Good to Great #5: Hedgehog Concept

Posted: May 28, 2010 in Change Leadership, Good To Great, Jim Collins, Leadership
Tags: , , , , ,

Here is the continuation of my breakdown of the key concepts of Jim Collins’ great book, Good to Great. As I stated in an earlier blog I make it a point to read this book at least once annually and work to incorporate the key practices and processes Collins details into my organization.

If you lead an organization and have never read this book you are hindering your leadership abilities through ignorance, if you have read it I challenge you to pick it up again and see what new insights you might gain. Either way I recommend reading this book!

The Hedgehog Concept is a simple, crystalline concept that flows from a deep understanding about the intersection of the three circles. The key is to understand what your company can be the best at, and equally important what it cannot be the best at. If you cannot be the best in the world at your core business, then your core business cannot form the basis of your hedgehog concept.

  • The best in the world understanding is a much more severe standard than core competence.
  • To get insight of you economic engine, search for one denominator.
  • Set your goals and strategy on understanding, not bravado.
  • Getting the Hedgehog Concept is an iterative process.

People are squandering their time and resources on the wrong things.

Key Learnings

  • The fox knows many things, but the hedgehog knows one big thing.
  • Foxes pursue many ends at the same time and see the world in all its complexity. They are scattered or diffused, moving on many different levels. They never integrate their thinking into one overall concept, or unifying vision.

Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything.

  • You want to know what separates those who make the biggest impact from all others who are just as smart? These are the hedgehogs.

Hedgehogs see what is essential, and ignore the rest

  • Walgreens concept – simply this: the best,  most convenient drugstore with high profits per customer visit.
  • All good to great companies attained a very simple concept that they used as a frame of reference for all of their decisions, and this understanding coincided with breakthrough results.

A Hedgehog Concept is a simple, crystalline concept that flows from a deep understanding about the intersection of the three circles

  • What you can be the best in the world at?
  • What drives your economic engine? (a piercing insight)
  • What you are deeply passionate about?

If you make a lot of money doing things at which you will never be the best, you will only build a successful company, not a great one.

  • If you become the best at something, you will not stay on top if you don’t have an intrinsic passion for what you are doing. Finally, you can be passionate all you want, but if you cannot be the best at it, or it doesn’t make economic sense, then you might have a lot of fun, but you wont produce great results.

This works at a personal level as well as a business level.

  • A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. This distinction is absolutely critical
  • Clearly, a Hedgehog Concept is not the same as a core competence.

Suffering from the curse of a competence, but lacking a clear Hedgehog Concept, companies rarely become great at what they do.

  • The central point is that each good to great company attained a deep understanding of the key drivers of its economic engine and built its system in accordance with this understanding
  • What is your economic denominator? eg profit per x, maintenance cost per x etc
  • The denominator question serves as a mechanism to force a deeper understanding of the key drivers in your economic engine
  • Have a denominator not for the sake of having a denominator, but for the sake of gaining insight that ultimately leads to more robust and sustainable economics.

You need the discipline to stay within the three circles.

  • The only way to stay great is to keep applying the fundamental principles that made you great.
  • You cannot manufacture passion or ‘motivate’ people to feel passionate. You can only discover what ignites your passion and the passions of those around you.

Comparison companies remained shrouded in mist for two reasons

  • They never asked the right questions prompted by the three circles.
  • They set their goals and strategies based more from bravado than from understanding.

Getting the Hedgehog Concept – an iterative process

  1. Ask questions guided by the three circles.
  2. Dialogue and debate, guided by the three circles.
  3. Executive decisions, guided by the three circles.
  4. Autopsies and analysis, guided by the three circles.
  5. Go back to #1.
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