THE HEDGEHOG CONCEPT SIMPLICITY WITHIN THE THREE CIRCLES

THE HEDGEHOG CONCEPT (SIMPLICITY WITHIN THE THREE CIRCLES) Michael Seymour Matthew Anderson

Disciplined Thought – Part 2 Level 5 Leadership � First Who…Then What � � Confront the Brutal Facts �Hedgehog Concept Culture of Discipline � Technology Accelerators �

Hedgehog Concept � The fox and the hedgehog �Good-to-Great – hedgehog �Comparison – fox � Strategy � EX: or Simplicity? Walgreens vs. Eckerd

The Three Circles What you are deeply passionate about What you can be the best in the world at What drives your economic engine

Understanding What You Can (and Cannot) Be the Best At � What can we do better than any other company? � What can we not do better than any other company? � It’s not a goal, but an understanding � EX: Wells Fargo, Abbott vs. Upjohn

Circuit City: Could Notes: Circuit City saw that become the best at implementing the “ 4 -S” model (service, selection, savings, satisfaction) applied to bigticket consumer sales. it could become “the Mc. Donald’s” of big-ticket retailing, able to operate a geographically dispersed system by remote control. Its distinction lay not in the “ 4 -S” model per se – but in the consistent, superior execution of the model.

Insight Into Your Economic Engine – What Is Your Denominator? � The notion of a single “economic denominator” �Companies have many options when choosing an economic strategy �Goal is choosing denominator that will have Greatest and most Sustainable impact on company economic engine �It can be subtle, even unobvious �The key is to gain understanding and insight into your economic model

Gillette: per customer Key Insight: Shift from profit per division to profit per customer reflected the economic power of repeatable purchases (e. g. , razor cartridges) times high profit per purchase (e. g. , Mach 3, not disposable razors).

Understanding Your Passion � Passion is a key part of the Hedgehog Concept � Discover what ignites your passion � The passion can be focused equally on what the company stands for � Ex: Phillip Morris: “We have a right to smoke, and we will protect that right!”

The Triumph of Understanding Over Bravado � “prehedgehog” � The Council and “posthedgehog”

The Council Ask Questions Autopsies & Analysis The Council Executive Decisions Dialogue & Debate

Conclusion � The hedgehog concept: �Lies in the heart of these three circles �Is a turning point in the journey from good to great � Keep it simple