#38 Acquiring Power, 7 Powers
In the previous seven posts we discussed strategies for maintaining or staying in Power (persistent differential returns). These strategies enable a company to become a durable cash generator, despite the best efforts of competition.
In this post we will discuss actions that a company can take to establish or acquire Power.
Invention
The first step to establishing Power is invention. Invention could be breakthrough products, engaging brands, or innovative business models.
Inventions are "crafted" not planned. Action, creation, risk, passion, monomania, domain mastery, and thoughtful experimentation are some of the essential ingredients of invention.
Invention should result in a substantial economic gain in the value chain and the company should be able to capture a portion of the economic gain created.
Topology of Invention and Power
A typical path to Power follows:
Flux in external conditions creates threats and opportunities. These conditions may arise due to evolution or changes in technology, regulation/laws, and competition
A company that wishes to capitalize on these new conditions leverages it's existing abilities to create new products/brands/business models/processes. These inventions are crafted through action, creativity, and thoughtful experimentation. This is process is riddled with uncertainty/failure and requires a lot of patience and nurturing
The invention opens the door for Power and also propels market size. Successful inventions typically create "compelling value" and evokes a "gotta have" response
There are three distinct paths to creating compelling value:
Capabilities led - Translate some capability into a product with compelling value. However, such efforts are risky as the customer need is unknown. Success can be achieved only if the company stays in the game and appropriately adapts the solution to the evolving requirements
Customer led - Many players spy an unmet customer need, but no one knows how to satisfy it. The first player to satisfy the need has a path to power
Competitor led - a competitor has already brought to market a successful product, and the inventor must produce something so much better to elicit the "gotta have" response. The uncertainty in this path is two-fold:
Will the solution be differentially attractive enough to drive share gains?
Will existing competitors be sufficiently delayed in their response?
The most important value moment for a business occurs when uncertainty around market size and Power (persistent differential returns) is radically diminished.