Let's meet the Seven Powers.
If you are a CEO, learn about your path to power.
And if you are an investor - learn about your path to power.
With thanks to Hamilton Helmer who wrote an excellent book with the same title. bit.ly/7powersbook
If you are a CEO, learn about your path to power.
And if you are an investor - learn about your path to power.
With thanks to Hamilton Helmer who wrote an excellent book with the same title. bit.ly/7powersbook
Let's be clear what we mean by Power when it comes to business:
Power is the ability to earn supernormal profits and generate large amounts of shareholder value over a long time.
Companies that have done it in the past would include: Intel, Walmart, Ikea and Costco.
Power is the ability to earn supernormal profits and generate large amounts of shareholder value over a long time.
Companies that have done it in the past would include: Intel, Walmart, Ikea and Costco.
More recent examples of Powerful companies include Netflix, Shopify and Amazon.
Their transformation was anything but a certain thing.
There were key decisions taken by the CEO's - Reed Hastings and Andy Grove that made it happen.
Their transformation was anything but a certain thing.
There were key decisions taken by the CEO's - Reed Hastings and Andy Grove that made it happen.
Here is what Reed Hastings says about the 7 Powers:
"The forces of competition are just incredibly strong. Everyone is trying to eat your lunch, and if you don't read 7 Powers you're going to die a lot sooner.
"The forces of competition are just incredibly strong. Everyone is trying to eat your lunch, and if you don't read 7 Powers you're going to die a lot sooner.
And this is what Peter Thiel has to say about the 7 Powers.
"Hamilton Helmer understands that strategy starts with invention.
He can't tell you what to invent, but he can and does show what it takes for a new invention to become a valuable business."
"Hamilton Helmer understands that strategy starts with invention.
He can't tell you what to invent, but he can and does show what it takes for a new invention to become a valuable business."
So let's meet the 7 Powers.
1/7: Scale Economies.
Most business analysts are aware of this and understand it. The key is when they kick in. At what point, in a growing business, it makes sense to invest heavily to achieve those scale economies.
1/7: Scale Economies.
Most business analysts are aware of this and understand it. The key is when they kick in. At what point, in a growing business, it makes sense to invest heavily to achieve those scale economies.
2/7: Network Economies
Best reading on is by James Currier and others at nfx.com This is a must-read for all CEO's and investors: bit.ly/NFXMustRead
My summary: For many networks, forget Metcalf's N^2 and think more 2^N (Reeds Law)
Best reading on is by James Currier and others at nfx.com This is a must-read for all CEO's and investors: bit.ly/NFXMustRead
My summary: For many networks, forget Metcalf's N^2 and think more 2^N (Reeds Law)
3/7: Counter Positioning
Sometimes your competitor just does not have the willpower to compete with your business.
Think Kodak vs Canon and others.
Helmer should have included Christensen's book into the discussion but so be it.
amzn.to/3d0LXnp
Sometimes your competitor just does not have the willpower to compete with your business.
Think Kodak vs Canon and others.
Helmer should have included Christensen's book into the discussion but so be it.
amzn.to/3d0LXnp
4/7 Switching Costs
SAP is discussed.
Oracle and Salesforce come to mind.
SAP is discussed.
Oracle and Salesforce come to mind.
5/7 Branding
Not all brands are created equal.
My favourite person on the topic of brands is not Warren Buffett, but Tom Russo bit.ly/30J5wxY
Not all brands are created equal.
My favourite person on the topic of brands is not Warren Buffett, but Tom Russo bit.ly/30J5wxY
6/7 Cornered Resource
At certain points it's development, a company may be able to dominate a key resource.
Patents and Pharma come to my mind. Helmer discusses Pixar. Or we have real estates, "location, location, location">
At certain points it's development, a company may be able to dominate a key resource.
Patents and Pharma come to my mind. Helmer discusses Pixar. Or we have real estates, "location, location, location">
7/7 Process Power
From time to time a company manages to develop a superior process. Helmer discusses Toyota. I like to think Berkshire Hathaway. Some people understand companies like Fastenal (but I don't - yet..)
From time to time a company manages to develop a superior process. Helmer discusses Toyota. I like to think Berkshire Hathaway. Some people understand companies like Fastenal (but I don't - yet..)
What are the Paths to Power
This, of course, is the key question.
Key insight: it's not about static analysis - it's about the dynamics of getting there.
That's what I (like so many followers of Porter's 5 Forces) failed to see.
This, of course, is the key question.
Key insight: it's not about static analysis - it's about the dynamics of getting there.
That's what I (like so many followers of Porter's 5 Forces) failed to see.
"The Path to Business Power is about as far removed from the orderly analytics of strategic planning as you can imagine"
- Hamilton Helmer in the 7 Powers
- Hamilton Helmer in the 7 Powers
"Netflix adaptively wound it's way to streaming ascendancy via successive thoughtful experimentation, demonstrating once again that action is the first principle of strategy, just as it is in business"
- Hamilton Helmer in the 7 Powers.
- Hamilton Helmer in the 7 Powers.
For any business person, "Me too" won't do.
That feels right intuitively.
Action, Creation, Risk.
These lie at the root of invention.
That feels right intuitively.
Action, Creation, Risk.
These lie at the root of invention.
Business value does not start with bloodless analytics.
Passion, monomania and domain mastery fuel invention and are so central.
Passion, monomania and domain mastery fuel invention and are so central.
Planning rarely creates power.
It may meaningfully boost power once you have established it, but if power does not yet exist, you cannot rely on planning.
It may meaningfully boost power once you have established it, but if power does not yet exist, you cannot rely on planning.
With thanks again to Hamilton Helmer.
All of this will be the subject of an upcoming podcast episode with @Jeremy_Deal of JDP Capital who introduced me to the book.
And also thanks to @MattPetersonCFA who introduced me to Jeremy.
All of this will be the subject of an upcoming podcast episode with @Jeremy_Deal of JDP Capital who introduced me to the book.
And also thanks to @MattPetersonCFA who introduced me to Jeremy.
@patrick_oshag has an excellent podcast episode with @hamiltonhelmer here
investorfieldguide.com/helmer/
investorfieldguide.com/helmer/
I meant to say: And if you are an investor, it’s your path to riches...
