Simplicity and the Hedgehog! what a subject to blog about. As I am going through the best performing CEO’s in the decade by HBR, I kept wondering about the single utmost important thing these CEO’s mastered, which put their names there!. What’s the difference between HBR 100 most performing CEO’s and CEO’s in the rest of the world, especially in our part of the world; Middle East!
I recalled that I’ve read something somewhere about simplicity, passion and being the best in the world in your business. I had to turn eventually to Jim Collins ‘Good To Great’, chapter-5 and get refreshed on The Hedgehog Concept!
To put some perspective; Jim wrote: ” In his famous essay ‘The Hedgehog and the Fox’ Isaiah Berlin divided the world into hedgehogs and foxes, based upon an ancient Greek parable:’ The fox knows many things, but the hedgehog knows one big thing’. The fox is a cunning creature, able to devise a myriad of complex strategies for sneak attacks upon the hedgehog. Day in and day out, the fox circles around the hedgehog’s den, waiting for the perfect moment to pounce. Fast, sleek, beautiful, fleet of foot, and crafty – the fox looks like the sure winner. The hedgehog, on the other hand is a dowdier creature, looking like a genetic mix-up between a porcupine and a small armadillo. He waddles along, going about his simple day, searching for lunch and taking care of his home.
The fox waits in cunning silence at the juncture in the trail. The hedgehog, minding his own business, wanders right into the path of the fox. ‘Aha, I’ve go you know!’ thinks the fox. He leaps out, bounding across the ground, lightning fast. The little hedgehog, sensing danger, looks up and thinks, ‘Here we go again, Will he never learn?’ Rolling up into a perfect little ball, the hedgehog becomes a sphere of sharp spikes, pointing outward in all directions. The fox, bounding toward his prey, sees the hedgehog defense and call off the attach. Retreating back to the forest, the fox begins to calculate a new line of attack. Each day, some version of this battle between the hedgehog and the fox takes place, and despite the greater cunning of the fox, the hedgehog always wins”.
The rationale from this story Collins contended is that “Foxes pursue many ends at the same time and see the world in all its complexity. They are scattered or diffused, moving on many levels… never integrating their thinking into one overall concept or unifying vision. Hedgehogs, on the other hand, simplify a complex world into a single organizing idea, a basic principle or concept that unifies and guides everything. It does not matter how complex the world, a hedgehog reduces all challenges and dilemmas to simple-indeed almost simplistic-hedgehog ideas.” Eventually, Collins concluded that: ” You want to know what separates those who make the biggest impact from all the others who are just as smart? they’re hedgehogs…. They took a complex world and simplified it”… Collins quoted names like Freud, Einstein and Adam Smith to mention few.
Though this looks to be very sophisticated long story to emphasize on one thing: Simplicity in business; nonetheless, Collins built on the hedgehog nature to build the three circle hedgehog concept. In this concept, Collins concluded that Good-To-Great companies like Gillette, Kimberly-Clark, Nucor, Circuit City, Walgreens and others, had built their whole strategy and acted like hedgehogs. Collins Hedgehog concept articulates three circles:
- Best Capability
- Economic Engine
The Good-To-Great companies concentrated their efforts and direct their resources to activities where there is great passion. The secret ingredient Collins indicated is that leaders have to identify what ignites people passion and pursue it instead of stimulating it. Executives should engage in continuous dialogue on what to do to transformer their businesses into something that they are passionate about. It’s a collective exercise and requires every genuine input to come up with the next business model or product. The importance of such positive dialogue is that it denies the theories of leadership celebrities, the idea of following blindly new set of directives by newly assigned CEO, who tends to be a celebrity leader. No one has a magic wand, and no one can move forces to deliver in a sustainable and great manner, unless group passion is ignited and nurtured.
Secondly, is the understanding of the organizational capability. Collins contended that companies should focus on what they master doing, they are best at, and dump activities or businesses that they are not best at. He argues that if you want to be the best in your sector, you need to understand your strengths and weaknesses. You have to maximize activities that make you great and not only good. Collins noted that ‘it requires the discipline to say ‘Just because we are good at it, just because we are making money and generating growth, does not necessarily mean we can become the best at it”. He added: “The Good-To-Great companies understood that doing what you are good at will only make you good, focusing solely on what you can potentially do better any other organization is the only path to greatness”.
Finally, companies have to identify their utmost single economic denominator “that had the greatest impact on their economics”. This could be profit per specific parameter, or cash flow per x sector…etc. Understanding this economic engine factor will enable resources utilization, innovative leadership and better handling of corporate investment. The better understanding on your economic denominator; the more insightful is your economic model.
Basically, it narrows all to simplicity. Executives need to be simple and focused. It looks that Collins brought nothing new and people argue that this is common sense. Nevertheless, if we examine few of the financial institutions, real estate corporate or companies into the consumer goods, you would hardly be able to identify their unique denominator… or simply: what does this company do!
Mouaz Aref Al-Zayyat