Business strategy with Hamilton Helmer (author of 7 Powers)

Lenny's Podcast: Product | Growth | Career

Exploring the Difference Between Power and Moat in Business Strategy

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In business strategy, power and moat are distinct concepts. Power involves having a competitive advantage that results in better outcomes than competitors and is difficult to replicate. On the other hand, a moat is a barrier that protects a business from competing forces. While power is about the benefit and barrier, a moat specifically focuses on creating a barrier against competitors. A moat is not always synonymous with power, as one can have a moat around an undesirable property. The concept of a moat, popularized by Warren Buffet and Charlie Munger, emphasizes the importance of having something that provides refuge from competitive pressures.

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