Chenyi Shi

We have all these ways to come up with options, but how do you assess which one of them is really the best idea?

And that's what we set out to give a better structure to.

I think particularly for earlier stage companies, the three most common power types that you would find are scale economies, network economies, and switching costs.

Well, it's actually often common that you'll have counter-positioning because that's how you tackle your incumbent in a space.

But there are a couple other power types that doesn't really come in until sort of the more mature phase of the business.

And that's laid out in the book, like process power or brand power.

You really need to develop them after years and years of experience, you know, honing in on the core business.

So for the benefit of the audience today, we thought it would be more useful to focus on the three types of power, scale, network, and switching cost, which is probably the most common that we'd find out there.

Yeah.

So regardless of what's the core power prospect, I'm calling it a prospect because power is a pretty hard bar to clear.

But even if you're still in the make for you and you think this is going to be the mechanism that protects you from competition in the long run, the first step is always to get a really clear understanding of what that core business power prospect looks like.

So back to your example of Uber.

If the core power prospect of Uber is actually scale economies, which says the technology framework of doing the matching automatically is so hard and requires so much cost to build, then international expansion would have been totally irrational, right?

Because you're just spreading that fixed cost over more geographies and you're getting a head start in every single place you have.

But the truth is, it's not.

The majority of cost of that business actually lies in acquiring and maintaining their customers, which means, if anything, the route you should really try to get to is network economies, if you have one.

And the scope of that network defines each market is actually heavily bounded geographically.

And so every new country, even new city you go into is a complete new business and you have to start from scratch.

So

That's just an example of getting a definitive answer or a confident answer about where core business power looks like gives you a very different place to look on where to transform or where to take it to the next step for your business.