#40 7 Powers - Book Summary
Key takeaways from the book 7 Powers, The Foundations of Business Strategy, by Hamilton Helmer
strategy is about continuing Power in significant markets
Power is about persistent differential returns. Note: Power is relative to a specific competitor
Persistent differential returns are possible only by establishing barriers that prevents competition from destroying margins. "Always look for the barrier first".
Differential returns must be constantly defended to be maintained
Intensity of Power is governed by the economic structure of the industry (industry economics) and competitive position of the firm
At least one type of Power needs to be deployed against each competitor
Each Power type provides one or more benefits to Power holders and presents one or more barriers to competition:
The typical benefits provided
Increased value provided to customers - Superior deliverables, affective valence, reduction in uncertainty, benefits obtained from acquiring additional users or customers
Reduction in costs - reduced costs of inputs, cost reductions due to scale or distribution advantages, cost reductions due to production or distribution approaches
The typical barriers posed
Unwilling to challenge due to adverse impact - collateral damage, adverse cost-benefit ratios
Unable to challenge due to external conditions - fiat, and hysteresis
7 Powers - Scale economies, network economies, counter positioning, switching costs, branding, cornered resource, and process power.
Power needs to be acquired and then maintained
Invention is the first step to acquiring Power. The invention must lead to the creation of compelling value
Different Power types needs to be leveraged on the route to establishing Power i.e origination, take-off, and stability
I hope this summary (and the previous chapter level summaries) spur you to read this book. Highly recommended. If you enjoyed this summary, you might like my summary of the book - Understanding Michael Porter