A Successful Strategy According to the Hedgehog Concept

2020 will be mentioned in our books as a turbulent year. A year where many companies had to make painful choices, but also where a few flourished. In my opinion, this is a good reason to highlight the “Hedgehog Concept”, because it offers a good foundation for omnichannel and e-commerce organizations that want to make a difference.

At the origin of this concept is author and researcher Jim Collins. In his book “Good to Great” (2001) he explains why some companies make the leap “from good to great”, and others do not.

The hedgehog and the fox

In his book, Collins quotes part of a famous essay by Isaiah Berling called “The Hedgehog and the Fox.” Berlin divides the world into hedgehogs and foxes, based on the ancient Greek reasoning that “the fox knows everything, but the hedgehog knows one big thing”. Collins substantiates this statement with the following explanation:

The fox is a cunning creature that can devise a large number of complex strategies to make the hedgehog its prey. Day in and day out, the fox circles around the hedgehog’s burrow, waiting for the perfect moment to attack. Fast, streamlined, beautiful, smooth and cunning; the fox looks like the sure winner. The hedgehog, on the other hand, is a worse creature, which looks like a genetic confusion between a porcupine and a small armadillo. He waddles on, does his simple day, seeks lunch and takes care of his home.

The fox waits in cunning silence for the confrontation. The hedgehog, busy with his own business, wanders straight into the path of the fox. “Now I have you!” the fox thinks. He jumps up very quickly. The little hedgehog, feeling danger, looks up. “Here we go again. Will the fox ever learn?” thinks the hedgehog. The hedgehog transforms into a perfect ball full of sharp points. The fox runs towards its prey, sees the hedgehog defenses and ceases its attack.

Application to strategy

Now imagine a sober meeting room at a medium-sized retail company. The company’s leaders have met to discuss how Covid-19 has affected the company, what the upcoming election could do to the company, and what they need to do next.

There are several discussions. Ideas fly around. Some want to chase the competition, others believe that new technology is the answer. Still others propose to hire or fire workers. Each person advocates for her point of view and gives good reasons for their approach until no one is sure what the company should do. The problem in this scenario may be that there are too many foxes and not enough hedgehogs.

Foxes pursue many goals at once and see the world in all its complexity. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle, or a concept that unites. No matter how complex the world is, a hedgehog reduces all challenges and dilemmas to simple… “hedgehog ideas”.

Those who built the companies “from good to large” were hedgehogs to some extent. They drove their companies forward on the basis of the “Hedgehog Concept”. Reference companies that failed to do so were mostly foxes, leading in a fragmented, diffuse and inconsistent manner.

Because leaders struggle to manage the many and different challenges, it is a proven solution to simplify this complexity.

The “Hedgehog Concept” diagram

In “Good to Great,” Collins doesn’t tell readers what their specific “Hedgehog Concept” should be, but refers to the diagram below, where three circles (or dimensions) are represented. These are also questions that a company can ask itself in order to develop a simplistic and clear business strategy.

  1. What are you deeply passionate about? What do you enjoy doing, and what best reflects your values?
  2. What can you be the best in the world at? And just as importantly, what can’t you be the best in the world at?
  3. What drives your economic engine? How can you develop a sustainable “economic engine” to deliver superior performance over your mission? What are the things you can do that are an important added value for the organization?

Context is important here. Collins speaks directly to business leaders who want to build great companies and outperform the competition. A company that is satisfied with its market share does not necessarily have to focus on what it can do best. But an omnichannel or e-commerce retailer that strives for greatness can only really focus on what they can do better than almost any other business.

Competence alone is not enough. If the company is not passionate, it will not retain the necessary energy and drive. Similarly, if what a company is passionate about and good at doesn’t bring in profits, it won’t be great.

When a company manages to identify its “Hedgehog Concept”, it has one of the ingredients of a distinctive and successful business. It forms a simple and therefore understandable strategy, which will lead to difficult decisions. This is true even in a year like 2020.

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