The Hedgehog Concept

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MarenWinter

Be a hedgehog in business, and embrace simplicity.

If you could choose to be a fox or a hedgehog, which would you rather be?

Many people would choose to be a fox. After all, foxes are beautiful, sleek and cunning. Hedgehogs, which are small, prickly creatures found in Europe, Asia and Africa, are quite the opposite: slow, quiet and plodding.

So, what do foxes and hedgehogs have to do with your organization's success? In short, everything! It's all about learning the art of simplicity, like a hedgehog, and creating a clear focus for your organization.

In this article, we'll look at the Hedgehog Concept, and discuss why, in business, it pays to be a hedgehog rather than a fox.

What Is the Hedgehog Concept?

The Hedgehog Concept is based on an ancient Greek parable that states, "The fox knows many things, but the hedgehog knows one big thing."

In the parable, the fox uses many strategies to try to catch the hedgehog. It sneaks, pounces, races, and plays dead. And yet, every time, it walks away defeated, its tender nose pricked by spines. The fox never learns that the hedgehog knows how to do one big thing perfectly: defend itself.

Philosopher Isaiah Berlin took this parable and applied it to the modern world in his 1953 essay, "The Hedgehog and the Fox." Berlin divided people into two groups: foxes and hedgehogs. [1]

He argued that the foxes pursue many goals and interests at the same time. As a result, their thinking is scattered and unfocused, and ultimately they achieve very little. Hedgehogs, however, simplify the world and focus on a single, overarching vision, which they then achieve.

Business researcher and consultant, Jim Collins, developed the idea in his classic 2001 book, "Good to Great." Collins argued that organizations will more likely succeed if they can identify the one thing that they do best – their "Hedgehog Concept." [2]

When an organization has identified its Hedgehog Concept, its leaders should devote all of their energy and resources to pursuing it. Collins argues that when the going gets tough, it's the organizations that focus on what they're good at that survive and thrive.

How to Apply the Hedgehog Concept

You can find your organization's Hedgehog Concept by making three separate assessments:

1. Understanding what your people are truly passionate about.
2. Identifying what the organization does better than anyone else.
3. Determining where it's good at generating revenue. (Collins calls this "understanding your economic engine.")

Where all three answers overlap is the "sweet spot" for your organization's strategy, as shown in figure 1, below.

Figure 1 – The Hedgehog Concept

Copyright © 2001 Jim Collins. Originally published in the book "Good to Great: Why Some Companies Make the Leap… And Others Don't." Reprinted by permission of Curtis Brown, Ltd.

Let's look at each assessment in detail, and examine the steps that you can take to apply the Hedgehog Concept to your organization.

Step 1: Find Your Passions

Think about what you feel passionate about at work. What gets you up in the morning and keeps you working late, voluntarily?

Then, consider what your people feel most excited about. How does the purpose   of the organization inspire them? And what motivations and values   do you look for when you hire new team members?

Then, look at your organization's mission and vision statements   . What are its core values, and do your people buy in to them?

Step 2: Understand What You Do Best 

Here, your aim is to understand what your organization can do better than anyone else. If you cannot be number one in the world at your core business, then this shouldn't be your Hedgehog Concept.

It's also important to know what your organization will never be the best at. Be honest when you consider these weaknesses, and remember that not being the best in certain areas is OK – understanding what your organization can be good at is far more powerful.

Tools such as SWOT Analysis   , Core Competencies Analysis   and USP Analysis   will reveal what you do well already, and help you to determine where you can excel.

Step 3: Discover Your Economic Engine

To have a powerful economic engine, your organization must understand how to generate sustained cash flow and profitability, and express this insight as a single "economic denominator." This is also known as "profit per X," where "X" is the single measure that can have the greatest and most sustainable impact on your organization's long-term success.

Some common economic denominators include:

• Profit per customer.
• Profit per employee.
• Profit per location.
• Profit per geographic region.
• Profit per part manufactured.
• Profit per brand.
• Profit per sale.

The "X" that you adopt can be specific to your business or industry. For example, most of the airline industry historically used "total revenue per available seat mile." Southwest Airlines, however, adopted "profit per airplane" as its denominator.

Focusing on airplanes, rather than on available seat miles, meant that Southwest took different strategic decisions from its competitors. As a result, it has become the most consistently profitable US airline. [3]

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Step 4: Look for the Overlap

Once you've looked at the model's three circles, look at where they overlap. That's where you'll find your Hedgehog Concept: the central vision that should guide your organization's strategy.

For example, imagine that people in your organization are passionate about innovation, and about benefiting vulnerable people. You realize that you have the capability to be the best in the world at developing affordable water filtration systems and portable water carriers. You have a great charity network, and you have experience in making high-volume, major account sales.

Therefore, a possible Hedgehog Concept could be to develop a portable water filtration system that people in developing nations could use to filter river water. You could sell these products in bulk to charities.

Don't worry if your Hedgehog Concept isn't obvious right away. You may have to do some additional analysis or explore different combinations to find the core vision that works best for you.

Step 5: Review and Communicate Your Strategy

Once you've found the areas of overlap between the circles, look at your existing strategy   and ask yourself whether it aligns with your Hedgehog Concept.

You may find that your organization could benefit from developing a revised strategy   , based on what you've learned.

You'll need to get your team members on board   with the new strategy. Start by explaining what the Hedgehog Concept is, and communicate why it's so important for your organization to align its strategy to reflect its true passion, talent and economic capabilities. (Linking your explanation back to people's personal passions and values can be a useful way to win their support).

If the result of your analysis is likely to result in a significant shift within your organization, it's essential to plan and manage this change effectively. Our article on Change Management   can help you to achieve this.

Once implemented, your new, properly aligned strategy will provide long-term focus for your team members, vendors and customers, resulting in better engagement, productivity and profitability.