THE HEDGEHOG CONCEPT

The Hedgehog Concept 

The good to great companies are more like hedgehogs – simple, dowdy creatures that know “one big thing” and stick to it. Consistency

*The Hedgehog concept

Is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:

1. What you can be the best at in the world, and what you can’t?

“They stick with what they understand and let their abilities, not their egos, determine what they attempt.” Warren Buffet about his $290 million investment in Wells Fargo

The hedgehog concept is not a goal, strategy, or intention; it is an understanding.

2. What drives your economic engine?

How to most effectively generate sustained and robust cash flow and profitability

3. What are you deeply passionate about?

Not to stimulate passion but to discover what makes you passionate

You want to find the intersection of what you can be best at, what drives your economic engine, and what you are passionate about. Don’t just settle for what you are good at; focusing solely on what you can potentially do better than any other organization is the only path to greatness.

Economic Insight – “If you could pick one and only one ratio –profit per x (or, in the social sector, cash flow per x) – to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?”

Understanding Passion – Don’t try to inspire passion about what you are doing, do things that we can get passionate about.

*Circuit City’s Hedgehog Concept

To become the best at implementing the “4‐S” model (service, selection, savings, satisfaction) applied to big ticket consumer sales. Its distinction lay not in the “4‐S” model per se – but in the consistent, superior execution of the model. The cumulative value of $1 invested in Circuit City in 1972 would have been worth $311.64 in 1992!