Hastings Reed - 7 Powers: the Foundations of Business Strategy

PRAISE FOR 7 POWERS

Hamilton Helmer is the best kind of big thinkerhe offers great insights that you can turn into real world action. At Spotify the 7 Powers are widely used as we discuss new initiatives. His distillation of the key types of strategic power, how to find them, how to leverage them, and how to maintain them is a fantastic tool set for companies at every stage.

DANIEL EK, CEO AND CO-FOUNDER OF SPOTIFY

The forces of competition are just incredibly strong. Everyone is trying to eat your lunch, and if you dont read 7 Powers youre going to die a lot sooner.

REED HASTINGS, CEO AND CO-FOUNDER OF NETFLIX

7 Powers lays out a clear, compelling and insightful framework for thinking about the persistent sources of competitive advantage. Helmer draws on three decades of experience to break down how companies establish power and shape their industries, illustrating at every turn with entertaining and illuminating examples.

JONATHAN LEVIN, PHILIP H KNIGHT DEAN,
STANFORD GRADUATE SCHOOL OF BUSINESS

Hamilton Helmer understands that strategy starts with invention. He cant tell you what to invent, but he can and does show what it takes for a new invention to become a valuable business.

PETER THIEL, ENTREPRENEUR AND INVESTOR

7 Powers provides vital guidance for any business person developing strategy. I have known Hamilton for more than a decade since his time as a strategy advisor to Adobe, and I am delighted that he is now sharing his original and compelling business insights.

BRUCE CHIZEN, FORMER CEO OF ADOBE

Hamilton is a deep thinker who makes a compelling connection between passion and good business. His ideas are well thought out, wise, and often challenging. I always look forward to what he has to say.

PETE DOCTER, PIXAR DIRECTOR AND TWO-TIME
ACADEMY AWARD WINNER FOR UP and Inside Out

Making a small number of decisions wisely is far more important than making a lot of decisions correctly. Hamilton Helmer explains exactly how the leaders of the worlds most successful businesses get that small number just right.

MIKE MORITZ, CHAIRMAN OF SEQUOIA CAPITAL

Silicon Valley correctly places enormous value on execution and on culture. However, I think this sometimes leads to insufficient importance being placed on strategy. Hamilton Helmers deeply incisive work will hopefully help correct that.

PATRICK COLLISON, CEO AND CO-FOUNDER OF STRIPE

7 Powers is a highly innovative approach to understanding some of the key underlying drivers of company value and capturing ideas that certainly are not very well understood in the markets. And the result has been one of the most exceptional and sustained alpha records Ive ever seen.

BLAKE GROSSMAN, FORMER CEO OF BARCLAYS GLOBAL INVESTORS

This book is a must-read for anyone starting or growing a business. It lays out an elegant and insightful framework that really helped inspire my thinking about building and maintaining strategic advantage in a competitive landscape.

DAPHNE KOLLER, CO-FOUNDER AND
FORMER PRESIDENT OF COURSERA

A startup must have a compelling way of getting traction to be investable. Otherwise, its simply a bleeding hole that burns through money. 7 Powers rigorously lays out the strategies for a company to get this traction and details what it takes to get there. Anyone starting a business should read it.

SEAN OSULLIVAN, FOUNDER AND MANAGING PARTNER, SOSV

A master in the discipline of strategy, Hamilton has condensed 40 years of thought and practice into a single readable book. Read it and to your benefit you will see the 7 Powers everywhere you look.

MARK BAUMGARTNER, CHIEF INVESTMENT OFFICER,
INSTITUTE FOR ADVANCED STUDY

Mentor has benefited from a continuing consulting relationship with Hamilton for the better part of 20 years and has incorporated many of his ideas and principles into the core of our strategy. 7 Powers consolidates those ideas and principles into a powerful framework and vocabulary to describe and permit analysis of where a company stands in its competitive space. Its a powerful work.

GREG HINCKLEY, PRESIDENT, MENTOR GRAPHICS CORPORATION

7 Powers

The Foundations of Business Strategy

Hamilton Helmer

Foreword by Reed Hastings

Copyrighted Material

7 Powers: The Foundations of Business Strategy

Copyright 2016 by Hamilton W. Helmer. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any meanselectronic, mechanical, photocopying, recording or otherwisewithout prior written permission from the publisher, except for the inclusion of brief quotations in a review.

For information about this title or to order other books and/or electronic media, contact the publisher:

Deep Strategy LLC

1 First Street, Los Altos, CA 94022

7powers.com

ISBNs: 978-0-9981163-0-3 (Hardbound)

978-0-9981163-1-0 (Paperback)

978-0-9981163-2-7 (Kindle)

Printed in the United States of America

Cover and Interior design: Irene Young and Carol Ehrlich

FOREWORD

BY REED HASTINGS

Hard to imagine, but my relationship with Hamilton began purely as a courtesy. Among the many entries on my calendar for Sept. 29, 2004 was a visit from him and Larry Tint, founders of Strategy Capital, a hedge fund investor in Netflix. At that time Netflix was a small DVD-by-mail rental company, and we had only gone public two and a half years before.

Typically, in meetings of this type, investors will suss out management, probe for additional color on the company. They are kicking the tires, in other words. But Hamilton and Larry took this sit-down in an entirelyand refreshinglyunexpected direction. Hamilton started with a crisp overview of Power Dynamics, his novel strategy framework, and then utilized that very framework to offer up a penetrating assessment of Netflixs strategic imperatives. Incisive, extraordinary. The meeting quickly became anything but a courtesy.

Hamiltons impressions stuck with me, and a half-decade later they percolated into an idea. By that point, in 2009, the existential threat from Blockbuster was behind us, and we were on track to reach almost $1.7 billion in sales. These were hard-won advances, but even so our strategy challenges were no less daunting. The clock was ticking on our red envelope business, as DVDs by mail was clearly a transitional technology. And looming was the prospect of facing off against huge competitors with resources far beyond ours: Google, Amazon, Time Warner and Apple to name several.

As I had learned over my years as a business person, strategy is an unusual beast. Most of my time and that of everyone else at Netflix must be spent achieving superb execution. Fail at this, and you will surely stumble. Sadly, though, such execution alone will not ensure success. If you dont get your strategy right, you are at risk. I have been around long enough that I remember the lesson of the IBM PC. Here was a breakthrough productthe customer take-up was amazing: 40,000 upon announcement of the product and more than 100,000 in its first year. No one had ever seen anything like it. IBMs execution was flawless. Their superb management never missed a beat. It would be hard to imagine another company at that time scaling physical production as rapidly as they did without tripping up. Even their marketing was inspired. Remember Charlie Chaplin as the friendly face of their campaign, welcoming all of us to the new world of computing?

But they got the strategy wrong. By outsourcing the OS and permitting Microsoft to sell it to others, IBM squandered their opportunity for the kind of network economy home run that had powered their mainframe juggernaut, System 360. Then their decision to outsource the microprocessor to Intel, while still promoting applications hard-wired to it, likewise ceded yet another important front. As a consequence, they sealed the fate of the PC, rendering it an unattractive box-assembly business. Try as they might, they could never right this ship. The inevitable denouement came with their 2005 fire sale of the business to Lenovo.