Finding Power

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People think strategy is about profit, but really, it’s about power. Profit is just the prize.

And if you want to understand the nature of power in business — where it comes from, how to create it, how to sustain it — probably the best place to start is Clay Christensen’s “Law of Conservation of Modularity,” a massively underrated idea from his second book, The Innovator’s Solution.

It’s pretty obscure compared to Christensen’s other hit theories, like “disruptive innovation” and “jobs to be done.” I think this is because the theory can be somewhat abstract and technical, making it hard to understand. (Don’t worry — in this article I do my best to make it engaging and intuitive! 😅)

Another reason the idea is obscure is it suffers from branding issues. Confusingly, it was originally called “The Law of Conservation of Attractive Profits” and some people still refer to it by that name.

But, despite all the challenges, this is not an idea you want to overlook. In my view, it’s actually the most powerful theory in Christensen’s entire oeuvre. I love it because it gives us a unique lens we can use to answer the most important question in strategy: why are some companies so much more powerful than others?