The document discusses the "Hedgehog Concept" developed by Jim Collins, which advises companies to focus on a single, core idea that guides their strategy and product development. It states that companies should define three circles: what they can be the best in the world at doing, what drives their economic engine, and what they are passionate about. The document then provides an example of a company that applies the Hedgehog Concept to successfully focus its product strategy.
1. The Hedgehog Concept and
How It Applies to Product
Development
By Chris Marocchi
‘The Practical Product Marketer’
January 12, 2011
2. The Problem
Product Development and Management is
all about managing the product lifecycle
“Cradle to Grave”.
Customer and market research will
determine what could be developed
(product, feature set, service).
A common problem evolves from this: a
brand loses its identity by becoming “All
things to all people”.
3. The Question
After a product reaches a certain point of
robustness and gains traction in the
marketplace, the question evolves from:
What to develop?
into
What not to develop?
4. The Answer
Jim Collins, in his book ‘Good to Great’,
addresses this question by defining the
Hedgehog Concept.
“Those who built the good-go-great
companies were, to one degree or another,
hedgehogs. Those who led the comparison
companies tended to be foxes…, being
scattered, diffused, and inconsistent.”
(Collins, pg. 92)
6. Foxes vs. Hedgehogs
Foxes pursue many ends at the same time.
They are “scattered or diffused moving on
many levels”.
Hedgehogs simplify a complex world into a
single organizing idea, a basic principle or
concept that unifies and guides everything.
7. Examples
Foxes:
ITT in the 1990’s (owned Sheraton, ITT – Tech,
etc.)
UPS in early 2000’s (owned Marriott, aircraft
carriers, etc.)
Time Warner in the 1990’s (owned Warner
Music Group, AOL, Time Inc., etc.)
Hedgehogs:
In N Out Burger
Krispy Kreme
Starbucks
8. The Three Circles
Collins’ definition of the Hedgehog concept is
based on three key dimensions that should lead
the strategy of product development for any
company:
9. Three Circles Defined
What you can be the best in the world at – it’s an
understanding of what you can be the best at. Not
just a core competency.
What drives your economic engine – determine
what is your denominator. If you were to pick one
ratio (e.g. profit per x), what would have the
greatest and most sustainable impact on your
business?
What are we passionate about? You can’t
“manufacture” passion, you can only “discover”
what ignites your passion and the passion of your
employees.
10. A Case Study
Company – CB Richard Ellis
Division – Asset Services
Profit Center – Axis Portal Group
Team:
Director
Marketing Manager
Business Analysts
Customer Service Manager and Rep
Developers
12. Where To Begin?
Off-Site Strategy Meeting
Presentation of the Hedgehog Concept
Define objective: The team doesn’t leave
the room until it defines the 3 circles and
applies the Hedgehog Concept to the
product strategy
Split into 3 teams
Brainstorm
13. The 3 Questions Answered
Compile the brainstormed answers from all
teams into a single list
Compare and analyze the results of all
three teams
Determine common patterns by analyzing
frequency of results
Discussion
Agreement
14. The Answers
What can Axis Portal be the best in the world at
doing?
Offering online service products to benefit property
managers and tenants
Provide customer service/support
• What drives Axis Portal’s economic engine?
Monthly fees (recurring $ per month and the # of properties
paying recurring fees)
Setup fees
• What are we passionate about?
Web technology
Providing high level of service and training
Providing solutions to our clients’ challenges
15. The Results
What product enhancements should we
pursue?
Portfolio data/reporting
Improved analytics
Improved customer experience/footprint
Axis Community
Sustainability module
38% revenue growth with 14% margin
increase over 3 years.