Friday, September 03, 2010

The Hedgehog Concept (Simplicity within the Three Circles)

In honor of Labor Day Weekend here are my favorite quotes from Chapter 5 - The Hedgehog Concept (Simplicity within the Three Circles) from Good to Great by Jim Collins.

Hedgehogs – simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guide everything.

For a hedgehog, anything that does not somehow relate to the hedgehog idea holds no relevance.

Hedgehogs see what is essential, and ignore the rest. (91)

[take] one simple concept and just [do] it with excellence and imagination. (93)

The Three Circles of the Hedgehog Concept
What you Can be the best in the World at?
What Drives Your Economic Engine?
What you are deeply Passionate About? (96)
And if we can’t be the best at it, then why are we doing it at all? (97)

A Hedgehog Concept is…an understanding of what you can be the best at. (98)

…if you cannot be the best in the world at your core business, then your core business cannot form the basis of your Hedgehog Concept. (99)

Suffering from the curse of competence but lacking a clear Hedgehog Concept, they rarely become great at what they do.

…[focus] solely on what you can potentially do better than any other organization is the only path to greatness. (100)

Our study clearly shows that a company does not need to be in a great industry to become a great company.

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? (104)

…pushing for a single denominator tends to produce better insight than letting yourself off the hook with three or four denominators. (105)

…the sake of gaining insight that ultimately leads to more robust and sustainable economics. (106)

If you successfully apply these ideas, but then stop doing them, you will slide backward, from great to good, or worse. The only way to remain great is to keep applying the fundamental principles that made you great. (108)

You can’t manufacture passion or “motivate” people to feel passionate. You can only discover what ignites what ignites your passion and the passions of those around you. (109)

The passion circle can be focused equally on what the company stands for. (110)

..[ask] the right questions – prompted by the three circles

…not one of the good-to-great companies focused obsessively on growth. (111)

…if you have the right Hedgehog Concept and make decisions relentlessly consistent with it, you will create such momentum that your main problem will not be grow, but how not to grow too fast. (112)

It took about four years on average for the good-to-great companies to clarify their Hedgehog Concepts.

…getting a Hedgehog Concept is an inherently iterative process, not an event.

Do we really understand what we can be the best in the world at, as distinct from what we can just be successful at.

Do we really understand the drivers in our economic engine, including our economic denominator?

Do we really understand what best ignites our passion? (114)

…consensus decisions are often at odds with intelligent decisions. (116)

To get insight into the drivers of your economic engine, search for the one denominator (profit per x or, in the social sector, cash flow per x) that has the single greatest impact. (119)

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