Quick question. What spirit animal do you think best represents a successful business? A lion because it eats before the competition? A horse because it charges forward with wild abandon? A bear for its resilience, ferocity, and adaptability?
The Hedgehog Concept argues otherwise. Yep, you read that correctly. A hedgehog. I’m guessing you wouldn’t even have considered a hedgehog. I sure didn’t.
According to its proponent, Jim Collins, author of “Good to Great”, the mighty little hedgehog is the perfect symbol of successful businesses. Not because a hedgehog rolls into a protective ball to survive. Instead, among all in the animal kingdom, hedgehogs truly have their head in the game, clearly understanding their primary direction in life.
How about you? Do you know where your business is going, or more importantly, where it SHOULD be headed? If not, read on. You’re going to love the hedgehog.
The Hedgehog and the Fox
Before we dig deeper into what this seemingly absurd concept is about, it’s valuable to take a step back and analyze its roots for a better understanding. Jim Collins’ Hedgehog Concept was derived from the Greek proverb:
“The fox knows many things, but the hedgehog knows one big thing.“
In the parable, the fox is seen hunting for prey as it stumbles across the humble hedgehog. The cunning fox tries all forms of tricks to capture the hedgehog. Sneaking, pouncing, racing…all to no avail. The hedgehog always stayed true to its one big thing–tucking into a ball. Each of the fox’s attacks were reciprocated with razor-sharp spines that prick his nose and paws.
Isaiah Berlin, a Russian-British philosopher, used this parable to describe the human race in 1953. In his essay, aptly called “The Hedgehog and the Fox,” he divided people into two groups: foxes and hedgehogs.
Berlin argued that foxes pursue many things and are preoccupied with a wide range of interests. In the end, they achieve very little because their thinking is scattered and unfocused. On the other hand, hedgehogs focus on a single vision—one goal in which they perform expertly.
So how does this relate to your business?
Jim Collins explains that hedgehogs have an unwavering understanding of what they’re good at. This knowledge gives them clear direction to perfect that skill and be the best in that craft. The hedgehog principle in “Good to Great” asserts that organizations succeed when they identify the one big thing they do best.
That one big thing is your Hedgehog.
Pursuing one BIG thing doesn’t mean you flunk out on all other fronts. It’s about orienting your energy and resources with the Hedgehog Concept at its core.
Like the hedgehog, that’s how you thrive in a fox-filled world.
Do you want your business to get pricked, or do you want to dominate?
Wizard Ryan Chute can help you find your Hedgehog Concept the same way that I’ve helped countless others find theirs. All you have to do is book a free 45-minute call with me to talk about it.
The Hedgehog’s Three Rings
The Hedgehog Concept is but one of many principles that Jim Collins outlined in his book “Good to Great.” To discover the best companies he mentioned in the book, he intently studied nearly 1500 companies over four years.
Collins argues that all good-to-great leaders, in one way or another, exhibited the hedgehog principle. This means that they navigated their ship with a single North Star employing the Hedgehog Concept.
Conversely, those who chased all the other stars and constellations in the sky were led awry. This left many otherwise hopeful companies scattered, diffused, and inconsistent in their success.
Being a fox in a tough and competitive business climate is a burden on resources (money, efforts, and time). Burning your energy on the wrong things or spreading yourself too thin is a risky move. That’s why mastering the Hedgehog Concept has proven to be a lynchpin for success.
Doing so begins with understanding the three core principles (rings) that make up the Hedgehog Concept.
Before we explore each ring that unifies the Venn diagram above, there’s something to clarify. The Hedgehog Concept is NOT a goal, a strategy, an intention, or a plan to be the best company ever.
The Hedgehog Concept is a way to understand what aspect your business can be the best at.
Knowing this distinction is helpful in moving from good to great.
Why? Because every organization wants to be seen as the best. But only the wise few fully understand the potential to be the best at a single powerful endeavor.
You can be good at lots of stuff, but what is the one you want to be known for? What’s the one that moves the “who gives a shit meter” the most in your customer’s perceptual reality?
Let’s explore each ring of the Hedgehog Concept.
#1 What Are You Deeply Passionate About?
Have you ever wondered what gets you up in the morning and what keeps you working late? Knowing what excites, drives, and motivates you is a critical element in this 3-piece puzzle. This is your purpose, and finding it is the first step to forming your Hedgehog Concept.
Only through purpose will you find the resilience to become the best. Despite the trials and tribulations along the way, your purpose will always pull you through.
Moreover, when you are crystal clear on your unwavering purpose in life, it’s not just a job anymore–it becomes your passion. Fulfilling a temporary role no longer feels heavy on your shoulders because you know you’re building to something much bigger.
How then, do you apply this to your business? Simple.
Go back to square one. Ask yourself what you deeply care about. Dig deep. It may be hiding in a blind spot, even a childhood trauma. Dissect every layer and find your life’s purpose.
#2 What Can You Be the Best in the World At?
Now that you have a clear purpose, you want to figure out what you can be the very best at in your immediate world. Your trade area. Your region. Your industry.
I don’t mean good. I mean great.
