# Better, Simpler Strategy **Felix Oberholzer-Gee** | [[Strategy]]  --- > "The basic intuition underlying value-based strategy could not be simpler: companies that achieve enduring financial success create substantial value for their customers, their employees, or their suppliers." Most strategy frameworks multiply complexity. Oberholzer-Gee reduces it to one question: **Does this initiative raise customer willingness-to-pay (WTP) or lower employee/supplier willingness-to-sell (WTS)?** If not, it isn't strategic. The companies that perform best don't think about themselves first. They dream up ever better ways to create value for others. Think value, not profit, and profit will follow. This is liberating because it gives you exactly two levers to pull, and a clear test for every initiative. The genius is buried in chapter three: **complements**. We typically treat falling prices as bad news, but what really happens is more subtle. When prices fall, value shifts—it moves from the less-expensive product to its complements. Understanding this opens up entirely different strategic moves: you might give away complements, own them, commoditise them, or bundle them. Each choice reshapes the profit pool. --- ## Core Ideas ### [[The Value Stick]] The simplest possible mental model for strategy: - **WTP (Willingness-to-Pay)**: the maximum a customer would ever pay for your product - **WTS (Willingness-to-Sell)**: the minimum compensation employees/suppliers require - **Value created**: the gap between WTP and WTS (the length of the stick) There are only two ways to create additional value: increase WTP, or lower WTS. Every significant initiative must be designed to do one or both. Initiatives that fail this test should be cut. Companies that excel at creating value focus squarely on WTP and WTS. Companies that outperform their peers increase WTP or decrease WTS in ways that are difficult to imitate. That last bit is critical—differentiation matters more than absolute performance. ### [[Complements]] When the price of a complement falls, WTP for your product rises. This is one of the most powerful and overlooked strategic levers. Most strategists focus obsessively on their own product, missing the larger system. But value pools shift. Companies that produce their own complements get to shift profit pools from one complement to another. Identifying complements requires thinking creatively about customer journeys—they often seem unrelated to your core business. Two extreme pricing options worth considering: What if you made bulk profits with your main product and gave away the complements? What if you reversed this? For both scenarios, how much competition would you face? --- ## Key Insights **If your company were to disappear tomorrow, who would miss it?** Perhaps your customers, who found supreme delight in your products? Perhaps your staff, who cherished working there? Perhaps the suppliers, who enjoyed a special relationship with you? Someone needs to miss you. If no one misses you, if your value stick resembles everyone else's, you have no meaningful difference—and without that, little chance of earning excess returns. **Strategy's hallmark is telling you what not to do.** When no one knows when to say no, most ideas seem like good ideas. And when most ideas seem like good ideas, you end up in the hyperactivity that pervades the business world today. Every strategic initiative needs to be evaluated against two metrics: WTP and WTS. If it can't pass that test, cut it. **In most industries, variation in profitability inside the industry exceeds profitability differences across industries.** Your best opportunities are almost always in your current industry, even if it's considered difficult. Stop looking for greener pastures. Start creating differentiated value where you are. **Near-customers are the ones whose WTP is fairly close to the level required to make a purchase.** Understanding what's stopping them reveals substantial business opportunities. Why are your near-customers not buying? Do they misperceive value? How might you tweak your offering to boost their WTP? **Price-sensitive customers signal weak differentiation, not unavoidable market conditions.** At times, businesspeople complain about their customers' price sensitivity. But heightened sensitivity simply reflects a firm's competitive position. Tough customers are feedback—you haven't differentiated enough. **The joy and satisfaction workers derive from their job are the difference between their compensation and their WTS.** Firms can increase employee surplus by raising compensation OR by making work more attractive. Just like raising WTP requires deep understanding of customers, lowering WTS presupposes intimacy with your staff and their lives. **Fixed costs aren't inherently bad.** If your company is larger than rivals, high fixed costs can be an advantage. Every strategist must know their firm's minimum efficient scale. Choosing between fixed vs. variable costs has different implications for the number of competitors you'll face in future. It's irresponsible to choose a strategic direction without knowing whether you have the scale to be cost competitive. **Network effects are powerful, but WTP and customer delight are the currency that ultimately counts.** There's nothing magical about network effects. Underdogs lift WTP in ways that don't depend on scale. Underdogs cater to neglected parties—most platforms favour specific groups; serving the unloved group allows for meaningful differentiation. The number of users is a flawed metric; focus on high-value connections, not total connections. **Better execution is no substitute for sound strategy.** Better-managed firms are consistently more productive, profitable, and faster-growing. There are enormous differences in how well managers execute even basic tasks like setting targets and tracking performance. These differences matter. But don't confuse operational excellence with strategy. Rather than asking whether projects fall in the "strategy" or "operational effectiveness" bucket, consider their potential to raise WTP or lower WTS. **We routinely predict substitution when new technology actually increases WTP for existing products.** This bias is the norm—we fear change; potential losses loom larger than similar gains (loss aversion). New technologies often complement rather than replace. --- ## Connects To - [[7 Powers]] – Complements; Helmer focuses on **what** creates durable value (Power types), Oberholzer-Gee on **how** to measure it (WTP/WTS as the metric) - [[Alchemy]] – Perception shapes WTP; you can change WTP by changing the thing OR changing minds about it - [[Algorithms to Live By]] – "Before you can have a plan, you must first choose a metric"—WTP/WTS is the metric for strategy - [[The Fifth Discipline]] – Making work more attractive (lowering WTS) requires understanding your organisation as a system - [[$100M Offers]] – Offer design is about maximising perceived WTP relative to price --- ## Final Thought _Better, Simpler Strategy_ is the strategic equivalent of Occam's razor. Most frameworks give you dozens of variables to track; Oberholzer-Gee gives you two. This clarity is ruthless: every meeting, every initiative, every project must answer to WTP or WTS. If it can't, it's waste. The complements insight is what keeps me coming back. Most strategists miss the larger system—they optimise their own product whilst the profit pool shifts beneath them. But if you understand complements, you can reshape value pools rather than just competing for your slice. That shift—from optimising your own performance to orchestrating the whole system—is what separates good strategists from great ones. Competitive advantage isn't about being better; it's about being different in ways that are difficult to imitate. The firms that succeed stop optimising internal performance and start obsessing about creating differentiated value for others. That shift—from internal excellence to external value creation—is the heart of strategy.