Strategy

7 Powers: 8 key ideas

by Hamilton Helmer

The core ideas of 7 Powers, each in under a minute, written in our own words. Want the full depth? Get the book.

1. IDEA 1 OF 8

   Lasting advantage needs power

   Helmer, a strategy adviser and investor, argues that a business can earn lasting superior returns only if it has power, a combination of a benefit and a barrier that stops competitors copying it.

   He identifies seven types of power.

2. IDEA 2 OF 8

   Size can lower costs

   Helmer describes scale economies, where costs per unit fall as a business grows.

   In his account, a firm that makes more can spread fixed costs over more units, which lets it keep prices low or earn more per unit than a smaller rival.

3. IDEA 3 OF 8

   Networks grow stronger

   Helmer describes network economies, where a product becomes more valuable as more people use it.

   In his account, this makes the leading product harder to challenge, since each new user adds to its appeal.

4. IDEA 4 OF 8

   Newcomers can trap incumbents

   Helmer describes counter-positioning, where a new business model is one incumbents cannot copy without hurting themselves.

   In his account, a leader may avoid copying the newcomer because doing so would damage its own existing business.

5. IDEA 5 OF 8

   Switching can be costly

   Helmer describes switching costs that keep customers from changing suppliers.

   In his account, when changing to another supplier means effort, risk or lost investment, customers tend to stay put, which gives the current supplier a steadier base.

6. IDEA 6 OF 8

   Brands carry value

   Helmer describes branding, where reputation lets a company charge more.

   In his account, a trusted name can make buyers willing to pay more for the same quality, since they feel sure of what they will get.

7. IDEA 7 OF 8

   Some resources are unique

   Helmer describes a cornered resource, such as a patent or talent, that others cannot access.

   In his account, such an asset gives its holder an edge because rivals cannot get the same thing on similar terms.

8. IDEA 8 OF 8

   Processes can be hard to copy

   Helmer describes process power, built from complex organisation that takes years to replicate.

   In his account, a company that has built unusual ways of working over many years has an advantage that rivals cannot easily match.