7 Questions & 7 Powers

It’s hard to find 2 books that have been more impactful in forming how I think about businesses than Hamilton Helmer’s, 7 Powers: The Foundations of Business Strategy, and Peter Theil’s, Zero to One. I consider 7 Powers psuedo-required reading at where I have the privilege of working at, 137 Ventures, and I honestly consider Zero to One psuedo-required reading for the entire venture capital industry. Both of these set out to evaluate what makes a great business, a great strategy, and how to properly channel the God-given ability we all have to create, innovate, and optimize.

Subconsciously following the wonderful rule of 7, each proposes their own set of criteria for formulating a strategy, or formulating a business. Using these frameworks, they each walk through relevant case studies where they came into play. Properly understanding these core powers and questions will help you properly build a business with sustainable competitive advantages and/or mopololistic characteristics. Helmer’s 7 Powers, and Thiel’s 7 Questions, are great frameworks for investors and entrepreneurs alike. I highly recommend you read both books.

The 7 Powers:

Scale Economies — the quality of declining unit costs with increased business size.

Network Economies — a business in which the value realized by a customer increases as the installed base increase.

Counter-Positioning — a newcomer adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing business.

Switching Costs — the value loss expected by a customer that would be incurred from switching to an alternate supplier for additional purchases.

Branding — the durable attribution of higher value to an objectively identical offering that arises from historical information about the seller.

Cornered Resource — preferential access at attractive terms to a coveted asset that can independently enhance value.

Process Power — embedded company organization and activity sets which enable lower costs and/or superior product, and which can be matched only by an extended commitment.

The 7 Questions:

The Engineering Question — can you create breakthrough technology instead of incremental improvements?

The Timing Question — is now the right time to start your particular business?

The Monopoly Question — are you starting with a big share of a small market?

The People Question — do you have the right team?

The Distribution Question — do you have a way to not just create but deliver your product?

The Durability Question — will your market position be defensible 10 and 20 years into the future?

The Secret Question — have you identified a unique opportunity that others don’t see?

— Opinions expressed are solely my own and do not express the views or opinions of my employer, 137 Ventures