# 7 Powers **Hamilton Helmer** | [[Strategy]]  --- > "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?" Most strategy writing describes success retrospectively but tells you nothing about what to do. Helmer flips this: strategy is about **Power**—the conditions that create persistent differential returns—and there are only seven types. If you don't have at least one for each competitor, you don't have a viable strategy. The Statics/Dynamics distinction cuts through the fog. Statics asks what makes a business durably valuable once established. Dynamics asks how you achieve that position in the first place. Most companies optimise quarterly results without building Power, then wonder why competitors erode their position. What makes this different: Helmer claims these seven are **exhaustive**. There are no other sources of durable business value. If your strategy isn't on this list, it's not a strategy—it's a tactic, a position, or wishful thinking. --- ## Core Ideas ### [[The Seven Powers]] These are the **only** sources of durable business value: **1. [[Scale Economies]]** – Declining unit costs as business size increases - The Barrier: rational followers calculate that attacking the leader has unattractive payoffs - Requires: a business model that yields scale benefits + a product attractive enough to win share - Dynamic: pursue share aggressively in winner-take-most markets **2. [[Network Economies]]** – Product value increases as more users adopt it - Goal: build installed base early, because adoption snowballs - Dynamic: get to critical mass before competitors; network effects become self-reinforcing **3. [[Counter-Positioning]]** – Introduce a superior business model incumbents can't copy without damaging their existing business - Power is **relative**: only holds if rivals face collateral damage from imitation - The defining case: Vanguard's low-cost index funds (incumbents paralysed because adoption would undermine their active fund revenues) - Dynamic: pioneer a new model that promises collateral damage for incumbents if mimicked - Example: [The Heico Playbook](https://www.anishpatel.co/the-heico-playbook/) vs [The TransDigm Equation](https://www.anishpatel.co/the-transdigm-equation/) — opposite strategies in aerospace aftermarket, both rational, neither can imitate the other **4. [[Switching Costs]]** – Customers face friction (time, effort, money, risk) in leaving for a competitor - Protects incumbents once a base has been secured - Dynamic: attain a customer base first (new-product requirements similar to Scale/Network) - Example: [The TransDigm Equation](https://www.anishpatel.co/the-transdigm-equation/) — sole-source aerospace parts create 30-year switching cost annuities **5. [[Branding]]** – Durable attribution of higher value to an objectively identical offering, arising from historical information about the seller - Achieved only through **consistent, long-term creative choices** that build reputation and emotion - Dynamic: make consistent creative choices over an extensive period that foster affinity beyond objective attributes **6. [[Cornered Resource]]** – Preferential access at attractive terms to a coveted asset that can independently enhance value (patents, talent, proprietary data) - Must independently enhance value AND be defensible against replication - Dynamic: secure rights to valuable resources on attractive terms (often by developing them yourself) **7. [[Process Power]]** – Embedded company organisation and activity sets enabling lower costs/superior product, matched only by extended commitment - Process Power = operational excellence + **hysteresis** (path dependence) - Examples: Toyota Production System, Vanguard's index fund operations - Dynamic: evolve a complex process that's inimitable within a reasonable period yet offers advantages over longer periods - Example: [The Danaher System](https://www.anishpatel.co/the-danaher-system/) — the canonical case of codified operational improvement applied across 400+ acquisitions **Strategy is "a route to continuing Power in significant markets."** If you don't have at least one of the seven Powers for each competitor—actual and potential, direct and functional—you lack a viable strategy. **Always look to the Barrier first.** What prevents competitors from entering or eroding your advantage? Near-term performance explains only ~15% of a company's value. The Barrier is what makes Power durable. **Not all Powers are exclusive.** Scale and Network Economies tend toward one dominant player. Counter-Positioning can allow multiple players with Power. Power must be considered relative to each competitor—what works against one rival may not work against another. **The ascent of great companies is a step function, not linear.** Critical moments shape future trajectory inexorably. Strategy is about recognising those inflection points and choosing the right Power to pursue. --- ## Connects To - [[Better, Simpler Strategy]] – Complements; Helmer focuses on **what** creates durable value (Power), Oberholzer-Gee on **how** to measure it (WTP/WTS) - [[Competing Against Time]] – Time-based competition is a path to Process Power or Scale Economies - [[Dead Companies Walking]] – When companies lack Power, they collapse; Fearon's failing companies have none of the seven - [[Alchemy]] – Counter-Positioning often looks "illogical" (Vanguard giving up active management fees seemed mad) - [[The Fifth Discipline]] – Process Power requires organisational learning and systems thinking to develop inimitable processes