“The fox knows many things, but the hedgehog knows one big thing.”
– Isaiah Berlin

In his Good to Great study, Jim Collins says that foxes pursue many ends at the same time and see the world in all its complexity – this leaves them scattered, diffused, and inconsistent. Hedgehogs on the other hand, simplify a complex world into a single organizing idea – a basic principle or concept that unifies and guides everything. In short, they see what is essential, and ignore the rest.

The second part of Disciplined Thought is to learn what it means to develop a Hedgehog Concept – this is a simple, crystalline concept that flows from a deep understanding of the overlap between the following three circles:

1. What you can be the best in the world at (and, just as important, what you cannot be the best in the world at).

2. What drives your economic engine.

3. What you are deeply passionate about.

“If you make a lot of money doing things at which you could never be the best, you’ll only build a successful company, not a great one. If you become the best at something, you’ll never remain on top if you don’t have intrinsic passion for what you are doing. Finally, you can be passionate all you want, but if you can’t be the best at it or it doesn’t make economic sense, then you might have a lot of fun, but you won’t produce great results.”
– Jim Collins, Good to Great

Collins observed that all of the companies that made the leap into greatness had identified the thing that they could be the “best in the world” at. It is important to note that most of them weren’t already the best at any one particular thing – but, they had identified what they can be the best at, and simplified their efforts to focus on that one thing.

The comparison companies in the study did not do this. In fact, not only did they fail to identify what they could be the best at, they also didn’t face the brutal facts that showed that it was impossible for them to be the best at what they were currently doing. They got stuck in the “curse of competency” and failed to realize that just because they were “good” at something doesn’t mean they could be the best at it.

The second circle is identifying what drives your economic engine. This is a fairly simple formula: 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? 

The “denominator” equation serves as a mechanism to force you to take a deeper look at the key drivers of your economic engine. Yes, you can have more than one “x,” but the point (more than the denominator itself) is to gain greater insight into your business. This will ultimately lead to better decisions, and a more robust economic engine.

Lastly, what are you passionate about? It doesn’t have to be the mechanics of the business itself – it can be something as simple as what the business stands for. The point is, there must be some sort of passion attached to what you are doing. This is also where the right people come in – you can’t teach, instill, or motivate passion into people. They either have it or they don’t.

Interestingly, all the Good-to-Great companies that Collins studied took an average of 4 years to figure out those three circles. Where are you in the process? Are any of these circles easy, no-brainers for you? Is there a circle that seems like it might be kind of difficult to nail down? Don’t do it alone! Involve others in these discussions, and take your business from good to great!

“The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.”
– Proverbs 21:5 (ESV)