Defining Success: The 10 Virtues of Organizational Health and Power
The 10 things worth pursuing.
Anyone who has started a business knows how overwhelming it can be. One of the elements that was most overwhelming and surprising for me was that we could basically pursue anything we wanted to varying degrees. It was our business. We were calling the shots and there was no end to the number of problems we could try to solve or opportunities we could pursue.
“More organizations die of indigestion than starvation”
- Dave Packard, co-founder of Hewlett Packard
In my last essay, WTF is Strategy? , I defined strategy as both a theoretical and practical concept: a causal hypothesis for how to succeed, paired with the actions taken in pursuit of that success. I also discussed how Strategic Anchors can help constrain the problem space, providing much-needed focus. But here’s the catch—what exactly do we mean by “success”? The definition is often ambiguous and open-ended, which can make it feel elusive or even arbitrary.
After reading hundreds of business books and essays—and building one of the fastest-growing companies in the country—I’ve distilled the most valuable lessons I’ve learned into a single framework. While 70% of these ideas are drawn directly from Hamilton Helmer, with additional inspiration from Paul Graham, Jim Collins, and Patrick Lencioni, what’s perhaps novel here is that I’ve combined these concepts into one exhaustive and cohesive model. I call it the 10 Virtues of Organizational Health and Power, a framework designed to capture what truly drives durable success.
In this essay, I’ll outline the 10 ways to achieve success—or, put another way, 10 things worth pursuing to advance your company’s mission. If you only read one essay from me, let it be this one, because these 10 virtues form the foundation of everything I do and everything I wish I understood when I started my company a decade ago.
This is just a high-level introduction. Over the coming months (and likely years), I’ll be diving deep into each virtue, unpacking their nuances and applications. For now, consider this your roadmap to building enduringly great organizations—without having to sift through hundreds of books and essays yourself.
Organizational Health
Organizational Health is the foundation for building and sustaining operational excellence. It enables companies to function effectively, adapt to change, and grow sustainably, creating the clarity and capacity needed to execute at a high level and achieve lasting success.
Virtue 1: Team
1.1 The right people in the right seat
Building an enduring company requires not only assembling a team of the right individuals but also ensuring they are placed in roles that align with their strengths and the organization’s needs.
1.2 Mutual trust
Team members are able to be vulnerable with one another.
1.3 Healthy conflict
Teams engage in open, respectful constructive debate.
1.4 Clear commitment
Teams achieve genuine buy-in even if they don’t agree.
1.5 Accountability
Members hold themselves and each other responsible for delivering quality work and meeting commitments.
1.6 Focus on collective results
The team prioritizes group achievements over individual accolades, driving toward shared success.
Virtue 2: Clarity
Is the team crystal clear on the following questions?
2.1 Why do we exist?
This is your company’s mission and is the most critical area of clarity.
2.2 How do we behave?
These are your company’s core values and inform who you hire, fire, and promote.
2.3 How do we succeed?
This is your company’s strategy, described in detail here.
2.4 What is most important right now?
This is the single most important thematic goal or Rallying Cry for the whole company over the next 3 - 9 months. This should be in service of why you exist (Virtue 2.1) and one or more of the 10 Virtues, and coherent with respect to how you succeed (Virtue 2.3).
2.5 Who does what?
This seems obvious, but it’s not. At your next staff meeting, spend 5 minutes having each of your department heads write down their responsibilities. It’s extremely common for there to be overlap as well as gaps in terms of responsibilities.
Virtue 3: Agency
Agency is the freedom to act on your own terms—being able to do what you want, when you want, without relying on external forces. In practical terms, this means being profitable or having the ability to become profitable whenever you choose.
Like many founders, I found myself trapped in the venture capital cycle—raising funds to hit milestones, only to have to raise again and again. While venture capital can be a powerful enabler, it often becomes the default solution, limiting a company’s options and creating dependency. The best companies break free from this cycle by achieving profitability on their own terms, using outside capital as a strategic choice rather than a financial crutch. This independence massively expands a company’s opportunity-space, allowing them to build from a position of strength.
Power
What is Power?
