Setting Direction
Strategy reduces to two questions: how do you create value, and how do you keep it? Most strategy conversations skip the first question entirely and jump straight to competitive dynamics — moats, positioning, differentiation. But without clarity on value creation, you’re optimising the wrong thing.
This section starts with value, then works through positioning, trade-offs, and the decisions that determine long-term outcomes. The goal is a clear-eyed view of where advantage comes from and what it takes to sustain it.
Where to start
Value and Moats — The two questions that define strategy. Start here for the foundation.
The Value Stick — Strategy’s two levers: raise willingness-to-pay or lower willingness-to-sell. The mechanics of value capture.
The strategy core
How value gets created, captured, and defended.
Value and Moats — Creating value is necessary but not sufficient. Keeping it requires moats. The two questions and how they interact.
The Value Stick — Value has four components: willingness-to-pay, price, cost, willingness-to-sell. Strategy moves the ends; operations moves the middle.
Real Choices — Real strategic choices have rational opposites. If the opposite sounds absurd, you haven’t chosen anything.
Complements — How value pools shift when products work together. The four strategic options when you’re not the bottleneck.
Network Effects — Winner-take-most dynamics. How networks tip, and how to attack established ones.
Explore vs Exploit — The time horizon rule: explore early, exploit late. When to seek new value versus extract existing value.
Positioning
Where to compete and how to be different.
Context Beats Category — In vertical markets, positioning on consideration attributes (why you’re in the running) versus retention attributes (why they stay) makes all the difference.
Depth Before Breadth — ICP focus first. Sequence expansion around the halo. Why going narrow before going wide usually wins.
Growth Market Traps — Obvious large markets attract capital that destroys economics. The best opportunities often look small.
Vertical Market Playbook — The strategic framework for vertical software. From positioning through go-to-market execution.
Trade-offs
The decisions that shape long-term outcomes.
Margins vs Growth — Once returns are high enough, reinvestment becomes the lever. When to prioritise each.
Third Lever — Pricing as strategic choice beyond cost and volume. The lever most operators under-use.
Time as Leverage — Products add value 0.05–5% of the time. The rest is waiting. Implications for where value actually lives.
Economics
The numbers behind strategic choices.
Customer-Funded Growth — Businesses that generate cash by growing. When acquisition economics fund expansion.
Payback Period — When customer acquisition becomes self-funding. The timeline that matters.
Payback Over Ratios — CAC payback matters more than LTV:CAC. Why the timing of cash flows trumps lifetime calculations.
Practices
Tools for translating strategy into action.
Four Questions — A decision checklist: what are we doing, how will we prove it works, how will we get it done, how will we know if it worked?
One-Page Annual Operating Plan — Compress the year to 7-8 things that matter. Strategy made concrete.
Synthesis
Decision Architecture — The full integration: strategy as hypothesis, measurement as decision design, speed through codified logic.
Suggested reading order
If you’re working through this section systematically:
- Value and Moats — the two questions
- The Value Stick — how value gets captured
- Real Choices — what makes a choice strategic
- Complements → Network Effects — competitive dynamics
- Margins vs Growth — the core trade-off
- Decision Architecture — bringing it together
Then explore positioning or economics based on your context.
Connects to
Running the Machine — Strategy without execution is fantasy. Direction-setting must connect to operational reality.
Making Decisions — Strategy is a hypothesis. The decision-making section covers how to learn whether your strategic bets are paying off.