HEDGEHOG CONCEPT

HEDGEHOG CONCEPT

Isaiah Berlin divided the world into.

Look it just wasnt that complicated! Once we understood the concept, we just moved straight ahead. Cork WalgreenA very simple strategy: Convenient stores with high profit per customer visitImplemented it with fanatical consistencyEasy entrance/ Corner lotsDrive-through PharmaciesClose by stores

Growth for the sake of growthLeapt at opportunities to acquire clumps of storesNo unifying themeFailed to see what Walgreens saw:Profitable growth would come by getting rid of what did not fit with the Hedgehog conceptResult ceased to exist as an independent company

VSThe 3 circles

1. Be the BestThey stick with what they understand & let their abilities not their ego determine what they attempt -Warren Buffet Focus on what you can be the best at & what you cannot be the best atBeing good at something doesnt mean you can be the bestStay away from things that you can be just good at.Be critical on what you want to be the best at.

When dealing with the Hedgehog concept, it is not a goal to be the best or a plan to be the best, it is an understanding of what you can be the best at

Wells Fargo As A HedgehogTried to be a global bank mediocre standingExecutives began to question what they were better at than others & what can they not do Set their ego aside & accepted Citicorp was better than them in global bankingCleared the path for them to see their potential to be the best was in;Running the bank like business, with a focus on western US

2. Insight Into Your Economic Engine -What is your denominator? Each good-to-great company builds a fabulous economic engine, regardless of how great the industry is.

Find Economic Denominator The key is to find which single denominator (of a ratio) will maximize your economic engine.

WalgreensSwitched focus from profit per store to Profit per customer visitWalgreens was able to increase convenience (9 stores in a mile!) and simultaneously increase profitability across its entire system

Kroger: per local populationKey Insight: Shift from profit per store to profit per local population reflected the insight that local market share drove grocery economics. If you cant attain number one or number two in local share, you should not play.

Wells Fargo: per employeeKey Insight: Shift from profit per loan or profit per deposit to profit per employee reflected understanding of the brutal fact of deregulation: Baking is a commodity.

Applying the Economic DenominatorAll the good-to-great companies discovered a key economic denominator , while the comparison companies usually did not.

Hasbro (Comparison Company) Became best in the world at acquiring and renewing tried-and-true toys, reintroducing and recycling them at just the right time to increase profit per classic brand (Hasbros economic denominator) Formed all three circles of the Hedgehog Concept and was the best performing comparison company in the study.

3. Understanding your passionPhilip MorrisRoss Millhiser Vice Chairman of Philip Morris in 1979. I love cigarettes. Its one of the things that make life really worth living.A Board Member said:We have a right to smoke, and we will protect that right!

R.J. ReynoldsFocused on acquisitions rather than passion or being the best cigarette company.In contrast:They saw tobacco as just of way to make money.

You cant manufacture passion or motivate people to be passionate.

You can only discover what ignites your passion and the passions of those around you.

Gillette-Sophisticated, relatively expensive shaving system rather than cheap disposable razors.- People who arent passionate about Gillette need not apply

You dont have to be passionate about the mechanics of the business per se, but the passion circle can be focused equally on what the company stands for.

THE TRIUMPH OF UNDERSTANDING OVERBRAVADO

FOG METAPHORPRE-HEDGEHOG STATEPOST-HEDGEHOG STATEUSAGE OF METAPHORCOMPARISON CO. STILL IN FOG

PURSUIT OF GROWTHGROWTH- NOT A HEDGEHOG CONCEPTOVER 2/3RD OF COMPARISON CO. OBSESSED WITH GROWTHIF YOU HAVE THE RIGHT HEDGEHOG CONCEPTYOUR MAIN PROBLEM WILL NOT BE HOW TO GROW, BUT NOT HOW TO GROW TO FAST

HEDGEHOG TIMELINETURNING POINTTRANSITION PERIODTAKES ABOUT 4YEARSUNDERSTANDING THE HEDGEHOG CONCEPTCONCEPT SIMPLIFIESAN INHERINTLY ITERATIVE PROCESSESSENCE OF THE PROCESS

UNDERSTANDING THE HEDGEHOG CONCEPT

UNDERSTANDING THE HEDGEHOG CONCEPTDEVICE MECHANISM- THE COUNCILWHICH CONSISTS OF

UNDERSTANDING THE HEDGEHOG CONCEPTQ: HOW DO WE ACCELERATE THE CONCEPT OF GETTING A HEDGEHOG CONCEPT?Q: DOES EVERY ORGANIZATION HAVE A HEDGEHOG CONCEPT TO DISCOVER?CONCLUSIONKEY IS TO UNDERSTANDNOT A GOAL, STRATEGY OR INTENTIONSEARCH FOR ONE DENOMINATORSET GOALS ON UNDERSTANDING NOT BRAVADOIT IS AN ITERATIVE PROCESS WHERE COUNCIL IS HELPFUL

THE END.