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The Hedgehog Concept

Choose a Winning Business Strategy: Price, Product, or People?

Many brilliant corporate strategy gurus have created and tested interesting theories about how businesses can best compete regardless of their stage. They suggest that there are three generic strategies for business growth. They assigned different names to their strategies, but in a nutshell, it all boils down to this:

  1. Price: Winning through Cost Leadership/Operational Excellence

  2. Product: Winning through Product / Brand Differentiation

  3. People: Winning through Client Focus/Client Intimacy

Good and Bad News

The good news is that if you want to profitably grow your business, you only have to remember those three strategies. The bad news? You have to pick one.

One could argue that all three strategies— low price, product differentiation, and customer focus— are important, and they are. But they are often at odds, and that is what makes choosing a business strategy such a challenge. For example, it is practically impossible to be a low-price competitor AND differentiate by offering a category-leading, quality product. Bells and whistles usually cost more to produce, and this is where many companies fall; they get stuck in the middle between two or more strategies. That is why you have to commit to one plan and stick with it.

The Hedgehog

As a business leader, you want to emphasize and promote your main strategy above all else, since it will guide the decision-making of everyone in the company. In Good to Great, Jim Collins discusses Isaiah Berlin’s essay, The Hedgehog and the Fox, which is based upon the Greek poet Archilochus’ assertion that “the fox knows many things, but the hedgehog knows one big thing.”

The story goes that the fox spends every day pacing around the hedgehog’s den thinking up clever, complicated schemes for attacking and making a meal of the lowly hedgehog. Every day the same result ensues: the fox sneaks up on the “unsuspecting” hedgehog and pounces, only to be met with a muzzle full of spikes when the quick little hedgehog curls himself up into a prickly ball. The fox runs away and starts hatching an even more elaborate plan for how to subdue the hedgehog tomorrow. Tomorrow comes, and with it comes the same painful result for the fox. And so on.

What sets successful companies apart from the pack?

Even though the fox is more skillful and cunning than his prey, the hedgehog comes out on top every time because he knows one simple thing very well: how to use his spikes to protect himself from danger. He was able to strip the problem down to its essence and maintain a singular, winning focus. The fox? Not so much. Collins took the fox and hedgehog analogy and applied it to his research into what sets successful companies apart from the rest of the pack.

Ultimately, those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature to drive toward what we came to call a Hedgehog Concept for their companies. Those who led the comparison companies tended to be foxes, never gaining the clarifying advantage of a Hedgehog Concept, being instead scattered, diffused, and inconsistent.

How do you apply one of these three focuses in your business practices? Comment down below! After that, follow us on Linkedin at “Encompass-CX” for more content and blog updates.

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