The Fox and the Hedgehog concepts in business

The Hedgehog Concept-

Using the Power of Simplicity to Succeed

• Babu Appat

If you could choose to be

a fox or a

hedgehog,

which would you rather be?

Many would choose to be

a foxAfter 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?

So what do foxes and hedgehogs have to do with your

organization's success?

In short, everything

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.

Yet, every time, it walks away defeated, and 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 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 achievein 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 competitorsand become

truly great in 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

The Hedgehog Concept (Graphically Represented)

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, a

Core Competence Analysisand a USP 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

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

T H A N K Y O U

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