The super informative and entertaining Aquired podcast, reviews every organisation it features through the lense of the ‘7 Powers’ framework. After hearing the framework used a dozen times I decided to read the book.
Written by veteran Silicon Valley strategy consultant Stanford University teacher, Hamilton Helmer, the 7 ‘powers’ are methods the author has observed businesses used to sustain high margins over time.
The book cover honestly looks like a dubious self-help manual, but the content is clear, concise and peppered with fascianting examples from Helmer’s own direct experience in tech. There are some pretty gnarly formulas if you enjoy that kind of thing, but they aren’t required to understand the point.
A quick summary of the seven powers
- Scale economics: Reduce the impact of fixed costs on unit costs by scaling
- Network economics: The famous network effect à la Facebook, but also networks of suppliers etc
- Counter-positioning: An offer that a large incumbent can’t rationally match, but a challenger can sustain e.g. Netflix waving late-fees to sink Blockbuster
- Switching costs: Customer’s pain of switching to a competitor, even if the competing product is better or cheaper. I think of this every time I use Jira
- Branding: Customer’s positive assosicatinons with a brand engender higher loyalty and lower price senstivity
- Cornered resoure: Some input available to a business that is not available to it’s competitors. In tech, often patents. Or Coca Cola and a unique license to import cocoa plants
- Process power: Being better at operating in a way that competitors can’t just copy e.g. TSMC’s huge lead in the contract chip manufacturing
This is 100% worth a read for anyone interested in business strategy or the tech industry.