Heard of the Hedgehog Concept, the ancient Greek word that became more prominent in the book “Good to Great” by Jim Collins?
According to Jim, the Hedgehog Concept is simple, crystalline concept that flows from deep understanding about the intersection of three circles:
- What you are deeply passionate about,
- What you can be the best in the world at, and
- What best drives your economic or resource engine.
I have had conversations with a lot of business leaders to get a sense of the intentions behind their mission or vision statement, and my findings always point to the same conclusion. They have no clue! They wanted to go with the trend, find something fancy they can put in their business plan, pitch deck or sales proposal. The implications of this is the vast distinction and disagreement between a company’s vision/mission statement and everyday business activities.
Some vision and mission statement have no soul, just fancy words, that sometimes makes sense and most times just work of art crafted just to feel good without a clear connection to the actual work.
So before you write that vision or mission statement, you might want to consider making three separate assessment about yourself and your team. These assessments make a whole lot of difference and contribute to the overall success of any business venture.
How to Apply the Hedgehog Concept
You can find your organization’s Hedgehog Concept by making three separate assessments:
- Understanding what you are deeply passionate about. The focus here is not to get you to be passionate. It is not a stimulation exercise. It is to get you to figure out what you are already passionate about. A business must have a purpose that is exciting and motivating because it was borne out of passion. I never do anything I am not passionate about. Actually, that is not entirely true, I wrote a book on decluttering just for $ 300 as compensation. I wasn’t really passionate about it, but at that time, the anticipation of getting $300 as remuneration kept me going. What are you passionate about? Does your business purpose inspire your people or they simply don’t care? It is important to hire people that align with your business purpose and culture.
- Identifying what your organization does better than anyone else. What are you the best in the world at? Sometimes what you are passionate about might not be what you are the best in the world at. I am passionate about singing but would struggle to compete with some of the world’s best because I know in my heart of hearts it is not my core competence. I am passionate about solving problems, helping people and businesses reach peak performance that translated into setting up a business that does just that in the form of Management and Leadership Consulting. I bring about transformation, help with marketing and operational excellence, leadership and change management in diverse organizations across the globe. What are you the best in the world at? What can your organization do better than anyone else? It is also understanding your weaknesses, what you can’t be the best in the world at. Knowing what you struggle to do can open the doors to finding what your organization can do really well.
Quick tip: Don’t shut down or wallow in the net of negativity entertaining the notion, there is nothing I am passionate about, and I am not the best in the world at anything. This will stop the search process immediately. Avoid it as much as you can.
What if I am work in progress? That’s totally fine.
You can be the best in the world at something, but it is gradually unravelling. That’s where I am at in my career journey. See things as a journey and not a final destination. I love the process of becoming way better. The adrenaline rush, the uncertainties, the experimenting, the opportunity to make a dent in the world by taking bold small steps even when the world thinks you have gone nuts, and the success at the end showing for all your hard work. And then the continuous loop begins.
- Determining where your organization is good at generating revenue. (Jim Collins calls this “understanding your economic engine.” ). Your organization must understand how to generate sustained cash flow and profitability. Business continuity and sustainability is fueled by having a steady cash flow. When you have a weak inflow of cash, or a poor cash flow management process, you can go bankrupt easily. The task of the business leader is to discover or discern what this denominator is. Understanding how your company generates sustained cash flow and profitability and being able to express this insight as a single “economic denominator” is the core of what drives your economic engine. 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 product line
- Profit per sale.
- Profit based on the company’s mission
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.
A significant category of economic denominator seems to be cost efficiency.
Your profit/x is how you choose to make money; it is a strategic metric, not an operational one. This ratio is a key driver in your financial engine, and when you make decisions about how to spend money (which products to launch, where to open new locations, how many people to hire), you should be guided by asking how it maximizes your profit per x.
Understanding where the three models meet or overlap is where you’ll find your Hedgehog Concept: the central vision that should guide your organization’s 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.