In 7 Powers: The Foundations of Business Strategy, Hamilton Helmer defines “Power” as the conditions that enable a company to achieve persistent differential returns, forming the basis of sustained competitive advantage.
To achieve Power, a company must secure two essential elements:
• Benefit: Tangible improvements to cash flow, such as higher pricing, reduced costs, or lower investment requirements.
• Barrier: Defenses that prevent competitors from eroding these benefits, ensuring the company’s position remains secure.
What makes Helmer’s framework unique is its clarity and focus: he asserts that there are only seven distinct ways to create a defensible advantage, offering businesses an elegant map for creating lasting value.
Virtue 4: Counter-Positioning
This is my personal favorite Power and one that every single pre-seed start up should be thinking about.
Definition:
A scenario where a new entrant adopts a superior business model that incumbents cannot or will not emulate due to the anticipated damage to their existing operations.
Benefit:
The new entrant’s business model offers enhanced value propositions, such as lower costs or improved services, leading to increased market share and profitability.
Barrier:
Incumbent firms face significant obstacles in replicating the new model, as doing so would undermine their current revenue streams and operational structures.
Example:
Blockbuster’s business relied heavily on revenue from late fees, a source of frustration for customers but a significant profit driver for the company. Netflix disrupted this model by offering a subscription service with no late fees, allowing customers unlimited rentals for a flat monthly rate. This shift eliminated the pain point of late fees entirely, creating a better customer experience and drawing users away from Blockbuster’s stores. Blockbuster couldn’t effectively respond without cannibalizing its lucrative late fee revenue, which was integral to its business model. This inability to adapt allowed Netflix to outpace Blockbuster, ultimately driving it into bankruptcy while Netflix became an industry leader.
Virtue 5: Cornered Resource
Definition:
A cornered resource refers to a company’s exclusive access to a unique asset that significantly enhances its value and is not readily available to competitors.
Benefit:
This exclusive access enables the company to offer superior products or services, command higher prices, or achieve cost advantages, thereby securing a competitive edge in the market.
Barrier:
Competitors are unable to replicate or access the resource due to factors such as legal protections, proprietary rights, or unique personal choices, preventing them from offering similar value propositions.
Examples:
Exclusive Contracts: Agreements granting sole rights to distribute a sought-after product or service.
Patents: Legal protections providing exclusive rights to a specific technology or process.
Unique Talent: Securing individuals with rare skills or expertise critical to the company’s success.
Proprietary Data: Exclusive datasets owned by a company, providing unique insights that inform strategic decisions, enhance customer experiences, and can be monetized through new revenue streams.
Virtue 6: Switching Costs
Definition:
The anticipated loss a customer expects when changing from one product or service to another.
Benefit:
These costs create customer stickiness, allowing the company to maintain a stable revenue stream and potentially command higher prices, as customers are less inclined to switch to alternatives.
Barrier:
Competitors must offer substantial incentives to overcome these switching costs, which can be economically unfeasible, thereby protecting the incumbent’s market position.
Example:
Switching between ride-sharing apps like Uber and Lyft is effortless; users can simply open a different app to compare prices and services, as both platforms offer similar functionalities. In contrast, Apple’s ecosystem creates significant switching costs. Transitioning away from Apple products involves not only the financial burden of replacing devices but also the loss of seamless integration among devices and services. This deep interconnectivity makes users less inclined to switch to other platforms, thereby fostering strong customer loyalty within the Apple ecosystem.
Virtue 7: Network Economies
Definition:
Network Economies occur when the value a customer derives from a product or service increases as the total number of users grows. This effect creates a positive feedback loop, where each new user enhances the overall value of the offering for all participants.
Benefit:
Companies leveraging Network Economies can achieve rapid user growth and increased engagement, as the product becomes more valuable with a larger user base. This often leads to a competitive advantage and the ability to monetize the platform more effectively.
Barrier:
New entrants face significant challenges in attracting users, as a smaller user base offers less value compared to an established network. This creates a barrier to entry, as users are less inclined to join a platform with limited connections or interactions.
