The Hedgehog Concept

The Hedgehog Concept is based on an ancient Greek parable that states, “The fox knows many things, but the hedgehog knows one big thing.” What this means is the fox has many talents to lean on when pursuing prey; speed, graceful moves and even playing dead. But the hedgehog has only one talent; the ability to defend itself.

Through the years many philosophers and thinkers have compared this concept to people, dividing them into two camps: foxes and hedgehogs. Foxes pursue many goals and interests at the same time. As a result, their thinking can be unfocused and all over the map, which can lead to achieving less than they set out to do. By contrast, the hedgehog person focuses on a single vision allowing them to achieve their goal more easily.

The business side of the hedgehog concept instructs managers to apply the principles by making the following three assessments of their company:

With those three questions answered, the overlap of where these three pieces of information intersect is the company’s sweet spot. On the surface, it’s very easy to agree. I have taken this exercise and applied it with visible success. It makes sense and does work. Followers of the Lean Concept will love this, too, because it falls right in the wheelhouse of what they believe. However, it can be like preaching to the choir. You must be careful not to accept concepts for your business merely because they support what you currently believe.

Business minded people love these sorts of parables. It’s much easier teaching a business concept through the eyes of a hedgehog than those of an educated business professor. The concept is much simpler to understand because you have a point of reference to relate it to. However, this is where you must be careful. Just because you understand a construct such as simplifying your operation to achieve goals more easily does not mean it will have the same results as displayed in the parable. We’re all looking for better and simpler ways to make our businesses work, but we must exercise caution before creating wholesale changes. Let me explain.

One of the contractor partners in my business model runs a highly successful finishing operation. They’ve been a fixture of the Seattle high-end construction market for over 50 years. For all of you that are familiar with high-end markets, you know they can be very fickle. The big money people from the 1960’s (old money), are very different than the new money high rollers of today. For a business to survive the different generations of money and product, they must learn the art of flexibility for survival. And this is what my partner company has mastered.

About four years ago, my friend decided to sell his company office and shop building to streamline operations for the future. Among other things, governmental regulation demands were making it more difficult to have a centrally located finishing shop near the downtown core. The company was basically breaking even on its shop work, while the field work was proving to be the cash cow keeping the lights on. Not only did it support the company but provided a lopsided profit margin making them question the need for even having a shop.

When my friend made this decision, I understood from a head-knowledge perspective but from the heart it just didn’t feel right. My business, although a different trade and size, runs much the same way. Our field work outpaces the shop 5:1. But what I have discovered is the shop work is the identity of my company, even though we show better profit in the field. My finisher friend discovered the same thing about his company. Unfortunately, it took a four-year journey to realize. They bounced around using four different temporary shop spaces trying to make the Hedgehog Concept work. The problem was the one thing he focused on (field work) relied on the secondary talent (shop work) to bring the company’s sweet spot into full fruition.

He may have been better off applying the Hedgehog Concept to his company as a whole, rather than using it to separate the different functions within his operation.

Finding balance in anything is tough. Our government can’t do it, and the brightest minds in business can’t find it. Concepts and parables are great for teaching the basics of balance, but they must still be met with common sense and self-evaluation. What works for one may not work for another. As I mentioned, I have applied the Hedgehog Concept to my business, and it does work. But I have applied it with modifications so that it works within the framework of what I do.

I can’t tell you how many times I have talked with other shop owners and business executives who have told me what I need to do to better monetize my company. I’m sure my stubbornness has forced me to miss many opportunities, but it’s also taught me to be careful on how I apply change to a company I’ve spent the bulk of my career building. Who better than a caring mother knows what her child needs? Trust your instincts over prepackaged promising concepts, for they will be the guiding principle behind your intellect. Not the other way around. 

This article was originally published in the December 2021 issue.