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Hamilton Helmer

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73
first
2024-05-05
most recent
2024-05-05
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1
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podcast

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  1. “Despite the name Seven Powers, which makes it sound like, oh, you can kind of sort this out, actually understanding whether or not there is a type of power in place is hard. I mean, if I did it with my colleagues here at Strategy Capital and were looking at a well-known company, it might take us weeks to answer that question for a single company. And it comes down to the hard part is industry economics is what really are the economic relationships. And it's very hard. So with those caveats that sort of get with some...”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Yeah, so I agree with your observation, but I don't want to be unkind. So, I mean, there are two things to keep in mind here in terms of making people feel better about that incorrect slide in the deck. One is that founders have to be optimistic, right? I think it's an important quality that they maybe understate the risks a little bit, but they're so committed to I'm going to do this thing that they go through that. And that may give them an advantage over a large corporation trying to do the same thing. The other is that”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Right. And you've done the right thing by not having me go through and define each of those. But your listeners will need to sort of go back to my book and see what those things are to be going through the shorthand as we should, but all of what we said won't be completely obvious to them.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “You're pretty high risk from an incumbent who already has the capabilities necessary to do that. They just have to extend their product or, you know, do this or that. And so, but counterpositioning is the refuge from that. And then you go into the other three types of power, scale economy switching costs and network economies. And those depend on your scale relative to competitors. This is pretty cursory. But that's what I'd say. I'll focus on those four. And I would recommend that you think pretty hard about whether you think you have counter positioning to start.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Product market fit is primarily substitution. It's you are coming up with a way to satisfy a more or less existing need in a novel way that creates more value. Now, there are sometimes you tap into entirely new needs, but it's not so often. I mean, Amazon was up against brick and mortar stores, you know, Google was up against Yahoo and so on. And so you're usually substituting. And that substitution is, so your competition at that point is functional competition. And if you don't have counterpositioning at that point,”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “If you're the first person to come up with Viagra, that's worth a lot of money. If you took that license and gave it to somebody else, it'd be worth a lot of money to them. But that's a different class and it's usually not the types of things that I'm dealing with. And it's kind of obvious to everybody. So the key challenge there is can you invent a pharmaceutical that's effective for a large market. So you can take those three off the table and that then leaves counter positioning scale economies, switching costs and network economies. And the important thing to keep in mind there is that they're sequenced. So almost every startup that you want to deal with starts with counter positioning. Because remember what”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “I find that there's a confusion about this because brand recognition for a startup may be incredibly important. But you can get brand recognition by buying an ad in the Super Bowl. That's not power that you paid for it. And so take branding and process power is really sort of operational excellence on steroids kind of and usually is imitable. So it's usually not. So take those off the table. And then kind of resource type power, which is you have something that is of value that if you transfer it to somebody else, it would be a value to them. But you own the rights. So the barrier is law, for example, or lack of knowledge from others. And there are classes of businesses that are like that. So prescription pharmaceuticals, right?”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “That's a great question, Lenny. Because I think the path to power is where the rubber meets the road. And it's very complicated and nuanced. But I'll give you a few thoughts along it. And frankly, our next book, The Second Advention, that's what it's about. It's about the power. So in a book, there's a thing called Power Progression, which says it tells over the cycle of a business. There are times when certain types of power are available and the converse of that is times when they're not available. And so there's some that only are really available when you reach a stability phase of a business pretty far out there. And so if you're starting a company, take those off the table. So those two are branding and process power. So often, you know,”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Their cost structure over a year, they can take that fixed cost and spread it over more subscribers. So their cost per subscriber is less versus somebody with fewer subscribers. So if they face the same prices as their first subscriptions as their competitors, they will be more profitable. So that's a scale economy. And that's an example of a type of power and a common one, I'd say. But these things are hard to achieve, right? Because there's kind of the holy grail.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “The barrier side is that there's something that is durable about that that makes it over time that you can't, that a competitors can't take away from you. So benefit and a barrier, we call it the to-be or not to be test, right? And if you have that, you can think of that immediately translating it into value because that will give you good margins out into the foreseeable future, which is what you're after. And so I don't know if we're getting into the weeds here, but that's what it's about. And so power is those structures. Let me give you a quick example. So one I use in the book. So Netflix would scale economies, right? They have more subscribers. The cost of their content is a very large fixed cost, about 50%.