Skip to main content

7 Powers: The Foundations of Business Strategy

By Hamilton Helmer

Power 1: Scale Economies​

  • Definition: A business where per unit costs decline as volume increases
  • Benefit: Reduced costs
  • Barrier: Prohibitive costs of share gains

Power 2: Network Economies​

  • Definition: A business where the value realized by a customer increases as the userbase increases
  • Benefit: Ability to charge higher prices or monetize more due to additional value created
  • Barrier: Hard to gain market share as users don’t want to switch due to the lower value provided

Power 3: Counter Positioning​

  • Definition: A business adopts a new, superior business model that incumbents cannot mimic due to the anticipated cannibalization of their existing business
  • Benefit: Lower costs and/or higher prices due to more valuable product
  • Barrier: Cannibalization of existing business

Power 4: Switching Costs​

  • A business where customers expect a greater loss than the value they gain from switching to an alternate
  • Benefit: Ability to charge higher prices for the same product
  • Barrier: Competitor has to compensate the customer to switch

Power 5: Branding​

  • Definition: A business that enjoys a higher perceived value to an objectively identical offering due to historical information about them
  • Benefit: Ability to charge higher prices due to perceived higher quality or reduced uncertainty
  • Barrier: The significant time and uncertainty needed to build a brand

Power 6: Cornered Resource​

  • Definition: A business that has preferential access to a coveted resource that independently enhances value
  • Benefit: Ability to charge higher prices, reduce costs, or create better products due to access to a cornered resource
  • Barrier: Ranges from property and patent law to personal preference, e.g. retention of key talent

Power 7: Process Power​

  • Definition: A business whose organization and activity set enables lower costs and/or superior products that can only be matched by an extended commitment
  • Benefit: Improved product and/or lower costs due to superior process
  • Barrier: The significant time and/or investment needed to create the process

7 Powers: The Foundations of Business Strategy by Hamilton Helmer

7 Powers: The Foundations of Business Strategy by Hamilton Helmer | Book Summary - YouTube