Ep 427 | Are You a Fox or a Hedgehog Leverage

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off podcast, where we believe that every single day brings a new opportunity to get better. Let's dive right into the Hedgehog Concept, this concept that was developed by Jim Collins, who's the author of Good to Great. Uh, it's this business strategy framework that he teaches, that he talks about in the book, he talks about all over the place. And really what it does is encourage us, encourage companies to focus on what we can be best at versus spreading ourselves too thin across multiple areas. It comes from this, uh, this idea that the fox— the fox, the animal— the fox knows many things, but the hedgehog knows one big thing. The fox knows many things, the hedgehog knows one big thing. So the concept divides companies and people into really two different types. The foxes who pursue many goals at once and the hedgehogs who concentrate on one essential mission or one essential idea. Jim Collins, who has studied what makes for a great company, has determined through his research over the many years and decades he's been doing it, that companies that operate like hedgehogs that focus really deeply on their core strengths, they actually outperform their competitors. So the Hedgehog Concept, which I find fascinating, it's something I've been working through myself in, in a handful of different businesses. It involves really identifying where these three circles intersect, these three circles that kind of— the intersection is the sweet spot, and that's where the company, where your company, can achieve Sustainable greatness is what Jim Collins would call it. So, the 3 circles. First, you've got this, the first circle, I'll call it what you're passionate about. So, in this particular circle, you're gonna write what you're passionate about, what your company is passionate about. This is the area of business that gives you energy, gives the company energy, excites you, excites the company. Jim Collins would tell you that being good at something isn't enough for lasting success. He met many a company that were good at something, but it didn't necessarily make for lasting success. It was passion. Passion was necessary to sustain focus and inspire a company over time. So, in this very first circle, if you're working through this exercise, and I think we're gonna throw in the show notes a worksheet, so be on the lookout for that. Like, go below to the show notes below the actual podcast that you clicked on there. The episode you clicked on, and you'll find a worksheet around this. But in the first circle, you're gonna put what you're most passionate about in business. What gives you energy? What excites you? In the next circle, what can you be best at in the world? Like, what can you literally be best in the world at? So, it goes beyond just being good. It's about identifying your company's or your unique strengths and capabilities that can make you or your company the best in a particular field or in a particular area. Companies should concentrate on what they could truly excel at rather than spreading resources thinly over various markets. So what can you be best in the world at? I liken this to kind of the student that has, say, 2 A's, 2 B's, and a C. A lot of times in school, where do they focus their time and energy? They focus on the C to try to get it up to maybe a B or A. And what I'm saying here in this particular situation is, don't totally forget about that C, but maybe take one of the areas in which you have an A and double or triple down on that and become best in class at it, best in the world at it. So, remember, Circle 1 is what you're passionate about. Circle 2 is what you can be best in the world at. Now, Circle 3 is what drives your economic engine. This is the area that focuses on the financial aspect. So, find the areas or the metrics that best fuel a company's profitability and fuel its long-term economic success. That's what goes in Circle 3. So, maybe this is a key metric or maybe it's a profit per unit. Profit per customer, profit per transaction, whatever it may be, whatever it is that drives your sustainable growth, your financial growth. So when these three elements, remember, what you're passionate about, what you can be best in the world at, and what drives your economic engine, when these three elements intersect, the Hedgehog Concept gives you a clear focus direction that aligns with your company's goals, aligns with your company's decisions, with its greatest potential for impact. So the idea here is again to get focused like a hedgehog as opposed to be spreading thin like a fox. Let's give a couple company examples that you could consider. Apple's always one that sticks out to me. What is Apple's passion? Uh, Steve Jobs had a deep commitment to elegant, user-friendly design, creating seamless experience across devices. This is their passion. It was think differently, but it was to give a different experience. And the passion drove the company culture and it fuels its innovation even still today. Now, what's it— what could it be best in the world at? Well, Apple is best in the world at integrating hardware, software, and services. And as a result, it creates these beautifully designed, high-performance products, but it also creates this amazing ecosystem. So they don't have to try to make every type of tech product. Instead, they concentrate on specific areas— smartphones, computers, tablets— and they do them exceptionally well. So they're best in the world at integration of hardware, software, and services within their products, and their product list is relatively short. Now, their economic engine is really the revenue generated per device sold. So again, they create these high-quality, premium-priced products. They've got an amazing ecosystem and dedicated customer base. And so Apple ultimately aims to maximize its profit per customer. Now, what's the outcome of all this? The outcome is that Apple's focus on its core strengths has made it one of the most valuable companies in the world of all time. They didn't diversify too broadly. They've stuck to a limited number of pretty high-quality products in an integrated ecosystem. This is the hedgehog concept at work. Maybe another great example, Southwest Airlines. What's Southwest Airlines? Now, Southwest has struggled a little bit as late— as of late, but let's just look at Southwest historically. Their passion lies in making air travel accessible, friendly, and reliable, especially for budget-conscious customers. So, they've always taken this simple, no-frills service approach and this customer-friendly approach. That's what they're passionate about. What are they best in the world at? They're best at offering affordable, efficient, and reliable flights. They don't serve food. They don't have assigned seating, at least they haven't up until this point. They have a great, um, uh, number of cities in which they serve. Costs are pretty low. They're pretty competitive. So what are they best at? Offering affordable, efficient, reliable flights. And then lastly, what's their economic engine? It's profit per airplane. And why do they focus, or how do they go about focusing on that? They have a super high utilization rate. They have a very cost-effective model. They only fly one type of aircraft, which is that Boeing 737. They focus on shorter direct flights. So that minimizes cost, maximizes turnaround time. So profit per airplane. So the outcome here, by adhering to this kind of simplified low-cost model that they're passionate about, concentrating on high-usage domestic routes, They've been one of the most profitable airlines in the industry. They don't mimic everybody else. They haven't yet. And that's the power of the hedgehog concept. So, for you, what should you be thinking about? You've got to identify your company's core passion. Goes without saying. So, one way or another, be it workshopping or talking with your leadership team or surveying your people, what are you guys most passionate about? In addition, what are your strengths? What are you really good at, right? Like, what differentiates you from, from the competition? Next, I'd say, like, how are you making your money? What's your primary economic driver? Like, what are the metrics that most affect your profitability? I'd also be considering, um, what are your company's goals? What are its projects? And ultimately, how do all of these things play into this hedgehog concept. In other words, how can you get more focused? How could you have greater clarity on what separates you from the pack, making you a hedgehog in your focus versus a fox? So the focusing question for you today, it's really 3 questions. It's the hedgehog concept. What are you passionate about? What can you be best in the world at? And what drives your economic engine? And where those 3 circles intersect That is likely the area of focus that could make you— take you, I should say, from a good operator or a good company to a great one. That's all I have for you today, the No Days Off Podcast. Thank you so much for listening. And remember, every single day brings a new opportunity to get better. So let's get after it.