How to find your Hedgehog!
We now have a Vision – and if we’ve followed the steps in our previous tutorials we will have a Powerful Vision that we believe in. If you’ve got a senior team then hopefully you have involved them in creating it and we will then have made an important step in galvanising the business around a common set of values, purpose and direction.
At the moment though, this is still in the realms of being a wish – we now have to work out how we are going to make it happen.
To do this well we need to make sure that we find the right business model – and a big part of that is focus.
Most of the business owners that we work with are not short of ideas – in fact quite the opposite. So what we want to do is to focus onto products and services that we can become known for doing brilliantly and that are also ones that we can scale. If we want to build the kind of business that doesn’t require us being involved in every single decision and every single step then we need focus on products and services that are scalable.
So I’m going to introduce a concept here that links with other blogs on finding your X-Factor and building a scalable business.
It is called the hedgehog principle –let me explain. Imagine a hedgehog being hunted by a fox. The hedgehog has been around for the last 15 million years and has one big idea –one big thing it does whenever the fox comes close – it rolls up into a ball so that its prickly spines form an impenetrable barrier to the fox.
It does this every time and it does it very well
It doesn’t try something new – it doesn’t think one day ‘I wonder if I can outrun the fox today?’ It sticks to the thing that it knows it is great at and it has perfected it. It knows the fox will eventually get bored and then when it does, the hedgehog can go about its business.
So what has this got to do with business and our planning? Well we need to find our ‘hedgehog’. Businesses that do stand the greatest chance of achieving long term success and in the words of Jim Collins becoming great businesses.
So he proposed a simple model for businesses to articulate their hedgehog – it is based on three things – what we are passionate about, what we can be the best at (or best in class at) and the economic or profit engine/ or the handle that we will crank that will drive the profitability – what drives our profits/ how do we make money?
The sweet spot is where these three circles interlock and if we’ve done it well this should directly link with our Stretch Goal.
The first we’ve already done – it is our core purpose. The remaining 2 we will come back to in more detail once we have understood a few more principles about scalability and value. But for now I’ll give you an example of what we are after:
Imagine we are a nationwide pharmacy chain – dispensing medications and health and wellness products and services.
What we might be passionate about – or our core purpose could be “To help people get, stay and live well”
Where we think we can build differentiation from our competition – or what we think we can be the best at – might be “The best on the ‘high street’/ convenient provider of support and advice”
And our profit engine might be “Profit per customer visit”. This gives us real clarity and focus because if we’ve agreed this then everything we do needs to be about increasing customer numbers/ driving customers into our stores and then ensuring that make the most profit from each customer – upselling etc.
So you may already be thinking about your circles. You can certainly complete the top one with your core purpose and you can also pencil in your Stretch Goal. The reason I say pencil in is that we are going to do some more thinking and it may be that as a result we re-visit our stretch goal later.
By all means have a stab at completing the other two circles – what can we be the best at/ world class at if we really go for it – and what might be the profit engine/ what has or will have the greatest impact on your bottom line?
But don’t worry too much at this stage because we are going to explore some other ideas first to make sure that we think through them properly and that we settle on something we are confident that we have the right model that allows us to scale.
So the next blog is going to explore what makes a good business model and the basics of scalability.
BizSmart aims to help SME and micro-business owners scale their businesses and create value through sound practical business support. We aim to give you insight and clarity and fire up your determination to succeed. You can access blogs like this and more besides through our free SmartRoom service here.