The Hedgehog concept is from the Book, Good to Great by Jim Collins and it’s crucial to remember that it is an intersection of three circles:
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What You are Deeply Passionate About?
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What You Can Be the best In the World At, and
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What Best Drives Your Economic or Resource Engine?
Origin of the Hedgehog Concept
The Hedgehog and the Fox is an essay by philosopher Isaiah Berlin that was published as a book in 1953. The title is a reference to a fragment attributed to the famous Greek Poet, Archilochus: “a fox knows many things, but a hedgehog knows one big thing”
Jim expands on this idea in his 2001 book, Good to Great. And according to Jim, “the good-to-great companies founded their strategies on deep understanding along three key dimensions and then translated their understanding into a singular approach that guided all their actions.”
What You are Deeply Passionate About?
Jim alludes that it’s not about igniting passion in employees but finding those already passionate about the company’s mission. it’s that simple.
Cultural fit is more important than a person’s skill.
HR practitioners should create employee personas before they start creating job descriptions and interviewing people.
A lot of companies have organizational culture and values but are yet to translate those into employee values. For example, how does, “excellence” as stated in your company’s handbook translate to excellence in practical terms where employees are involved?
Most of us are passionate about a lot of things but it usually boils down to one simple truth. That is, There’s always a common denominator running through all of our passions. Maybe it’s helping people. Maybe it’s making money. Maybe it’s providing opportunities for others. It could literally be anything.
Some people believe we become passionate about certain things following deep emotional experiences from our childhoods or any other time in our lives. Others say that it’s more of a genetic thing; the classic nature versus nature debate.
Because human beings are complicated, I don’t believe that we can narrow the concept of passion to “what you love”. I think it’s more than that and this quote by Mitch Albom sums it up, in my view.
“What you carry is what defines you. It can be the burden of feeding your family, the responsibility of caring for patients, the good that you feel you must do for others, or the sins that you will not release. Whatever it is, we all carry something, every day.”
Because it’s not just what you love, but what you believe you must do.
Now, imagine a company where everyone has the same mindset.
What You Can Be the best In the World At
Here’s an excerpt from Jim’s book to frame our discussion:
“Prior to clarifying its Hedgehog Concept, Wells Fargo had tried to be a global bank, operating like a mini-Citicorp, and a mediocre one at that. Then, at first under Dick Cooley and then under Carl Reichardt, Wells Fargo executives began to ask themselves a piercing set of questions: What can we potentially do better than any other company, and, equally important, what can we not do better than any other company? And if we can’t be the best at it, then why are we doing it at all?”
What You Can Potentially do Better Than any Other Company?
This evaluation requires benchmarking which in itself is very challenging
If you don’t compare apples to apples, you can easily make erroneous recommendations. Comparing apples to apples means matching items properly and accounting for differences in age, experience, access (financial, geographical, educational, customer) and genetic construct. Bottom-line, there are factors responsible for the results we see and their impacts need to be evaluated as well.
What You Cannot do Better than Any Other Company?
This requires a clear understanding of your current resource constraints which could be time, skillset, people count and so on.
However, how do you match this question with innovation and the need for change because sticking to “what we do best” can stifle innovation?
In essence, it’s necessary to confront the facts of one’s current business environment.
January 19, 2023, marked the 11th anniversary of the bankruptcy of one of America’s greatest companies, the Eastman Kodak Company.”
The Kodak film company is an interesting case study about confronting changes in the business environment. The very company that revolutionalized and commercialized cameras and photography through affordable cameras and films failed to keep up with digital photography.
What Best Drives your Economic or Resource Engine?
According to Jim, “If you could pick one ratio (profit per X) – to systematically increase over time, what X would have the greatest and most sustainable impact on your economic engine?”
Well, consider using a North Star metric to answer this question.
What Is the North Star Metric
The north star metric reflects the core value that your product delivers to customers and can be a good predictor of a company’s long-term success.
To qualify as a “North Star”, it must deliver three things:
- Lead to revenue,
- Reflect customer value,
- And measure progress.
A few examples:
- The number of weekly customers completing their first order (Amazo)
- Customer lifetime value (CLV)
- Monthly-recurring revenue (MRR)
- Daily Active Users
- Total Watch Time Per Month (Netflix)
- Number of patients on refills
- Average Order Value (Amazon)
- % of paid subscribers (Spotify, Youtube Music)
- Daily Screen time (Instagram, Tiktok)
In conclusion, If you are trying to change your company, go read Good to Great. Also, the people on your team matter. This fact is covered as “First Who, Then What” in the same book. Without the right people, you will never get the results you hope for.
