7 Powers: The Foundations of Business Strategy 4/4

Part 3.

6/ Cornered Resource

  • Exclusive use of a valuable resource. [MK: similar to an Unfair Advantage.] Can be preferential access to a patent, a required input or technology.

  • Benefit. The product outcome is significantly better than the competitors’, with a comparable price point.

  • Barrier. IP protection or property rights protection – both are by law.

The 5 tests of a cornered resource

  • Why is the firm able to repeatedly do something or get resources others can’t? Is it because of processes, methods, people with unique skills [MK: or corruption]? And if it’s about the people – how can the firm ensure the renewal of the talent pool?

  • No arbitrage. The firm must be able to receive the entire economic rent of its access to the resource (vs hiring Brad Pitt who would ask for the majority of it).

  • Transferable. If the resource can’t be transferred to another firm with success, it’s not just the resource that’s cornered. [MK: the firm’s business configuration is equally important then.]

  • Ongoing. The advantage gets embedded in the resource. (ex: Pixar without Jobs’s full involvement was doing as well as with him)

  • Sufficient. Similar to transferable, is access to this resource sufficient for the other firm to recreate success?

7/ Process Power

  • The process is the power, but it can’t be replicated with preserving the full context. Copying the visible parts doesn’t count.

  • Embedded company organization and activity sets, which enable lower costs and/or superior product, and which can be matched only by an extended commitment.

  • Benefit. A company with process power is able to improve product attributes and/or lower costs as a result of process improvements embedded within the organization. It’s not dependent on individuals.

  • Barrier. Process advancements take lots of evolutionary iterations to master. Most such processes are complex or very complex, so replicating them requires also replicating the entire value chain with its context. If the processes are tacit (vs documented), they may be embedded in the business configuration, but the firm wouldn’t be able itself to pinpoint the core focus points.

Won’t be continued.