Chapter 3 The Diamond-E Framework.docx - Chapter 3 The Diamond-E Framework Manage ment Preferen ces Organi zation Strateg y Environ ment Resour ces

Chapter 3 The Diamond-E Framework.docx - Chapter 3 The...

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Chapter 3: The Diamond-E Framework Principal logic underlying the framework is that of consistency, coherence, and alignment. High internal consistency will lead to successful performance, while conflict or inconsistencies will lead to poor performance. Coherence means the framework is complete in and of itself as well as being internally logical and consistent. Strategy must satisfy both internal and external circumstances simultaneously. STRATEGIC RISKS Environmental risks arise from potential inconsistencies between strategy and environment. In the short run, the risk is usually one of miscalculating timing, or potential, or competition reaction. In the long run, the risk is usually one of missing or underestimating environmental changes (e.g. Kodak laziness vs Canon innovation). Environmental risks will manifest themselves into industry profits so it’s important to keep an eye on the growth in the industry, with respect to cost and revenues, and the way in which value is created captured and distributed. Capability risks arise from inconsistencies between strategy and the resources/capabilities and drives within the firm. In the short run, a new strategy may simply demand too much from a business unit’s resources and capabilities. In the long run, resources and capabilities may not develop adequately to support a consistent but continuously more demanding strategy. Demands of strategy notch up as environment evolves but internal capabilities actually erode as complacency sets in and takes its toll on innovation and costs.
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