Are You a Hedgehog?
Deciding what products and services to offer your target market is a decision that most entrepreneurs are familiar with. But as I talk with experts in a variety of fields and industries, I have discovered that too often this decision follows more of a “Hey, there’s something shiny” approach where individuals simply choose to “follow the money.”
With that approach, it really becomes less of a decision about what your core capabilities are and more a decision of “How can I potentially generate some revenue quickly?”. While this type of pursuit seems logical, it can often lead to some big problems down the road. When the “shine” is gone, you might have some extra money in the short term, but you have done nothing to build and grow your core capabilities—those things that separate you from the pack.
An overdue exercise for many companies is to stop and clearly identify what they really want to focus on. Once that is done, it gives way to clear guidelines as to what opportunities I will pursue (aligned with my core capabilities), and which will I pass on (just another something shiny).
In today’s economy, it is becoming increasingly difficult for small companies to succeed by trying to be “all things to all customers.” So if you can’t do everything, how do you decide what to do?
Be Like the Hedgehog
In one of the best business books of my generation, Good to Great, Jim Collins introduces an idea he calls the Hedgehog Concept®. The concept originates from an ancient Greek parable about foxes and hedgehogs. The fox is clever and knows a little about a lot of things, while the hedgehog doesn’t know about a lot of things, but does know one big thing really well. So while the fox continually comes up with new ideas to eat the hedgehog, the hedgehog defeats him every time out by doing just one thing: rolling up into a thorny ball.
The lesson is a good one: you cannot become great being the “jack of all trades”— especially when you are a small business. Your business needs to have a core set of capabilities to become great. So how do you determine what to focus on and as is important, what to say “no” to?
Collins contends and his research supports that the answer lies in the intersection of three circles given in the Venn diagram below.
Three Key Questions
The three questions you must ask are first: “What can you become best in the world at?” What do you do really well, and perhaps better than anyone else. The second question is: “What drives your economic engine?” What are the most profitable ways that you generate revenue? Last, but by no means least, is the third and final question: “What are you passionate about?” What excites you? What wakes you up at night with new ideas? What gets your motor going every work day?
Your greatness lies at the intersection of these three circles. But getting there is a process, not an event. It’s not something you can do in a meeting or retreat. You can and should start there, but finding your own Hedgehog takes time.
For me and my first company, it took almost five years to get to that place. But, once we got there, everything fell into place and great things started to happen. We eliminated two of our four lines of business and reduced our portfolio of sales training offerings from 18 to only two. The result was a three-fold increase in our revenue, profit, and market share.
What About You?
I’d encourage you to take some time away from the grind to think about your response to these three very important questions:
- What am I the best or what could I become the best in the world at?
- What activities generate (or could generate) the most profitable revenue for me?
- What activities am I doing (or could be doing) that I am really passionate about?
Pretty deep questions if you stop and think about them. And if you can design your business around the intersection of your responses … you’ve found your “sweet spot.”