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Chapter 3

BU481 Chapter 3: Chapter 3- The Diamond-E Framework

Course Code
Karin Schnarr

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Chapter 3: The Diamond-E Framework
Introducing the Diamond-E Framework
-Road map for strategic analysis identifies key variables and structures critical relationships
-Strategy tells you what opportunities the business is pursuing in the environment, and what
resources, organizational capabilities, and mgmt. preferences are required for effective execution
The Criterion of Consistency
-Consistency among component variables will lead to successful performance
-Viable strategy must be in alignment with opportunities and challenges of environment, and
with internal capabilities, drives, and constraints of business
-In dynamic environment with shifting customer preferences and competition, strategy and org
must be nimble
-Strategy must satisfy both external and internal circumstances simultaneously
-Linkages must developed and sustained over time, even as circumstances change
-Principle of alignment remains driving concern in strategic analysis
Becomes matter of mgmt. judgment to decide which inconsistencies the firm can lie
with, which can be resolved or mitigated within existing strategic approach, and which
are so significant and difficult to address that major strategic changes are required
Consistency, Opportunity, and Risk
-Environmental Risks: Arise from potential inconsistencies between strategy and environment
Short run: risk is of miscalculating timing or potential, or competitive reaction
o You think strategic initiative will work but might be misreading situation
Long run: risk is of missing or underestimating environmental changes
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o You think you’re okay, but perceptions are biased by past success and present
Zook suggests to take a close look at customers to determine state of profitability, market
share, retention rate, loyalty, and share of wallet
For competition, look at relative cost position, degree of differentiation, and emerging
business models of competitors
-Capability Risks: Arise from inconsistencies between strategy and capabilities and drives
within firm
Short run: New strategy may demand too much
Long run: Capabilities may not develop adequately to support consistent but more
continuously more demanding strategy
Demands increase as org grows, but internal capabilities erode as satisfaction takes a toll
on innovation and costs
Zook suggests looking at core capabilities and organization/culture to determine stress
points arising from undesired attention, energy, motivation, or bottlenecks to growth
-Be conscious of risks and weigh them against needs and opportunities
Strategy, Strategic Proposals, and Strategic Analysis
-Strategic Proposals: Discrete ideas or action plans that will have significant implications for 1+
components of strategy and thus for strategy of a business as a whole
-Decision on desirability of such proposals must consider their:
1. Implications for ongoing strategy of the business
2. Consistency with other variables in the Diamond-E framework
3. Their promise of profitability
-Must take broad approach to strategic analysis, remaining sensitive to strategic implications of
what seem to be everyday decisions
Using the Diamond-E Framework
-Objectives of analysis for the linkages in Diamond-E are to help:
1. Assess the appropriateness of firm’s current strategy
2. Generate new ideas and strategic proposals
3. Evaluate specific strategic proposals
The Strategy-Environment Linkage
-Assess forces at work in environment and translate observations into implications for business
in terms of specific opportunities and challenges
-Check existing strategy of business for consistency with opp/chall, and evaluate a proposal that
will be analyzed or worked at generating new strategic proposals
-Put together performance forecast for proposals understudy based on assumption that it could be
successfully implemented
The Strategy-Resources Linkage
-Identify resource requirements for current strategy or new strategic proposal
-Compare required resources with those available and identify resource gaps
-How to close resource gaps, consequences of failing to do so, and the wisdom of proceeding
with the strategy under study
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