7 Powers: The Foundations of Business Strategy

The quality of declining unit costs with increased business size is referred to as Scale Economies.

Network Economies occur when the value of a product to a customer is increased by the use of the product by others.

In the case of Netflix, their lead in subscribers translated directly in lower content costs per subscriber for originals and exclusives.

As I delineate the seven types of Power in the chapters to come, I will similarly describe their unique Benefit/Barrier combination.

Pasteur’s well-known dictum: “Chance only favors the prepared mind.”

Exclusive rights and originals made content, a major component of Netflix’s cost structure, a fixed-cost item. Any potential streamer would now have to ante up the same number of dollars, regardless of how many subscribers they had. If, say, Netflix paid $100M for House of Cards and their streaming business had 30M customers, then the cost per cust

A Barrier: some obstacle which engenders in competitors an inability and/or unwillingness to engage in behaviors that might, over time, arbitrage out this benefit.

Single Business Focus. The protagonist of Strategy and of a strategy is each strategically separate business by itself, even if they exist within the same corporation, a common occurrence.

Strategy can be usefully separated into two topics: Statics—i.e. “Being There”: what makes Intel’s microprocessor business so durably valuable? Dynamics—i.e. “Getting There”: what developments yielded this attractive state of affairs in the first place?