The 10 Virtues of Organizational Health and Power

There are only ten things worth pursuing when you build a company. Three make it healthy: the right team, the right context, and the agency to be profitable when you choose. Seven create defensible advantages, and they come straight from Hamilton Helmer’s 7 Powers. Health decides the extent to which you can execute. Power decides whether what you execute is still worth anything once competitors notice.

I learned this the expensive way. When I started Bowery, one of the least obvious challenges we faced was that we could work on anything. Nobody was going to stop us. There was always another product, another market, another customer who wanted something slightly different, and for years we chased most of them. Dave Packard supposedly said more companies die of indigestion than starvation. That was us, and it’s true of most CEOs I coach when we first meet.

The ten are the filter I wish I’d had then. It’s the one I use now with the CEOs I coach.

Health

Team

The vast majority of problems I solve with CEOs are, at root, people problems. Either the wrong person is in the seat, or the right person doesn’t have the right context to do the job, so their decisions make sense locally and add up to nothing.

Start with talent density: fewer, better people, each in a seat that fits. Then build trust, and the fastest way I know is to go first. Tell your team something you’re bad at. Trust lets people argue without it getting personal, arguing lets them commit to decisions they disagreed with, and commitment is what makes accountability possible. That’s straight out of Patrick Lencioni’s The Five Dysfunctions of a Team, and the order matters.

Accountability is where most CEOs flinch. If someone keeps missing commitments and nothing happens, you’ve told the whole team that commitments don’t matter. Eventually it means letting people go, and the common mistake is waiting too long.

The mistake usually starts earlier, at the hire. At Bowery we spent nine months looking for someone to fill an important role. With investors pushing us, we hired someone we knew wasn’t a fit, and let him go four months later. We knew at the time. A bad hire is an indictment of your hiring process, not of the person, so own it and be generous on the way out.

Context

The right context is clarity that has reached everyone making decisions. It isn’t more information. It’s the answers to five questions. Why do we exist? How do we behave? How do we win? What matters most right now? Who owns what? Your leadership team should be able to answer all five without looking anything up, and so should everyone who reports to them. Most teams can’t.

The first sounds philosophical, but most companies that fail do so because they didn’t actually need to exist. The second is where values lists go to die. At one point Bowery had seven core values, and nobody on the leadership team could name more than five. I use core behaviors instead, because what I care about is how people actually show up, not how they aspire to show up. Keep it to three or four you would hire, promote, and fire for.

How you win is your strategy: the two or three things you’ll invest in more than anyone else, that reinforce one another. When Bob Iger took over Disney he picked global expansion, branded content (IP) and technology, and nearly every acquisition he made fit one of them. I wrote more about this in WTF is Strategy?

What matters most right now has one answer. When I start with a new company, the CEO almost always gives me two or three. Three priorities means people pulling in three directions, which is how you manufacture silos and turf wars. Picking one takes courage, and it’s the CEO’s job. That one thing becomes your Rallying Cry for the next quarter or two.

“Who owns what” sounds obvious until you ask each executive to write it down. You’ll find overlaps and you’ll find gaps.

Agency

Agency means you can be profitable when you choose to be.

At Bowery we raised, grew, and raised again, and grew some more. It works until it doesn’t. I remember thinking, oh shit, I don’t think we can raise any more money. It took us almost a decade to become profitable. Bowery is profitable today.

Paul Graham has the best test for this I know. In Default Alive or Default Dead? he asks: if your expenses stay where they are and revenue keeps growing at its recent rate, will you become profitable on the money you already have? If yes, you’re default alive. If not, you’re default dead, and you’re betting the company on the next round. Agency means you’re default alive, or you know exactly what you’d change to get there.

I’m not saying don’t take venture capital. It’s a great tool. The problem is depending on it. If the only way you survive is raising again, you’re in a very precarious position, because the funding market decides your future. If you can be profitable on your own terms, you raise when it’s an opportunity rather than a necessity.

Power

Health lets you execute. It doesn’t protect what you build. For that you need a defensible advantage, which Helmer calls power, and he argues there are only seven kinds. Each pairs a benefit, like higher prices or lower costs, with a barrier that stops competitors from copying it. None of the seven is a better product.

Most great businesses have two or three powers, and they become available roughly in this order.

