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

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

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

For the purposes of this book, “value” refers to absolute fundamental shareholder value5—the ongoing enterprise value shareholders attribute to the strategically separate business of an individual firm. The best proxy for this is the net present value (NPV) of expected future free cash flow (FCF) of that activity.6 NPV = Σ(CFi/[1+d]i) Where: CFi ≡

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

Our first public “culture deck,” released in August of 2009, identified nine highly valued behaviors. The first was “Judgment.” As we elaborated: You make wise decisions … despite ambiguity You identify root causes and get beyond treating symptoms You think strategically and can articulate what you are and are not trying to do You smartly separate

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?

Strategy: the study of the fundamental determinants of potential business value

Narrowness. To clear the high hurdle of Power, Branding in the context of Power Dynamics is a much more restricted concept than in marketing. For example, even if “brand recognition” is very high, there may not be Branding Power. In instances like this, it could actually be Scale Economies creating heightened brand awareness. For example, Coca Cola