Example:
WhatsApp exemplifies Network Economies in the messaging app market. As more individuals adopted WhatsApp, the platform’s utility increased for each user, since a larger network meant more contacts available for communication. This growth attracted even more users, reinforcing WhatsApp’s market position and making it challenging for new messaging apps to compete.
Virtue 8: Scale Economies
Definition:
Scale Economies occur when a company’s per-unit costs decrease as its production volume increases. This cost advantage arises because fixed costs are spread over a larger number of units, reducing the cost per unit.
Benefit:
By achieving Scale Economies, a company can lower its operational costs, allowing it to offer competitive pricing or enjoy higher profit margins. This efficiency can strengthen the company’s market position and financial performance.
Barrier:
To achieve similar per-unit costs, competitors would need to increase their production volume substantially, which often requires considerable investment and time. This creates a barrier to entry, as smaller firms may find it economically unfeasible to scale up to the necessary level.
Example:
Initially, Amazon relied heavily on third-party logistics providers, incurring variable costs that fluctuated with shipping volumes. As the company expanded, it invested in building its own fulfillment centers and delivery infrastructure, converting these variable logistics costs into fixed costs. This strategic move allowed Amazon to spread substantial fixed costs over its growing volume of shipments, effectively reducing the per-unit cost of fulfillment. By internalizing its logistics operations, Amazon not only gained greater control over its supply chain but also enhanced its ability to scale efficiently, achieving a competitive advantage in the e-commerce industry. Competitors faced a significant barrier, as replicating Amazon’s massive logistics infrastructure required substantial capital investment and years of operational scaling, making it difficult to match Amazon’s cost efficiencies and speed.
Virtue 9: Branding
Definition:
Ability to charge higher prices AND OR win market share at equal prices due to perceived superior value and trust, cultivated through consistent quality, reputation, and emotional connection.
Benefit:
A business with strong branding can command higher prices OR capture superior marketshare for its products due to positive associations and customer loyalty, leading to increased cash flows.
Barrier:
Establishing a strong brand requires significant time and consistent effort, creating a substantial obstacle for new entrants attempting to replicate this advantage
Examples:
Louis Vuitton
Apple
Hermès
Porsche
Tiffany
Virtue 10: Process Power
This is the number one power companies think they have, but don’t actually have.
Definition:
A company’s unique organizational methods and operational practices that enable it to produce superior products or achieve lower costs, which competitors cannot easily replicate without significant time and investment.
Benefit:
A company can consistently deliver high-quality products efficiently, leading to enhanced customer satisfaction and reduced operational costs.
Barrier:
Competitors face substantial challenges in duplicating these processes, as doing so requires extensive time, resources, and organizational changes, thereby protecting the company’s competitive advantage.
Example:
TSMC, the world’s largest contract chip manufacturer, produces semiconductors for industry leaders like Apple and NVIDIA, and its dominance exemplifies the concept of Process Power. Over the course of four decades, TSMC has perfected processes in chip fabrication that are unparalleled in the industry. Its advanced nodes, like 3nm and 5nm technologies, require not only state-of-the-art equipment but also deeply embedded operational expertise. While competitors like SMIC may invest billions in similar machinery, they face an insurmountable challenge in replicating TSMC’s processes, which has 13 more years of accumulated institutional knowledge and process power.
Conclusion
Navigating the complexities of building a business is challenging, but frameworks like the 10 Virtues of Organizational Health and Power offer clarity and focus in an otherwise chaotic and ambiguous landscape. Success, as elusive as it might seem, is not an infinite pursuit of possibilities but rather a deliberate alignment of effort, purpose, and advantage. By focusing on the 10 Virtues of Organization Health and Power, businesses can position themselves for enduring impact and sustained excellence.
This essay is just the beginning. The principles outlined here are the foundation for creating great organizations. Whether you’re a founder, a leader, or someone aspiring to make a difference, these virtues provide a map to not only survive but thrive. My hope is that this framework helps others avoid so many of the missteps I made and empowers them to build healthy powerhouses.
Thanks to Sharmin Sultana Isaacs, Cesar Devers, Annika Lewis, Jason Shuman, Hamilton Helmer, Jim Collins, and Patrick Lencioni.