwill, and other intangible factors afford name recognition for products and services. Obviously, the Nike brand has become a valuable intangible asset because of the broad awareness and reputation for quality and high performance that it has built. Differentiators can also be found in capabilities, that is,\u00a0<\/span>how<\/em>\u00a0<\/span>the organization does something.\u00a0Wal-Mart, for instance, is very good at keeping its costs low. Nike, in contrast, focuses on developing leading-edge, high-performance athletic performance technologies, as well as up-to-the-minute fashion in active sportswear.\r\n\r\nThe third facet of the strategy diamond in this traditional view is\u00a0<\/span>economic logic<\/em>, which explains how the firm makes money. Economic logic tells us how profits will be generated above the firm\u2019s cost of capital. The collapse in the late 1990s of stock market valuations for Internet companies lacking in\u00a0profits\u2014or\u00a0any prospect of\u00a0profits\u2014marked\u00a0a return to economic reality. Profits above the firm\u2019s cost of capital are required to yield sustained or longer-term shareholder returns. While the economic logic can include environmental and social profits (benefits reaped by society), the strategy must earn enough financial profits to keep investors (owners, tax payers, governments, and so on) willing to continue to fund the organization\u2019s costs of doing business. A firm performs well (i.e., has a strong, positive economic logic) when its differentiators are well aligned with its chosen arenas.\r\n\r\n<\/div>\r\n
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    Vehicles<\/h2>\r\nYou can see why the first three facets of the strategy\u00a0diamond\u2014arenas, differentiators, and economic\u00a0logic\u2014might\u00a0be considered the traditional facets of\u00a0strategizing\u00a0in that they cover the basics: (1) external environment, (2) internal organizational characteristics, and (3) some fit between them that has positive performance consequences. The fourth facet of the strategy diamond is called\u00a0<\/span>vehicles<\/em>. If arenas and differentiators show where you want to go, then vehicles communicate how the strategy will get you there.\r\n\r\nSpecifically, vehicles refer to how you might pursue a new arena through internal means, through help from a new partner or some other outside source, or even through acquisition. In the context of vehicles, this is where you determine whether your organization is going to grow organically, acquisitively, or through a combination of both.\u00a0<\/span>Organic growth<\/em>\u00a0<\/span>is the growth rate of a company excluding any growth from takeovers, acquisitions, or mergers.\u00a0<\/span>Acquisitive growth<\/em>, in contrast, refers precisely to any growth from takeovers, acquisitions, or mergers. Augmenting either organic or acquisitive growth is growth through partnerships with other organizations. Sometimes such partnership-based growth is referred to as\u00a0<\/span>co-opetition<\/em>, because an organization cooperates with others, even some competitors, in order to compete and grow.\r\n\r\nVehicles are considered part of the strategy because there are different skills and competencies associated with different vehicles. For instance, acquisitions fuel rapid growth, but they are challenging to negotiate and put into place. Similarly, alliances are a great way to spread the risk and let each partner focus on what it does best. But at the same time, to grow through alliances also means that you must be really good at managing relationships in which you are dependent on another organization over which you do not have direct control. Organic growth, particularly for firms that have grown primarily through partnering or acquisition, has its own distinct challenges, such as the fact that the organization is on its own to put together everything it needs to fuel its growth.\r\n\r\n<\/div>\r\n
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    Staging and Pacing<\/h2>\r\nStaging and pacing constitute the the fifth and final facet of the strategy diamond.\u00a0<\/span>Staging and pacing<\/em>\u00a0<\/span>reflect the sequence and speed of strategic moves. This powerful facet of\u00a0strategizing\u00a0helps you think about timing and next steps, instead of creating a strategy that is a static, monolithic plan. As an example, the managers of\u00a0Chuy\u2019s, a chain of Austin, Texas-based Tex-Mex restaurants, wanted to grow the business outside of Austin, but at the same time, they knew it would be hard to manage these restaurants that were farther away. How should they identify in which cities to experiment with new outlets? Their creative solution was to choose cities that were connected to Austin by Southwest Airlines. Since Southwest is inexpensive and its point-to-point system means that cities are never much more than an hour apart, the Austin managers could easily and regularly visit their new ventures out of town. Remember,\u00a0strategizing\u00a0is about making choices, and sequencing and speed should be key choices along with the other facets of the strategy. The staging and pacing facet also helps to reconcile the designed and emergent portions of your strategy.\r\n\r\n<\/div>\r\n
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    The Strategy Diamond and Your Personal Growth and Development Strategy<\/h2>\r\nThe strategy diamond is a useful professional and personal tool for managers. How might it benefit them personally? Well, in the same way it can benefit\u00a0you\u2014thefollowing figure maps out how your strategy fits in the planning aspect of P-O-L-C. Remember that, like in P-O-L-C, your personal strategy should be guided by your own mission and vision. Let\u2019s look at how you might apply the strategy diamond to your personal growth and development objectives.\r\n
    \r\n\r\nFigure 5.21<\/span>\u00a0<\/span>Planning and Your Personal Growth and Development Strategy\r\n\r\n\"\"<\/a>\r\n\r\n<\/div>\r\n
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    Personal Arenas and Differentiators<\/h2>\r\nYour arenas and differentiators will answer such personal growth and development questions as:\r\n