Using the Power of Simplicity to Succeed

The Hedgehog Concept

Using the Power of Simplicity to Succeed

"Walgreens" is a trademark of Walgreen Co. (see www.walgreens.com). We have no association or connection with this company.

The hedgehog survives by focusing
on what it's good at.

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.

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

About the Model

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 a variety of strategies to try to catch the hedgehog. It sneaks, pounces, races, and plays dead. And yet, every time, it walks away defeated, with a nose full of spines. The fox never learns that the hedgehog knows how to do one 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.

In his essay, he argued that foxes are sleek and shrewd animals that pursue many goals and interests at the same time. Because of this wide variety of interests and strategies, their thinking is scattered and unfocused, and they are limited in what they can achieve in the long run.

Hedgehogs, however, are slow and steady, and people often overlook them because they're quiet and unassuming. But, unlike the fox, they are able to simplify the world and focus on one overarching vision. It's this principle that guides everything they do, and helps them succeed against all odds.

Jim Collins developed this idea further in his classic 2001 book, "Good to Great." According to Collins, organizations are more likely to succeed if they focus on one thing, and do it well. By doing so, they can beat their competitors and become truly great businesses.

An organization can find its "Hedgehog Concept" by making three separate assessments. First, it can understand what its people are truly passionate about. Next, it can identify what it does better than anyone else. And last, it can determine where it's good at generating revenue.

The right way forward is where all three answers intersect, and it's this central position that is the "sweet spot" for the organization's strategy. We show this in figure 1, below.

Figure 1 – The Hedgehog Concept

When an organization has identified its Hedgehog Concept, its leaders should devote all their energy and resources to pursuing the one thing it does best. Collins argues that when the going gets tough, it's the organizations that focus on what they're good at, rather than searching for alternative strategies, that survive and thrive.

Applying the Model

Let's look at each of the three circles in detail, and examine how you can apply them to your organization.

Step 1: Understanding Your Passions

Think about what makes you passionate at work. What gets you up in the morning and keeps you working late, when everyone else has gone home?

And what are your people most excited about? What inspires them about the purpose of the organization? And what motivations and values do you look for when you take on new team members?

Then, look at your organization's mission and vision statements. What are its core values, and how far do people subscribe to these values?

Step 2: Understanding What you can be Best at

With this dimension, your aim is to understand what your organization can do better than any other company. If you cannot be number one in the world at your core business, then this shouldn't form the basis of your Hedgehog Concept.

You also need to know what you'll never be the best at. Be honest when considering 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.

Discover your organization's true talent by conducting a SWOT analysis and a core competence analysis. These tools will show you what you do well already, and help you determine where you can excel.

Step 3: Understanding Your Economic Engine

To have a sound economic engine, your organization must fully understand how to generate sustained cash flow and profitability. This insight should be expressed as a single "economic denominator" or measure that can have the greatest and most sustainable impact on the organization's long-term success.

For example, in the 1970s, U.S. retailer Walgreens' vision was to become the best convenience drugstore in the world. The organization believed that it could achieve this vision, and had the passion to follow through on its ambitions. To measure success against its strategy, the retailer changed its focus from profit per store to profit per customer, because it identified that this fitted better with its overall vision.

By focusing on convenience, the organization opened up many new stores, which meant that more customers could visit, leading to increased profits across the whole company. The alternative of focusing on profit per store, which would have been achieved by reducing the number of stores, would have been less successful, because this ran contrary to Walgreens' convenience concept.

Step 4: Looking for Overlap

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

For example, imagine that people in your organization are passionate about innovating, 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: Reviewing Your Strategy

Once you've found the best areas of overlap between the circles, look at your existing strategy. Would your organization benefit from developing a revised strategy, based on what you've learned?

You'll also need to get your team members on board with the new strategy. Explain what the Hedgehog Concept is, and communicate why it's so important that the organization aligns its strategy to reflect its true passion, talent and economic capabilities.

This new, properly aligned strategy will provide long-term focus for your team members, vendors and customers.

Key Points

The Hedgehog Concept was originally based on an ancient Greek parable. Jim Collins published a management version in his influential book, "Good to Great."

The concept helps your organization focus on three main areas – passion, talent and the economic engine. By understanding each of these dimensions and, more importantly, how they intersect, you can identify the key focus that will guide your organization towards meaningful, long-term success.