Next in the ‘Strategy’ section of Scaling Up, we explore the 7 Strata of Strategy. This chapter (and its dedicated worksheet) is where you transition from running a business efficiently to dominating your market strategically.
This blog is part of a series looking at the habits required to successfully scale a sustainable business. Read our introduction about the Scaling Up book and how to implement it in your business, which includes a complete list of all the blogs that explore this book.
For many, Chapter 7 will reveal the uncomfortable reality of how much strategic work they’ve been avoiding. Most business owners discover they’ve been competing on price because they never did the hard thinking required to differentiate properly. The framework is unforgiving about exposing weak positioning and vague value propositions, but this clarity is what makes real differentiation possible.
Maintain a competition-crushing, differentiated approach
Chapter 7 presents strategy as something layered rather than a single declaration, arguing that a business must deliberately stack and align several interdependent elements to create lasting differentiation. It shows how clarity in language, promises, and focus allows a company to stand out in a crowded market. The emphasis is on tangibility, pinning down what the company stands for, how it communicates that stance, and the ways it proves it consistently to customers.
It also frames strategy as a discipline of reinforcement, where each layer strengthens the others, reducing the risk of being copied or commoditised. Through these layers, a company can build an integrated position that is harder to undermine, while keeping teams aligned on long-term direction. The outcome is a sharper identity in the market, a more resilient competitive advantage, and a foundation for scaling without losing coherence.
Working through the chapter
Harnish warns that this work is not easy, otherwise every business would have a killer strategy! Don’t try, as the CEO, to come up with all these answers on your own. Instead, form a council of three to five people who meet every week to discuss the strata. In between meetings, these people go out and test the decisions made – they talk to customers and employees as well as researching competitors for insight and ideas – coming back the following week to reflect.
This chapter is broken into the seven strata, or layers, that make up your strategy. Key resources are recommended for each, and you are encouraged to document the outcomes on the 7 strata worksheet [PDF download]. This is the pure strategic thinking you need to achieve before moving onto the planning you will do in the next chapter, where you’ll put together the famous One-Page Strategic Plan (OPSP). The strata are:
S1: Words You Own (Mindshare)
Your first job is figuring out what words customers think of when they think of your business. If Volvo owns “safety”, what do you own? This isn’t about your company name or tagline, but about the space you occupy in people’s heads. You’ll need to research what customers actually search for online when looking for businesses like yours, then create content – articles, videos, case studies – that reinforces your ownership of those terms.
The hard truth is that if you don’t own specific words in your market’s mind, you’re competing on price alone. This exercise means getting your hands dirty with search engine research, talking to customers about how they describe what you do, and consistently publishing content that positions you as the go-to expert in your chosen area.
S2: Sandbox and Brand Promises
Here you define exactly who your best customers are. You’re not describing demographics but the specific type of person who values what you do most. Thinking about why they want the service/product should be part of this. Then you make three concrete promises about what they’ll get from working with you. By concrete, we really mean measurable, as vague promises like “quality service” are too generic.
You need to be able to track whether you’re keeping these promises with real numbers. This requires honest conversations with your current best customers about what they truly value, and the discipline to focus on serving them brilliantly rather than trying to be everything to everyone. You’ll also need to set up systems to measure how well you’re delivering on each promise, which means collecting data you might not currently track.
S3: Brand Promise Guarantee (Catalytic Mechanism)
This is where you put your money where your mouth is. You need a guarantee that makes it painful for your business to break its promises – something that creates real consequences if you fail to deliver. Examples given include RedBalloon’s promise to refund 100% if customers found experiences cheaper elsewhere and Oracle’s million-pound guarantee that their software would run twice as fast.
The guarantee should reduce customer fear of buying from you whilst forcing your team to actually deliver on your promises. Creating this requires you to identify what customers are most worried about when buying from you, then crafting a guarantee that addresses those specific fears whilst pushing your operations to perform consistently.
S4: One-PHRASE Strategy (Key to Making Money)
This phrase is your secret sauce; it’s the one thing about how you operate that drives your profitability. IKEA’s is ‘flat pack furniture’ which lets them ship more efficiently and charge less. Apple’s ‘closed architecture’ creates premium pricing. You’ll need to identify the core mechanism that lets you make money differently than your competitors.
The uncomfortable reality is that this often means deliberately being rubbish at things other businesses try to excel at. For example, IKEA makes its customers assemble furniture and navigate warehouse-style stores. Most people hate this, but the ones who don’t mind it get much cheaper furniture. If you to dig into your business model you can identify what trade-offs you could make that competitors won’t stomach.
S5: Differentiating Activities (3 to 5 Hows)
These are the specific operational choices that make your business impossible to copy. Southwest Airlines flies only one type of aircraft, uses secondary airports, and has no advance seat reservations. These aren’t marketing gimmicks; they’re operational decisions that create competitive advantage – a lower cost base that competitors cannot follow without dismantling their existing operations.
You should identify three to five ways you actually run your business differently from competitors, ways that would be expensive or disruptive for them to copy. This requires analysing every aspect of how you deliver your product or service and consciously choosing to do certain things in ways that support your strategy whilst making it harder for others to replicate your approach.
S6: X-Factor (10x-100x Underlying Advantage)
This is your hidden weapon, giving you a massive advantage that competitors can’t see or easily copy. Outback Steakhouse solved the restaurant industry’s biggest problem (manager turnover) with an unusual compensation scheme that kept managers in place 10 times longer than industry average.
Identify what everyone in your industry complains about but accepts as unavoidable, then figure out a way to solve it that gives you a x10 to x100 advantage. Look at the last few years of industry conference topics or trade magazine headlines; the recurring problems are where your X-factor might hide. This is detective work that requires stepping back from day-to-day operations and questioning fundamental assumptions about how your industry works.
S7: Profit per X (Economic Engine) and BHAG
Finally, you need one key number that drives everything else: your ‘profit per X’ where X is whatever unit makes sense for your business model. Southwest tracks profit per plane (not per passenger or per mile), which aligns with their ‘wheels up’ strategy.
Now set a bold 10- to 25-year goal, measured in the same units. This isn’t wishful thinking but a measurable target that connects to how you actually make money. You’ll need to dig into your numbers to find the one metric that truly drives profitability in your business, then use that to set a goal ambitious enough to require you to think differently about scaling up whilst being concrete enough to track progress against.
From reactive to systematic strategic thinking
After the hard work of this chapter, you should have moved away from responding to whatever your competitors do or chasing every potential customer to making more considered choices about where to compete and how to win.
Because the strata push you to find your own lane rather than fighting in everyone else’s, your thinking will shift from ‘how do I beat the competition’ to ‘how do I make the competition irrelevant’. Instead of trying to be good at everything, you can start being exceptional at the things that matter most to your best customers. You’ll also have identified your economic engine – the one metric that actually drives your profitability – instead of drowning in dozens of KPIs that don’t connect to real money. Your team will have clearer direction because your strategy won’t be a vague mission statement but a specific set of operational choices.
