Where's Your Hedgehog?

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Grow or Die! - Part 2

Competing Successfully Requires Growing Effectively

In my previous post, I wrote about the need to grow or else your business could be left behind in this challenging, always changing marketplace. Some of you may have read that and said to yourself that your goal is not to get big. I understand that, because every small business owner doesn't necessarily have a goal or desire to become a "big" business owner. Regardless of whether or not you want to get bigger as a company, you still have to be able to outperform your competition if you plan on being in business for a long time.

One of the keys to outperforming your competition is differentiation. Another way to say differentiation is competitive advantage. Your competitive advantage can be demonstrated in various areas of your business, including product innovation, service quality, marketing, pricing, or operational efficiency. If you are able to effectively leverage the value of your differentiation or competitive advantage with your customers, you will be well on your way to growing a healthy company.

You may be asking how the title of this post relates to differentiation. I recently wrote a post entitled, "Turn a Great Idea into a Great Business", in which I explained how entrepreneurs could incorporate into their businesses best practice principles from the book Good to Great written by Jim Collins. The "Hedgehog Concept", one of the key principles that Collins details in the book, is a powerful model that a small business can use to develop a differentiation strategy. Let's take a closer look at this concept.

"Hedgehog Concept"

As Collins describes it, for a business leader the Hedgehog Concept represents three intersecting, critical decision-making criteria that all current and new strategies, plans, and ideas must satisfy before they are approved or implemented:
  1. What is our company deeply passionate about?
  2. What can our company be the best at doing?
  3. What are our economic drivers, i.e. products or services that will generate consistent cash flow and profits?
So, why is this concept called a "hedgehog?" On pages 90-91 in Good to Great, Collins describes the reasons why he chose this nondescript animal to represent this concept. A key characteristic about a hedgehog is that it only has one response to danger, which is to protect itself by rolling up into a ball with its spikes protruding. In describing how this relates to leaders of "great" companies, he writes:
"[Hedgehogs] simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It doesn’t matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple - indeed almost simplistic - hedgehog ideas. For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance... They understand that the essence of profound insight is simplicity... Hedgehogs see what is essential and ignore the rest."
(Collins identifies Albert Einstein and Adam Smith as two examples of hedgehogs, because of their ability to boil down complex concepts into simple yet powerful ideas.)

As it relates to growing your business, the issue is not about what you could do, but what you should do. If you have a current strategy or new idea that only satisfies one or two of these questions, your business model is not balanced. Companies that lack passion, skills, and/or profits might be able to operate like that in the short term, but eventually they will have major problems, because anything that's not balanced will fall over in time.

The criteria for any new strategy, idea or opportunity into which you would invest time, money, or people should be that you can answer all three questions confidently. So, as you think about how to grow your business, I encourage you to spend some quality time wrestling with these questions in order to find your business hedgehog. Then you'll really be ready to grow!

Empowering Champions,
Paul Wilson, Jr.

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