Where Good Ideas Come From:

• The Adjacent Possible- innovations come from the first-order combination of what's already available (“spare parts”). The inventions whose raw material is not available are ahead of their time and fail to materialize. (DaVinci's Helicopter)
• "Ah-ha" Lightbulb Moments are rare if not mythical. Innovation/Invention comes from long-term meditation on a particular subject The Slow Hunch until your neural network or multiple neural networks trigger powerful, sometimes seemingly random, connections to arrive at a discovery.
  • This is why dreams are historically perceived as a good medium for inventiveness- your brain is connecting neurons in an order that is not happening during the day. It is a liquid network- ideas flow with less friction. This is an accelerator of innovation. Similarly cities are "more liquid" than dispersed populations.
• Innovation comes more naturally to people with lots of different interests, because principles from one discipline can be utilized in another (e.g. a biologist taking principles of plants and applying them to zoology).
• Error- Good ideas emerge more from surroundings with a certain amount of noise and error, which leads to the exploration of the adjacent possible.
• Exaptation- Taking a concept/product/innovation designed for one purpose and exapting (as opposed to adapting) to another pupose
  • e.g. Gutenberg's printing press utilizes the technology for squeezing grapes into win

7 Powers: The Foundation of Business Strategy

• Businesses must obtain at least one of the Seven Powers to attain and maintain value
• The Value Axiom: Strategy has one and only one objective: maximizing potential fundamental business value
• Power: the potential to realize persistent differential returns, is the key to value creation.
  • Power is created if a business attribute is simultaneously:
    • Superior- improves free cash flow
    • Significant- the cash flow improvement must be material
    • Sustainable- the improvement must be largely immune to competitive arbitrage
• Equation of Strategy- MarketSize * growth factor of the market * long-term market share for the company * long-term average differential margins (margin above the amount needed to exceed cost of capital)
• The Mantra for Strategy: A route to continuing Power in significant markets.
  • "A route..."- The advantages a business develops
  • "...to continuing Power..."- acquiring greater market share, at a rate faster than all competitors, ad infitum
  • "...in significant markets" - in a market that has a large enough addressable size for outsized profits.
• The Seven Powers:
  • Scale Economies- A business that leverages scale economies sees their per unit cost decline as production volume increases. (Setting up a microchip factory is the biggest cost, each microchip produced reduces cost)
  • Network Economies- A business that leverages network economies sees the value realized by a customer increase as the installed base increases. (Social Networks)
  • Counter-positioning- A business that leverages counter-positioning adopts a new, superior business model which the incumbent does not mimic due to anticipated damage to their existing business. (Netflix counter-positioned to Blockbuster)
  • Switching costs- A business that leverages switching costs causes their customers to incur a value loss from switching to an alternate supplier.
  • Branding- A business that leverages branding enjoys a higher perceived value to an objectively identical offering that arises from historical information about the seller. (Not "marketing" branding. The brand that comes with being dependable over a long period of time)
  • Cornered resource- A business that leverages a cornered resource has preferential access at attractive terms to a coveted asset that can independently enhanced value. (The "BrainTrust" at Pixar)
  • Process Power- A business that leverages process power has embedded company organization and activity sets which enable lower costs and/or superior product and which can be matched only by an extended commitment. (Toyota's manufacture process)

Notion