The hedgehog concept is a simple yet powerful framework for individual or business success. The hedgehog concept was created by Good to Great author and business consultant Jim Collins. The book is based on an ancient Greek parable about a hedgehog and a fox, stating that “the fox knows many things, but the hedgehog knows one big thing.”
- Understanding the hedgehog concept
- The three circles of the hedgehog concept
- Hedgehog concept case study
- Hedgehog Concept vs. Mandela Effect
- Hedgehog concept example: Nike vs Adidas!
- Key takeaways
- Connected Business Concepts
Understanding the hedgehog concept
In the parable, the fox attempts to catch the hedgehog using a variety of strategies that fail.
Ultimately, the fox is defeated because the hedgehog does one thing well: defend itself.
In the next section, we will look at how a business can determine what that big thing is.
The three circles of the hedgehog concept
The hedgehog concept is based on three circles. Each of the three circles begins with a question:
What are you deeply passionate about?
In the first circle, a business should define its core values to identify work that inspires them.
Deep passion is important in building an authentic and sustainable brand.
What can you be the best in the world at?
Defining a competitive advantage means that an organization must also identify its weaknesses.
In so doing, the business avoids spending time on money on initiatives that will never succeed.
What drives your economic engine?
Examples of revenue generation include products, services, and other resources.
Whatever the driver, it must have a measurable and sustainable impact on cash flow and profits.
After completing the three circles, the business must identify where each overlaps.
Hedgehog concept case study
Here, the hedgehog concept in the form of a central company vision will be located.
Consider the example of a company that is passionate about innovation and sustainability in third world countries.
Although primarily operating in the UK, the company also has contacts in certain charitable organizations with a presence in Africa.
Therefore, a potential hedgehog concept may involve selling cheap and affordable electricity units to the African population.
Utilizing bulk orders, the solar panel company works passionately toward its goals while still making a profit.
In summary, businesses should note that the hedgehog concept does not provide a blueprint for becoming the best at something.
Instead, it gives insight into what a business could be best at given the common, intersecting information in each of the three circles.
Hedgehog Concept vs. Mandela Effect
Hedgehog concept example: Nike vs Adidas!
In the first hedgehog concept example, we will revisit the so-called Sneaker Wars that started in earnest between Nike and Adidas in the 1970s.
What is the company deeply passionate about?
When Phil Knight’s company Blue Ribbon Sports became Nike in 1971, Adidas was a vast, international brand that had been in operation for almost 50 years.
Both companies opted to sell shoes via collaborations or partnerships with major athletes, but Nike was far more passionate about the shoes themselves than its German competitor.
Knight was a track-and-field runner at the University of Oregon, and it was there he met coach and eventual business partner Bill Bowerman.
Both men became obsessed with making a shoe that runners would find comfortable, durable, and nimble.
They initially imported better quality shoes from Japan and sold them in the United States, but with a team of dedicated individuals behind them, the pair decided to end the arrangement and strike out on their own.
This was the sort of passion that had Bowerman develop The Waffle Trainer – the first prototype Nike shoe whose sole was inspired by the grooves in his home waffle maker.
Nike is also passionate about winning. Its first brand ambassador – runner Steve Prefontaine – shared this passion and since he was a native Oregonian, Knight believed he would best represent the company’s core spirit.
What is it the best in the world at?
One may assume that Nike is the best in the world at developing shoes, but this only tells part of the story.
Nike’s passion for shoes meant it had a product that was more durable than the Adidas equivalent. But how to match the German company’s reach?
If Nike is the best at anything, it is the ability to create sponsorship and endorsement deals in numerous different sports.
This started when Nike took a chance on emerging basketballer Michael Jordan in 1985 and continued into the 1990s as the company expanded into Europe.
To do this, Nike skilfully aligned itself with football and took advantage of the cult-following and strong sense of allegiance the sport enjoys.
The company managed to insert itself into youth clubs, local teams, and national teams to take market share away from Adidas.
When Brazil won the 1994 World Cup wearing Nikes, the popularity of the brand gained momentum and, as Knight had intended, became associated with winning.
Nike then repeated the process in other sports such as golf and tennis which were backed by endorsements from Tiger Woods and Roger Federer respectively.
What drives the company’s economic engine?
Nike’s economic engine is driven by its low-cost structure and wide brand appeal across multiple markets.
One can purchase Nike apparel in Walmart, for example, but the company has also collaborated with premium brands such as Louis Vuitton, Balmain, and Dior.
Today, 66% of Nike’s revenue comes from footwear with profits dependent on whether the customer buys direct or via some third-party retailer.
Retailer markup often consumes a fair chunk of the profit on a pair of shoes in the latter case, which has prompted Nike to make direct purchases more attractive.
To that end, the company has invested in direct-to-consumer (DTC) sales by closely replicating the store experience online.
This has proved lucrative, with DTC revenue up 14% to $18.7 billion in the fiscal year 2022.
- The hedgehog concept provides a simple yet clear focus for business success, allowing it to devote resources to a single unifying vision.
- The hedgehog concept is represented by three intersecting circles. Each circle asks important questions that help a business identify passions that are profitable and result in a competitive advantage.
- The hedgehog concept does not provide a concrete strategy on how an organization might realize success. But it does illustrate the potential benefits of a business adopting hedgehog concept principles.
Connected Business Concepts
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Model.