7 Powers: The Foundations of Business Strategy

by Hamilton Wright Helmer

But success requires more than Power alone; it needs scale.

Unconsidered needs and capabilities

Success requires that a company stay in the game, appropriately morphing to suit the requirements of the situation.

compelling value is competitor-led. In this case, a competitor has already brought to market a successful product, and the inventor must produce something so much better

In cases of competitor-led compelling value, the uncertainty is two-fold: (1) Will the new features be differentially attractive enough to drive share gains? And (2) will the existing competitors be sufficiently delayed in their response?

The answer to the “What?” question provides a vital insight into Dynamics: Power comes on the heels of invention, be it in products, processes, brands or business models.

“When can you reach the position of Power?”

Scale Economies. Piggy-backing on the rocket ship

Network Economies. Consumers don’t buy just chips; they don’t even buy just PCs. When buying a personal computer, what they’re really purchasing is this: the ability to do certain tasks

Network Economies are often characterized by a tipping point: once the leader has achieved an edge in installed base, most users will find it to their benefit to choose that leader.

takeoff is the stage when differential customer acquisition can take place at favorable terms, which is why it presents such ideal Power opportunities.

if a company has not established Power, competitive arbitrage will catch up as soon as growth slows; fundamentals will assert themselves, and the favorable early returns will prove fleeting.

Stage 1: Before—Origination. This occurs before a company clears the compelling value threshold, at which time sales rapidly pick up pace.

Stage 2: During—Takeoff. This is the period of explosive growth.

Stage 3: After—Stability. The business may still be growing considerably, but growth has slowed from “explosive” levels, with 30–40% per-year unit growth as a workable choice for the cutoff.

visionary leadership proved essential in spotting the potential

Moore’s deep scientific chops helped solve the early and serious production problems

implacable focus on execution drove Intel to a level of excellence that might hav...

Origination: Counter-Positioning and Cornered Resource Takeoff: Scale Economies, Network Economies and Switching Costs Stability: Process Power and Branding

The Value Axiom. Strategy has one and only one objective: maximizing potential fundamental business value.

Power is created if a business attribute is simultaneously: Superior—improves free cash flow Significant—the cash flow improvement must be material Sustainable—the improvement must be largely immune to competitive arbitrage

Value = Market Size * Power.

The Mantra. A route to continuing Power in significant markets.

The key strategic questions for you are: (1) “What Power types do I now have?” and (2) “What Power types do I need to worry about establishing now?”

There are three paths to achieving compelling value: Capabilities-led, Customer-led and Competitor-led.

The break between takeoff and stability is when unit growth falls below about 30%–40% per year.