Creating a Consistent Strategy
What business strategy do you employ? Is the goal to “go worldwide,” “become bigger and better,” or “raise revenue”? If so, you might not even have a strategy.
You may be familiar with the term “strategy.” Despite being frequently used in business, it’s perhaps one of the most incorrectly used and misinterpreted terms ever. This is why: Aspiring to be “the best,” “the most successful,” or “go worldwide” are objectives rather than methods.
So what exactly does the term “strategy” mean? And how can you create a strong one for your company?
By using the Strategy Diamond developed by Hambrick and Fredrickson to think about strategy, this essay investigates these issues and more.
What the Tool Is
The strategy of your business will determine what it can do. Simply put, a company’s “strategy” is a declaration of how it intends to prosper in its market, however that term is defined.
Professors Donald Hambrick and James Fredrickson have devoted a lot of time to studying strategic planning. They released their strategy diamond in the November 2001 issue of “The Academy of Management Executive,” as seen in figure 1 below.
The Strategy Diamond of Hambrick and Fredrickson
The model demonstrates the key components of a strategy and how they interact. It suggests that your plan should incorporate the following five components:
-Where will you be active? in Arenas.
-How will you get there, in vehicles.
-Differentiators: How will you succeed in business?
-What steps will you take in the staging?
-Economic reasoning: How will you bring in money and turn a profit?
These components combine to create a coherent, comprehensive approach.
Making use of the Strategy Diamond
Let’s examine each of these components individually, concentrating on how you would use them to create the plan for a business unit “.
Arenas Identifying the arenas, or places, in which your company will compete is the first stage in creating a strategy.
List the product categories you want to be involved with first.
Next, determine the size of the market segments you wish to target to make sure they are significant enough to warrant your attention. Include a summary of any fundamental technology that your company will be concentrating on as well as any other areas of the arenas that are significant to your business.
Vehicles
The next step is to identify what “vehicles” you will utilize to succeed in each of the areas in which you want your business to compete.
The method you’ll take to enter your desired venue is called a vehicle. Utilizing internal product creation, joint ventures, or strategic alliances could be one way to do this “, acquisitions, licensing arrangements, or franchising.
For instance, if you wish to participate in a new technological market, your chosen strategy might be to (a) make internal research and development investments, (b) partner with a company that already has the technology, or (c) acquire a business that does. Your options in this situation are (a) growth and investment, (b) alliances, or (c) acquisitions.
Differentiators
Differentiators provide your business the edge it needs to succeed in the markets you’ve selected because they explain why clients should choose you over your rivals. They may originate from the actual good or service, as well as from branding, marketing, pricing, customer service, personalization, and other elements.
By finding rivals in your preferred arenas, you may begin to comprehend differentiators. After identifying your unique selling proposition (USP), undertake a Core Competency Analysis to establish how you’ll maintain it.
Staging
Your strategy’s implementation plan, including the timing and order of key actions, is referred to as staging.
Resources, urgency, and credibility are a few examples of variables that may have an impact on the optimum order. To attract the additional resources you need to reach the end goal, it could be necessary to reach specific benchmarks in specific areas, vehicles, and differentiators.
Using a VRIO Analysis, begin planning your staging “to make clear the resources that are at your disposal. (Resources in this context include people, knowledge, financial assets, technology, market position, brand awareness, suppliers, and more.) You’ll be better able to organize your sequence when you are aware of the resources you have at your disposal.
Consider timing next. Do certain windows of opportunity influence your order of events, or are there other factors that make it necessary for you to pursue one of your elements before the others? Next, complete the remaining components of traditional business planning “and project planning to specify how you’ll carry out your plan.
Economic Sense
After you have thought about all the other components of the Strategy Diamond, focus on economic reasoning. Simply put, this is how you will continue to make money for your company.
Think about whether you intend to exploit economies of scale, for instance “to drive down pricing or whether you’ll offer a superior product in exchange for a higher price.
If you intend to compete on price, you must have a plan for steadily reducing your costs to levels below those of your rivals. If you want to compete on innovation or technology “in order to maintain your competitive advantage and generate substantial revenues.
Major Points
The Strategy Diamond was created by professors Donald Hambrick and James Fredrickson to provide organizations with a concise summary of the key components of strategy. The model’s five components address the following important issues:
Where will we be active? -Arenas
How will we get there? -Vehicles
Differentiators: How can we compete successfully in the market?
What will be the order of our movements during staging?
How will we earn our returns? – Economic logic
Your firm will be in a position to function very well when the five elements are in alignment and mutually reinforcing.
If you found this article insightful, you might also be interested in exploring these topics further. Here are five articles that could capture your attention:
- Self-Coaching Strategies – Discover techniques to coach yourself towards personal and professional growth.
- Team Management – Learn effective ways to lead and manage a team successfully.
- Essential Competencies for Managing a Team – Understand the key skills and competencies required for effective team management.
- Providing for Your People – Explore strategies to support and nurture your team members’ development.
- Mentoring – Gain insights into the art of mentoring and how it can benefit both mentors and mentees.