Where Does Strategy Live in a Digital Firm’s Stack?

#92: 1.3 Disentangling dependencies, leverage points, and compounding effects across the five layers

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In Chapter 1.1, we introduced the 5-layer stack as a way of rethinking business models:

• Infrastructure → the digital and physical foundation

• Intelligence → data, AI, learning loops

• Distribution → how value flows to customers (and back)

• Interface → where users and partners actually touch the product

• Monetization Logic → the economic engine

We argued then that these layers aren’t linear but recursive, feeding one another in loops.

• Stripe’s distribution is its API, allowing partners to build and extend its reach.

• Notion’s interface is the product, making it malleable across use cases.

• Shopify monetizes across layers (transactions, SaaS, lending, AI).

• Anthropic builds strategy around intelligence as a layer, embedded into ecosystems.

Each firm shows how business models operate less like a static plan and more like a live, recursive system.

Read Chapter 1.1 again here:

How Modern Business Models Actually Work: A Systems View for 2025

This chapter now asks the harder question:
👉 Where does strategy really live inside this stack?

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TL;DR: Finding Strategy’s True Power Layer

• Modern firms operate across five layers: Infrastructure, Intelligence, Distribution, Interface, and Monetization.

• Strategy isn’t evenly spread — power concentrates in certain layers while others become dependencies.

• Four critical lenses for identifying where strategy “lives”:

  1. Dependencies: Which external layers you rely on (e.g., AWS, Apple App Store).

  2. Leverage Points: Scarce layers where you can exert control and set the rules.

  3. Compounding Flywheels: Where loops of growth accelerate value (e.g., Amazon marketplace, TikTok recommendations).

  4. Orchestration Costs: The complexity tax of managing interconnected layers.

• Example contrasts:

  • Apple plays strategy in Distribution → App Store toll gate.

  • Netflix plays strategy in Intelligence → data-driven recommendations + content.

  • AWS plays strategy in Infrastructure → pricing leverage + market dominance.

• Key takeaway: Your stack is a power map — strategy thrives where you control the scarce layer and design compounding flywheels while minimizing dependency risk and orchestration costs.

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Table of Contents

1. Introduction: The Five-Layer Stack Recap

2. The Anatomy of Control

   • Dependencies: Who Controls Whom?

   • Leverage Points: Where Strategy Has Impact

   • Compounding Flywheels: Loops That Accelerate Growth

   • Orchestration Costs: Managing Complexity

3. Why This Distinction Matters

4. Case Example: Shopify’s Strategic Stack

5. Key Takeaway: Strategy as a Power Map

6. References

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