Hedgehog Concept In A Nutshell

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

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 business, Collins argues that a business is more likely to succeed by devoting its resources to one big thing. 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:

  1. 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
  2. What can you be the best in the world at? Determine what the business can do better than any other competitor. Does the business have unique resources or capabilities? Perhaps it has access to economies of scale? 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.
  3. What drives your economic engine? That is, where is a business adept at generating revenue? 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. It is here that 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. Through economies of scale, the company can manufacture solar panels at a lower cost than competitors. 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.

Key takeaways

  • 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

As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman since 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

Read Next: Mental Models, BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

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