It's a converting on 3rd down to keep drives alive move. He's not the best X or Z on the team because Houston just flat out has dudes at those spots (Collins and Dell), but Diggs moving around in the slot on third down as the primary target with Stroud throwing to him and the other two WRs occupying the best DBs/most zone attention is going to be a problem for defenses.
The offensive line getting healthy and the RB position improving means the play-action game on 1st and 2nd should be improved, which should mean more explosives. The offensive line getting healthy and the Diggs addition means the 3rd down conversions should improved, which should keep more drives alive and give more opportunity for explosives. This is before you get to Stroud potentially improving.
Houston finished 14th in offensive DVOA last year, and I think there's a clear path to breaking into the top five, which means winning a lot of games on offense alone