Lenny's Podcast: Product | Growth | Career

Business strategy with Hamilton Helmer (author of 7 Powers)

May 5, 2024

Hamilton Helmer, a world-renowned expert on business strategy and author of "7 Powers: The Foundations of Business Strategy," dives deep into the essence of competitive advantage. He discusses the essential powers startups should cultivate and debunks common myths about business strengths. Helmer distinguishes between moats and true powers, highlights how AI reshapes competitive barriers, and offers practical strategies for all levels of leadership to harness these insights for growth and success.

01:08:07

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Hamilton Helmer

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Quick takeaways

Operational excellence is critical but may not always translate into true power in business strategy.

Progression through the seven powers framework helps startups establish a competitive edge.

Understanding the link between strategy and power is vital for long-term success in business, especially in the age of AI integration.

Deep dives

Power and Barriers in Business Strategy

Understanding the importance of power and barriers in business strategy is vital for sustainable competitive advantage. Warren Buffet's emphasis on economic castles protected by unbreachable moats highlights the necessity of having a clear benefit and barrier in business. Operational excellence, often mistaken for power, is critical for competitive position but may not always translate into true power.

Types of Power and Business Strategies

02:36

Business Value comes from Power, Market Size, and Operational Excellence

01:14

Pearl Harbor Example

00:51

Moat vs power

00:41

Intro

5min

Strategic Thinking for Founders

25min

Understanding Power and Moats in Business Strategy

4min

Leveraging Business Powers for Strategic Product Management

5min

Enhancing Strategic Thinking for Product Leaders

2min

Generative AI and Business Strategy

15min

Economic Inequality and the Debate on Government Intervention

2min

The Power of Entrepreneurship and Inspiration

12min

Hamilton Helmer is one of the world’s leading experts on business strategy and the author of the seminal book 7 Powers: The Foundations of Business Strategy, which provides a comprehensive framework for understanding what it really takes to achieve and sustain a competitive advantage. With more than three decades of experience in the strategic consulting industry, Hamilton has advised over 200 companies—from burgeoning startups to Fortune 100 giants—on how to identify, build, and leverage their unique strategic powers. In our conversation, we discuss:

• Potential sources of power that startups should develop from an early stage

• Common misconceptions among companies about the types of power they possess

• How power relates to strategy

• The difference between a moat and a power

• Practical strategies for non-leaders to leverage insights about power and strategy in their work

• AI’s impact on competitive advantages and barriers to entry

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Find the transcript and references at: https://www.lennysnewsletter.com/p/business-strategy-with-hamilton-helmer

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Where to find Hamilton Helmer:

• X: https://twitter.com/hamiltonhelmer

• LinkedIn: https://www.linkedin.com/in/hamilton-helmer-42983/

• Website: https://7powers.com/

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Where to find Lenny:

• Newsletter: https://www.lennysnewsletter.com

• X: https://twitter.com/lennysan

• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/

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In this episode, we cover:

(00:00) Hamilton’s background

(04:08) When power becomes important

(08:24) How strategy relates to power

(12:09) How power informs strategy

(14:46) The sequence of powers

(21:13) Common misconceptions

(24:39) Network effects vs. network economies

(26:58) Uber’s success

(29:16) Moats vs. powers

(31:12) Strategies for non-leaders to leverage power and strategy

(37:51) Advice on how to become a strategic thinker

(39:27) AI’s impact on the seven powers

(45:43) Why moving fast is not a power

(50:24) Three things that create value in a company

(51:16) The debt trajectory of the U.S.

(56:35) Optimism for the future

(59:25) Lightning round

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Referenced:

• 7 Powers: The Foundations of Business Strategy: https://www.amazon.com/7-Powers-Foundations-Business-Strategy/dp/0998116319

• John von Neumann: https://en.wikipedia.org/wiki/John_von_Neumann

• Pearl Harbor: https://www.history.com/topics/world-war-ii/pearl-harbor

• Where the Japanese Went Wrong at Pearl Harbor: https://pearlharbor.org/blog/where-japanese-went-wrong-pearl-harbor/

• The ‘7 Powers’ of business success—from one of Netflix’s early investors: https://www.qualitycompounders.com.au/post/the-7-powers-of-business-success-from-one-of-netflix-s-early-investors

• 7 Powers: Foundations of Business Strategy (Key Takeaways): https://www.linkedin.com/pulse/7-powers-foundations-business-strategy-key-takeaways-nikita-maloo/

• Strategy Capital: https://strategycapital.com/

• Warren Buffett: https://www.forbes.com/profile/warren-buffett/

• Charlie Munger: https://www.forbes.com/profile/charles-munger/

• Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger: https://www.stripe.press/poor-charlies-almanack

• Bill Gates reveals why Warren Buffett was an invaluable source of support during the stormiest period of his career: https://www.businessinsider.com/bill-gates-interview-warren-buffett-support-microsoft-antitrust-lawsuit-2019-6

• Billionaire Warren Buffett’s Secret Love Affair With Castles, Revealed: https://www.thestreet.com/opinion/billionaire-warren-buffett-s-secret-love-affair-with-castles-revealed-14290973

• Netflix didn’t kill Blockbuster—how Netflix almost lost the movie rental wars: https://www.cnbc.com/2020/09/22/how-netflix-almost-lost-the-movie-rental-wars-to-blockbuster.html

• Michael Porter on LinkedIn: https://www.linkedin.com/in/professorporter/

• What Is Strategy?: https://hbr.org/1996/11/what-is-strategy

• TSMC: https://www.tsmc.com/english

• Toyota Production System: https://en.wikipedia.org/wiki/Toyota_Production_System

• America will be left with ‘severe, irreversible scars’ if national debt goes unchecked. Now, a blockbuster report warns the bill is higher than believed, hitting $141T by 2054: https://fortune.com/2024/04/01/america-social-economic-scars-us-debt-gomes-price/

• Ben S. Bernanke: https://www.federalreservehistory.org/people/ben-s-bernanke

• Forty-four of 50 U.S. states worsen inequality with ‘upside-down’ taxes: https://www.theguardian.com/us-news/2024/jan/10/states-wealth-inequality-taxes

• Joseph A. Schumpeter: https://en.wikipedia.org/wiki/Joseph_Schumpeter

• Theory of Economic Development: https://www.amazon.com/Theory-Economic-Development-Science-Classics/dp/0878556982

• The Road to Reality: A Complete Guide to the Laws of the Universe: https://www.amazon.com/Road-Reality-Complete-Guide-Universe/dp/0679776311

• The Gene: An Intimate History: https://www.amazon.com/Gene-Intimate-History-Siddhartha-Mukherjee/dp/147673352X

• American Fiction on Prime Video: https://www.amazon.com/American-Fiction-Jeffrey-Wright/dp/B0CQKR72NX

• Farahan Sarouk rugs: https://nazmiyalantiquerugs.com/persian-sarouk-farahan-rugs/

• Rory Sutherland on LinkedIn: https://www.linkedin.com/in/rorysutherland

• Ogilvy: https://www.ogilvy.com/

• Clint Eastwood quote: https://www.brainyquote.com/quotes/clint_eastwood_168005

• Winston Churchill: https://en.wikipedia.org/wiki/Winston_Churchill