Three Key Dimensions
Those who built the good-to-great companies were, to one degree or another, hedgehogs. They used their hedgehog nature to drive toward a Hedgehog Concept, a simple, crystalline concept that flows from deep understanding about the intersection of the three key dimensions:
● At what you can be best in the world. This standard goes far beyond core competence — just because you possess a core competence doesn’t necessarily mean you are the best in the world at that competence. Conversely, what you can be best in the world at might
not even be something in which you are currently engaged. The Hedgehog Concept is not a goal or strategy to be the best at something; it is an understanding of what you can be the best at and, almost equally important, what you cannot be the best at.
● What drives your economic engine. To get insight into the drivers of your economic engine, search for the one denominator (profit per x, for example, or cash flow per x) that has the single greatest impact. If you could pick one and only one ratio to systematically increase
over time to make a greater impact, what would that ratio be? This denominator can be subtle, sometimes even unobvious. The key is to use the denominator to gain understanding and insight into your economic model.
● What you are deeply passionate about. Good-to-great companies did not pick a course of action, then encourage their people to become passionate about their direction. Rather, those companies decided to do only those things that they could get passionate about. They
recognized that passion cannot be manufactured, nor can it be the end result of a motivation effort. You can only discover what ignites your passion and the passions of those around you. ■
DISCIPLINED ACTION
A Culture of Discipline
Sustained great results depend upon building a culture full of self-disciplined people who take disciplined action fanatically consistent with the three circles of the Hedgehog Concept.
This is in contrast to the typical ways in which many companies (particularly start-ups) conduct themselves when responding to growth and success. As these companies
grow, they tend to sacrifice the creativity, energy and vision that made them successful in favor of hierarchical, bureaucratic structures and strictures — thus killing the entrepreneurial spirit as they create order. Exciting companies thus transform themselves into ordinary companies, and mediocrity begins to grow in earnest.
Indeed, bureaucratic cultures arise to compensate for incompetence and lack of discipline, which arise from having the wrong people on the bus in the first place. Most companies build their bureaucratic rules to manage a small percentage of the wrong people, which in turn drives away the right people. This self-perpetuating problem can be avoided by creating
a culture of discipline.
Action Steps
To create a culture of discipline, you must:
● Build a culture around the idea of freedom and responsibility, within a framework. Good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. They hired
self-disciplined people who didn’t need to be managed, and then managed the system, not the people. They also had the discipline of thought, to confront the brutal facts of reality and still maintain faith that they were on the track to greatness. Finally, they took disciplined actions
that kept them on that track.
● Fill your culture with self-disciplined people who are willing to go to extreme lengths to fulfill their responsibilities. People in good-to-great companies tend to be almost fanatical in the pursuit of greatness; they possess the discipline to do whatever it takes to become the best within carefully selected arenas, and then seek continual improvement from there. While everyone would like to be the best, most organizations lack the discipline to figure out with egoless clarity what they can be the best at, and the will to do whatever it takes to turn that potential into reality.
● Don’t confuse a culture of discipline with a tyrannical disciplinarian. Many companies that could not sustain their success had leaders who personally disciplined the organization through sheer force. Good-to-great companies had Level 5 leaders who built an enduring culture of discipline, powered by self-disciplined people who acted in the company’s best interests without strict dictums from leadership. These disciplined companies could and did thrive even after their leaders had departed the organization; those companies that practiced discipline only by tyrannical rule could not sustain themselves once their leaders departed.
● Adhere with great consistency to the Hedgehog Concept, exercising an almost religious focus on the intersection of the three circles. The good-to-great companies at their best followed a simple mantra — “Anything that does not fit with our Hedgehog Concept,
we will not do.” They did not launch unrelated businesses or joint ventures in an effort to diversify. They did not panic if the competitive landscape shifted. If a course of action did not fit into their disciplined approach, they did not perform that action. It takes discipline to say “No” to such opportunities. ■