Cornered resource

Exclusive access to something valuable: land, an oil field, Mickey Mouse, Steve Jobs. For a startup it’s usually a patent or proprietary data. Most successful companies don’t have one, so don’t count on it.

Counter-positioning

A business model the incumbent can’t copy without damaging its own business. Blockbuster depended heavily on late fees. Netflix charged a subscription with no late fees. Blockbuster could see the model was better and still couldn’t adopt it without giving up profits it relied on.

Most founders innovate on the product. The bigger lever is often the business model. You can sell the same thing as everyone else and still win if the way you charge for it is one the incumbents can’t match. It’s also the one power that costs nothing: no technology, no patents, no scale. If you’re early and have no cornered resource, this is where I’d look first.

Switching costs

How much it hurts a customer to leave. Switching from Uber to Lyft costs nothing. Bowery ran its invoicing, work allocation and engagement letters on Salesforce, and leaving would have been so painful that Salesforce could keep raising our price, which it did. Switching costs come from integration, how deeply you’re wired into a customer’s other systems, and from memory, what you know about them that they’d lose by leaving.

AI is weakening this power. With AI coding agents like Devin, rebuilding or migrating a system has never been easier, and some enterprises are now replacing software they’ve paid millions for. That’s software everyone assumed was impossible to switch off. In 2024 Klarna said it was shutting off Salesforce and Workday as part of a push to consolidate its software using AI. I think it will be a major headwind for the companies that have traded on switching costs, like Atlassian. Switching costs are still real. But of the seven powers, this is the one AI is eroding fastest.

Network economies

Each new customer makes the product more valuable to every other customer. One phone is useless, and every phone after the first makes the rest more useful. Marketplaces work the same way. The test is how strong the effect really is. If customers happily use two competing networks at once, the way riders and drivers use both Uber and Lyft, it’s weaker than it looks.

Scale economies

Unit costs fall as you grow, typically because fixed costs spread across more customers. A $100,000 pizza oven is expensive with ten customers and nearly free with ten thousand. Netflix can outspend everyone on content because it has more subscribers to spread the cost across. It’s a powerful loop, but only once you’re big.

Brand

Customers pay more, or choose you at the same price, because of what your name means. Show someone Tiffany blue with the name blurred out and they know who it is. Brands usually take a decade to build, though TikTok, ChatGPT and Claude have made me less sure of that.

The strongest brands are the outside expression of two of the context questions: how a company behaves and how it wins. Disney calls itself the happiest place on earth, hires happy people and buys the kind of intellectual property that fits. Brand is where health turns into power.

Process power

The power companies most often think they have and don’t. A founder tells me they’ve built an algorithm for finding real estate deals. How long did it take? Three months. Then a competitor can build it in three months too.

Real process power takes a decade or more and lives in the culture. Toyota’s production system is famous because it’s so hard to copy, even for people who study it closely. Tartine, the San Francisco bakery, publishes every step of its bread recipe. I made it at home. Theirs was much, much better!

The ten on one page

Virtue	What it is	When it’s available
Team	The right people in the right seats, who trust each other	From day one
Context	Everyone making decisions can answer five questions	From day one
Agency	You can be profitable when you choose	Once there’s a business to run
Cornered resource	Exclusive access to something valuable	From day one, if you have it
Counter-positioning	A better business model incumbents can’t copy	From day one, and it’s free
Switching costs	Leaving you would hurt	Once customers build on you
Network economies	Each customer makes you more valuable to the rest	Once the network has density
Scale economies	Your unit costs fall as you grow	Once you’re big
Brand	Your name alone makes people choose you	Usually after years
Process power	You do something no one can copy even with the recipe	Usually after a decade

Treat the three health virtues as non-negotiable, and pick the one power you can realistically build at your stage. For most early-stage companies that’s counter-positioning, because it costs nothing to have.

When I started Bowery, I thought the hard part would be finding things worth doing. It turned out the hard part was saying no to almost all of them.

Thanks to Sharmin Sultana Isaacs, Cesar Devers, Annika Lewis, Jason Shuman, Hamilton Helmer, Jim Collins, Patrick Lencioni and Paul Graham. This essay first appeared on Substack in January 2025 and was updated in September 2026.