If you need to critically think about your business strategy; 7 Powers provides you with a framework/mental model to do so. It is also handy as an investor for evaluating the value and competitive advantage of a particular business, current and looking ahead in the future. By no means, is it a comprehensive guide on how to develop a sound business strategy or excellent go-to-market machinery. Although it helps you review what you currently have under a concrete evaluation framework and enables you to think about where and how you want to go to the next level.
To attain a real Power (a.k. a. competitive edge), he explains why invention – either of process, product, brand, or business model always needs to come first. Pretty much, this is the core thesis of your business. He then provides a progression ladder to enable you to target how and when you establish Power - whether it is in the origination, take-off, or stability stage of your business. It does depend on the kind of business. I found it refreshing because the valley is so full of talk around execution and culture that people don’t talk about Strategy that much. Not to mention, it’s a tough subject to discuss. Note: This is in the last two chapters.
A great pairing with 7 Powers would be Peter Theil’s Zero To One. I say this because it will completely drill in one core message from both the books. The message being: your business must achieve Power (a.ka. a sort of skewed durable competitive edge) to be a successful long-term business. Theil talks about in terms of business monopoly and uniqueness while Hamilton discusses it in terms of seven attributes (a.k.a Powers) that such a monopoly business would have.
Hamilton talks about each of these seven attributes with examples. Examples help walkthrough why those companies possess one or more of these attributes in a skewed competitive advantage sense. The core attributes are:
Your core invention/compelling value (business model, product, or process) + market dynamics/trends + market size + execution quality => these four factors ultimately decide the fate of your business and its lifetime.
Although operational excellence at your business is hard, all-consuming, and necessary; it isn’t a sufficient condition for success. A strong Strategy needs to be at the heart of the business.
The creation of Strategy is not a one-time static process. It needs to change/adapt quickly; especially in the early stages of the company.
The seven powers provide a good thinking & evaluation mental model for investment. You can measure through some concrete dimensions under his framework.
As a business, you need to strive to have more than one of the seven powers as a golden rule, but without possessing either of those, you can’t sustain long term growth as a business. You will die.
Market size is a dominant term in his formula. The ultimate shareholder value you can provide is strongly correlated to the market size, to begin with. Try to attack hard problems in a big market.