7 Powers: The Foundations of Business Strategy

For any business person, "Me too' won't do" 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 so are central. The compelling continuing contribution of founders demonstrates this. Planning rare

Strategy strategy value Strategy Dynamics Strategy Statics industry business market Description Strategy (with a Capital S) is the intellectual discipline sometimes called Strategic Management. I define it: the study of the fundamental determinants of potential business value.

The set of conditions needed for persistent differential returns. Power r

Winner take all. Businesses with strong Network Economies are frequently characterized by a tipping point: once a single firm achieves a certain degree of leadership, then the other firms just throw in the towel. Game over—the P&L of a challenge would just be too ugly. For example, even a company as competent and with as deep pockets as Google

The quality of declining unit costs with increased business size is referred to as Scale Economies. It is the first of the 7 Powers I will examine, and its conceptual lineage begins with Adam Smith’s Wealth of Nations and indeed the beginnings of Economics itself.

Scale Economies: Benefit: Reduced Cost Barrier: Prohibitive Costs of Share Gains

In our discussion of Power, I have been careful to characterize it as creating a potential for value, but this potential can only be realized when coupled with operational excellence. Netflix’s plummet in 2011 was the result of operational errors.19 Though the period proved painful, their strategy still remained valid, and their Power intact, so th

strategy: a route to continuing Power in significant markets

let’s define Scale Economies: A business in which per unit cost declines as production volume increases.

Boundedness. As powerful as this Barrier is, it is bounded by the character of the network, something well-demonstrated by the continued success of both Facebook and LinkedIn. Facebook has powerful Network Economies itself but these have to do with personal not professional interactions. The boundaries of the network effects determine the boundarie