This week’s podcast is more on the well-known 7 Powers framework by Hamilton Helmer. I go through three of his 7 powers.
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His fundamental equation of value is:
Value = M0*g*s*m = market scale * power
- M0 is Market at time zero. g is growth. This is about targeting big and growing market opportunities.
- S is long-term persistent market share. How much of it you have
- M is long term persistent margins. (operational margins after cost of capital)
- You can also do potential value = market scale * power.
His break-down of economies of scale is:
- Fixed costs
- Distribution network density
- Learning Economies (don’t agree)
- Purchasing Economies
- Volume / area relationships (cool but I never use this)
His break-down of switching costs is:
- Financial switching costs
- Procedural switching costs
- Relational switching costs
I also cited the 4 terrains from BCG:
Related podcasts and articles are:
From the Concept Library, concepts for this article are:
- Competitive Advantage: Economies of Scale
- Competitive Advantage: Surplus Margin Leader
- Competitive Advantage: Switching Costs
From the Company Library, companies for this article are:
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