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Earlier, I talked about these economic structures that provide durability of in terms of refuge from withering arbitrage of everybody who wants to eat at lunch, right? And so that's what power is. So you have to understand what is an economic, you're asking me questions that get pretty deep into theory here. I hope you don't. This is too conceptual, but you have to say you have to understand how competition takes place and say, what is it that creates some kind of refuge? And what it is, is there's something in what you do that gives you either a cost or price advantage over others. So let's say you're lower cost. And that's the benefit.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Roosevelt's problem of how he could get the U.S. citizens on board to attacking Hitler. The strategy of it was U.S. industrial might would eventually win the war and population. And the difference there is time constant, tactical, short, strategy long. And so if you focus on value, that narrows what you think about and allows you to get rather concise and offer up advice to founders about what they need to pay attention to.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “From decades of business experience that that narrowing is very useful. And then so once you make once you reach that understanding, it tells you some important things. So if you understand what drives business value, I mean, if you do the math of it, right, it's NPV of cash flow, right? Expected cash flow. And what that tells you is that strategy is a long time concept. You're looking far out into the future. So think of Pearl Harbor. Pearl Harbor for the Japanese was this enormous tactical success that just destroyed the U.S. ability, naval ability in the Pacific Ocean. And the worst possible strategic move because it completely solved Franklin Delaware.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Get a million. I'm not exaggerating a million this, right? And so strategy for some people might mean everything that gets to the pile, gets to the top of a pile in terms of what you have to do that year. Everything. And that's a perfectly legitimate definition. But what I have found is that there is a very important narrowing that makes it much more useful. So that's coming back to what I was saying about John Matth makes it much more useful to do business. So my view is that you want to focus. It's very useful for a business to focus on the fundamental determinants of business value. And that's an arbitrary choice. It could be something else, but I can tell you.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “As I said, I'm sort of a concept person, right? And so when you develop concepts. You have to be very highly constrained by their usefulness. I'm a great fan of the great mathematician John von Neumann, and he had a view which really irritated a lot of mathematicians, which is that if mathematics wasn't guided by what was useful, it would become, I think the word he used was aesthetic to aesthetic. And so any concept developments like that, it needs to be guided by usefulness. And so in dealing with strategy, the question is what domain of things do you want to include in that conversation? Because the term is ubiquitous in business. I mean, do a Google search sometime. I've done one recently on Google Scholar for the word strategy.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “They often have a second act or a third act or fourth act. I mean, think of AWS or Intel going into CPUs or Apple going into iPhones. All not the origin of business, right? And that's actually common, not unusual. And that's starting the process all over again.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “What are the underlying characteristics that might tilt them towards the availability of power or not? And those actually are meaningful conversations. And certainly by no means certain, right? Your tilting probabilities, you're not creating determinative things. And then later on, once you've already have product market fit, then you have to understand your source of power if to understand what competitive position is, because then you have to establish that. And then later on in a more stable phase when you're in a stability phase of business, you have to know what your source of power is if you have one, because you have to know how to defend it. And then also it is also the foundation. Knowledge that you need for if there's another”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “That's an odd answer, right? And so even before you have product market fit, it's worth thinking about strategy. Now, it's not strategy in the sense of sort of this fully articulated strategic planning. We're going to do this. These are going to be the competitors. This is going to how we're going to answer them. This is how we'll price. Not like that at all. At the earlier stage, you can imagine wildly more degrees of freedom. And the questions are of the business propositions that you're thinking of in trying to get to product market fit.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Conversations with them even at an early stage about strategic matters have a richness and relevance to me that was unexpected. And founders are practical people, right? I mean, it's very hard to do what they're doing and they have to be extremely focused and choose what's worthwhile spending time on. And so in observing their reactions and that dialogue, I could see that there was something going on that was meaningful to them. And this second book we're working on will tease out why that's so more. But the answer to your question is when should you thinking about this? The answer is always. And that's an.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “One of the things that has really surprised me in the last five years has been that my understanding of the answer to that question has changed. And before I thought it was Do product market fit and then you do strategy. And if you try and put strategy before product market fit, there's not much you can do with it. That's wrong. Actually, one of the, I mentioned before one of the great pleasures for me in my work is being able to talk to company founders. One of the things that has surprised me is that”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “There's a thing called power progression. There are times when certain types of power are available. The path to power is where the rubber meets the”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “On a treadmill, and if you stop running that treadmill, you get cream, but it's not power. The things that drive operational excellence can be mimicked.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Power requires a benefit and a barrier. So he's taking care of the benefit part by saying a castle, you have to have a pretty good understanding of why it's a castle and not a shack.”

    2024-05-05 · Lenny's Podcast · Business strategy with Hamilton Helmer (author of 7 Powers) · IDENTIFIED FROM THE TRANSCRIPT · source