It’s okay if you’re not the greatest yet. It only matters that you build an operation that laser-focuses your efforts on becoming the GOAT.
The thing that you are great at should be the thing that your customers care about most. Knowing that you’ll never be able to please everyone, choose what aligns most with your values.
Avoid thinking about what everyone has always done, and curiously explore what others would love to see done consistently.
One helpful technique to find the answer is using a SWOT analysis. This analytical process lists down all the strengths, weaknesses, opportunities and threats surrounding your business.
Among your strengths (Or aspirational strengths), find the one that resonates most with your potential clients.
If you cannot define one big strength, that’s okay. Look for the opportunity where you have the undeniable potential to be number one.
It’s equally important to accept that you are not the best at everything. You have weaknesses in your business and it’s super important to be completely honest with yourself about them.
For one, you don’t want to highlight them in your advertising, and two, you want to recognize their value and design your operation around improving or abandoning them.
#3 What Makes You Money?
The Hedgehog Concept is not merely a tool to find your best messaging. You want to be the best at those things that bring the healthiest revenue to the bottom line.
Understanding how revenue ties to your prospects core motivations will help you zero in your efforts on the actions and behaviors that drive revenue.
For example, in essential home services, you can view it in terms of the following economic denominators:
- Profit per replacement
- Profit per demand service
- Profit per preventative maintenance call
- Profit per member vs non-member
Whatever the department, the key is finding the opportunities that bring in the most money to your company over the anticipated lifetime (LTV) of the client, not profitability on each and every sale.
This means measuring ROI on more than just the appointment you’re on, or the options you provide. Relational selling requires patience to protect the lifetime value of the buyer. This single perspective will have the most prominent impact on your overall growth and profitability as a business.
Where The Rings Overlap
Once you’ve pieced all three rings together, take a look at the overlap. At the center of it all, you have your hedgehog. It’s the one big thing that you are really good at, driven to achieve, and makes you money. This centerpoint is your north star that guides all of your business strategies.
When you commit to this hedgehog, the likelihood of going from good success to great becomes exponentially higher.
Why? Because when you operate on a single-pronged goal where everyone is aligned, you attract a loyal following of people who want to do business the way you’re committed to doing business.
For example, one of my strongest essential home service businesses is deeply committed to convenience. So much so that they have a truck standing by with a technician ready and available to respond immediately to an emergency call that comes in. This allowed Wizard of Ads® for Essential Services to advertise this commitment to convenience in mass media, leading to a substantial increase in immediate demand.
They eventually got to 4 trucks standing by, per department! That’s 12 trucks waiting like a SWAT team, ready to respond at a moment's notice. While this seems dangerously wasteful, the strategy was brilliantly executed operationally, affording the operator mid twenty percent net profits and disproportionately high market share.
While operational excellence and strong leadership were key to this company’s success, there are a broad range of strategies that will have your brand standing 600 feet above the competition.
What Are You Best At?
When Jim Collins first devised the Hedgehog Concept, the inspiration behind it was Wells Fargo.
Warren Buffett, despite his reservations of the banking industry, had a staggering $290 million investment in Wells Fargo. In Buffett’s words, he said:
“They stick with what they understand and let their abilities, not their egos, determine what they attempt.“
But Wells Fargo has not always been successful. What ultimately led to their success, at the time Collins book was written, is when the Hedgehog Concept became central to Wells Fargo’s strategy.
Prior to their success, they operated their banking activities much like Citicorp, globally stinking up the place. This forced Wells Fargo to ask themselves difficult questions:
- What can we do that is distinctly better than our competition?
- What are we bad at?
Finally, they figured out both the good and the bad.
They realized that if they couldn’t be superior at key revenue-generating activities, then they should stop doing it.
In light of this realization, Wells Fargo halted their international operations and focused on the U.S. operations. They then turned their attention to the one thing they’re good at; running a profitable US bank.
Their solution wasn’t rocket science, but it was brave. They had to abandon their ego to realize success. Imagine how hard it was to accept this sunk cost? This blow to their global reputation.
Yet, when they poured all their resources and energy into what they were really good at, they saw next level success.
That is the simple truth that the Hedgehog Concept reveals to so many people trying to be all things to all people. One big thing is almost always more profitable than a bunch of little things done unprofitably.
Does that mean you shouldn’t strategically diversify your goods and services? Of course not.
It does mean that you should optimize what you’re really good at first, before adding in a new variable. Once you have perfected the art and science of one category, transfer these systems, skills, and abilities to other complimentary verticals.
Be A Hedgehog
To reiterate, the hedgehog concept is not an end to your means rather a means to your end. By intently committing to your ring’s centerpoint, you will find new clarity on what to prioritize for greatness.
In a Sea of Sameness, people are hungry for a brand they can connect with, relate to, and rely on.
The better you are at doing what you promise, the more attractive you become. In no time your community will demand you grow because you are delivering value that far exceeds their expectations.
Delighted customers are loyal, committed, and resolute. They produce your powerful word-of-mouth advertising, unsolicited referrals, and positive 5-star reviews.
After all, who doesn’t love an adorable hedgehog?
Nobody. That’s who.
Book a call with Wizard Ryan Chute if you want to do something about it.
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