Most businesses try to be many things to many people. They chase multiple opportunities, develop numerous capabilities, and spread resources across competing priorities. This approach feels productive but often leads to mediocre performance across all areas rather than excellence in any.
The Hedgehog Concept offers a fundamentally different approach based on finding the single focus where you can excel beyond all competitors. In this edition, we’ll break down Jim Collins’ Three Circles Framework, show you how to identify what your business can truly be best at, and share real-world examples of companies that used this concept to achieve excellence.
What Is The Hedgehog Concept
The Hedgehog Concept, developed by Jim Collins in “Good to Great,” argues that breakthrough performance comes from a deep understanding of three intersecting circles – what you can be best in the world at, what drives your economic engine, and what you’re deeply passionate about.
The power lies not in each circle individually, but in finding the intersection of all three. That intersection becomes your Hedgehog Concept – the simple, crystalline principle that guides all decisions and resource allocation.
The Three Circles Framework – What You Can Be Best In The World At
This isn’t about what you want to be best at or what you’re currently good at. It’s a rigorous assessment of where you have the potential to achieve genuine world-class capability. Most companies struggle with this question because it requires brutal honesty. You might be good at many things, but in which specific area could you realistically become better than any other company?
This question also requires understanding what you cannot be best at. Acknowledging these limitations is crucial because they help you stop wasting resources on areas where excellence isn’t achievable.
What Drives Your Economic Engine
Understanding your economic engine means identifying the single denominator that has the greatest impact on your financial performance. This isn’t revenue or profit directly. It’s the underlying driver that most influences those outcomes.
For some companies, it’s profit per customer. For others, it’s profit per employee, per transaction, or per location. The key is finding the single metric that, if improved, would have the most dramatic impact on your financial results.
What You’re Deeply Passionate About
This circle represents what genuinely excites and energises your organisation. Not what you think should excite you, but what actually does. Passion sustains the long-term effort required for excellence.
Without genuine passion, the discipline required to become the best in the world becomes exhausting rather than energising. With passion, that same discipline feels purposeful and engaging.
How Companies Identify What They Can Be Best At
Discovering what you can be best in the world at requires rigorous analysis, honest assessment, and often, uncomfortable conversations.
Challenge Your Current Strategy
Most companies assume their current strategy reflects their best potential. But often, the current direction was chosen for historical reasons that no longer apply or opportunistic reasons that don’t align with genuine capability.
Start by questioning everything about your current approach. If you were starting fresh today with your current resources and knowledge, what would you focus on?
Assess Relative Capability
Being best in the world doesn’t require being best at everything. It requires identifying a specific dimension or niche where your capabilities significantly exceed competitors. This might be a particular customer segment, a specific type of problem, a unique approach, or a distinct business model. The key is specificity. Broad categories like “customer service” or “innovation” are too vague to provide strategic direction.
Look For Unique Combinations
Sometimes being best in the world comes from combining capabilities in ways competitors can’t or won’t match. You might not be best at any single element, but your particular combination creates unmatched value.
Test Through Comparison
For each potential focus area, ask “Could we become demonstrably better at this than any company we might reasonably compete with?” If the honest answer is no, that’s not your Hedgehog Concept.
Examples Of Successful Hedgehog Concept Application
Abbott Laboratories – Building A Product Portfolio
Abbott discovered they could be the best in the world at creating a portfolio of products that would last. Their economic engine was profit per product. They became excellent at developing and acquiring products with long lifecycles, then managing those products efficiently.
This focus meant saying no to blockbuster drugs with short lifecycles and yes to steady, reliable products that could be managed effectively for decades.
Wells Fargo – Running A Bank Like A Business
Wells Fargo realised they could be the best in the world at running a bank like a business, focused on profit per employee. This seemingly simple insight drove dramatic strategic shifts, including emphasis on productivity, efficient operations, and careful cost management.
Implementing Your Hedgehog Concept
Discovering your Hedgehog Concept is just the beginning. Implementation requires discipline, patience, and a willingness to say no to opportunities outside your focus.
Use It As A Decision Filter
Every significant decision should pass through your Hedgehog Concept. Does this opportunity fit the intersection of all three circles? If not, it’s a distraction regardless of how attractive it seems.
This filtering is vital for growth opportunities. Many companies destroy value by pursuing growth outside their Hedgehog Concept rather than deepening excellence within it.
Align Resources Ruthlessly
Direct your best people, capital, and attention toward activities that strengthen your position within your Hedgehog Concept. This often means defunding or eliminating activities that fall outside it, even if they’re currently profitable.
Develop Deep Expertise
Becoming the best in the world requires depth of capability that takes years to develop. Commit to building genuine excellence rather than chasing quick wins or pivoting to new focus areas whenever challenges arise.
Measure Progress Systematically
Track your progress toward becoming the best in the world at your chosen focus. Are you improving relative to competitors? Are you developing the capabilities needed for genuine excellence?
Common Implementation Challenges
Impatience With Focus
Many leaders understand the Hedgehog Concept intellectually but struggle with the patience required. Becoming the best in the world takes time, often years. The temptation to add adjacent focuses or pursue tangential opportunities is constant.
Confusing Good With Great
Some companies settle for being good at their chosen focus rather than pushing toward genuine excellence. Being good isn’t enough. The Hedgehog Concept requires commitment to becoming demonstrably better than competitors.
Resistance To Saying No
Perhaps the hardest part of the Hedgehog Concept is declining opportunities that don’t fit. This requires discipline that feels counterintuitive, especially when those opportunities appear profitable or strategically interesting.
The Strategic Power Of Simplicity
The Hedgehog Concept’s power lies in its simplicity. By focusing deeply on the intersection of what you can be best at, what drives your economics, and what you’re passionate about, you create clarity that guides every decision and focuses every resource.
This clarity enables the consistent, focused execution that creates a genuine competitive advantage. While competitors spread resources across multiple priorities, companies with clear Hedgehog Concepts compound their advantages through sustained focus. The result isn’t just better financial performance. It’s the creation of organisations that achieve excellence and sustain it over time.
Thank you for being part of our Business Life community. If this has changed how you think about strategy and focus, share it with a leader grappling with strategic direction. If there’s a topic you’d like us to explore in future newsletters, let us know. Let’s keep building clarity that drives breakthrough performance.
Live with purpose,
