"If you asked people in 1989 what they needed to make their life better, it was unlikely that they would have said that a decentralized network of information nodes that are linked using hypertext."
In his book Good to Great, Jim Collins refers to an old parable of the fox and the hedgehog. The fox in the parable knew many things, but the hedgehog knew one big thing. Each time the fox tries to attack the hedgehog it tries a different tactic, after the last one he tried failed.
The other side of the story is — the hedgehog knew just one tactic — to curl up in a spiky ball. It didn’t matter how much effort the fox made coming up with new tactics, the hedgehog would simply retaliate by curling up and showing it’s spike.
The premise of the story is that organisations that go from good to great focus on their hedgehog concept — their one big thing.
And to identify what your hedgehog concept is, Collins suggest you look for what is at the intersection of the following three elements of your organisation:
- what you can be the best in the world at?
- what drives your economic engine or for ‘more than profits’ your social impact engine or a combination of the two?
- what you are deeply passionate about?
As an organisation, once you identify your hedgehog concept and if an opportunity comes up that doesn’t fit the concept you say thank you and you move on. In other words, everything is tested against your hedgehog concept – so that you don’t get distracted and stay laser like focused.
But despite this great advice, too many organizations fall into the trap of product line extensions or brand equity extension (some may call it “diversification”). IBM fell for it. So did GM.
IBM in their heydays were known for one thing — mainframe computers. And then they entered the PC market soon followed by other electronics and computer peripherals. Still then, when anyone would say “I want to buy an IBM” definitely meant “I want to buy a computer.” Now we see IBM logos everywhere over desktops, laptops, mini-computers, mainframes, microwave ovens, refrigerators, etc, etc. Today, IBM is known for everything. Therefore, they are known for nothing.
Same happened with GM. GM was known for muscle cars and heavy-duty vehicles. But they couldn’t resist the temptation to extend their brand equity. As a result, GM started making cars for the up-market, niche market, middle market and for every market that is out there. Soon GM ended up with boatloads of products that were almost identical [except for the looks and pricing] with little differentiation or no differentiation at all. And we all know the result of that…
[Fast fact: Today, GM only manufactures 4 brands — Chevy, Buick, GMC and Cadillac. Out of 12 brands they used to prior to new GM re-organization on July 10, ‘09 ]
On the other side of the spectrum, startups are known for their laser like focus and execution. But they too fall for the “produce more” trap. Which typically unfolds with the latest funding stream and trying to spend time building a new line of product extension or see how they could fit what they want to do in the other market segments. While others have a misconception that their hedgehog concept is some kind of a goal to be best in everything they do. It’s not. As Collins explains:
A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. The distinction is absolutely crucial.
A great example of hedgehog concept applied in an organisation business model is Airbnb — an online marketplace to find and rent accommodations around the world. Airbnb took one category of craiglist’s line extension and build a billion dollar company around it. The thing to note about Airbnb — is their vertical and focused approach to creating online marketplace. When the rest of the world was all praise about Craiglist’s and Amazon’s horizontal approach to building online marketplaces. Airbnb’s vertical and focused approach has proven to be more successful regardless of how amazing Amazon’s horizontal approach to online marketplace is.
i) you can create a dramatically better user experience when it’s tailored to a specific use.
ii) you can do unscalable hacks when starting out (e.g. AirBnb paying photographers to take pictures of apartments)
iii) you need far fewer users to get to minimum viable liquidity and
iv) brand building is easier when you solve a straightforward, narrow problem (e.g. “I need a place to stay this weekend”).
To me, the whole premise of hedgehog concept is that you got to be strong somewhere instead of weak everywhere. And if you want to be successful, you have to reduce your product line, not expand it. Less is the new more.
I came across an inspiring quote by Ira Glass a month or so back — and the thing it really speaks to me is the difference between starting and finishing. If you’re in a creative field and if you look back — it’s usually the idea/inspiration/passion that gets you started. Which is why it’s so important to surround yourself with people who are better than you. People who are encouraging, but more than that — people who are willing to tell you where you can grow and how you can do better. There’s always something new to learn, but to find out what that new thing is — you got to keep pushing. Keep shipping. To me, it’s to keep writing here, more often.
Now over to Ira:
“Nobody tells this to people who are beginners, I wish someone told me. All of us who do creative work, we get into it because we have good taste. But there is this gap. For the first couple years you make stuff, it’s just not that good. It’s trying to be good, it has potential, but it’s not. But your taste, the thing that got you into the game, is still killer. And your taste is why your work disappoints you. A lot of people never get past this phase, they quit. Most people I know who do interesting, creative work went through years of this. We know our work doesn’t have this special thing that we want it to have. We all go through this. And if you are just starting out or you are still in this phase, you gotta know its normal and the most important thing you can do is do a lot of work. Put yourself on a deadline so that every week you will finish one story. It is only by going through a volume of work that you will close that gap, and your work will be as good as your ambitions. And I took longer to figure out how to do this than anyone I’ve ever met. It’s gonna take awhile. It’s normal to take awhile. You’ve just gotta fight your way through.”
Perhaps Steve also wanted to send the same message, but in brief…
From the very beginning Jeff Bezos’ goal was to create a friction-less marketplace for physical consumer goods. Yet he did not jump in building that right away: he identified one product — Books. Amazon built a repeatable and scalable end-to-end connection from supplier to buyer, doing only stuff they’re good at, proving that people will look up books on the web, will type in their credit card, etc and eventually buy it. Even now when Amazon enters a new market territory, they start with ‘Books’.
By focusing on one product, Amazon saved great amount of time, money and resources which otherwise would have been diluted should they’ve wanted to offer more. Similarly, before Apple started selling iPods,iPhones and iPads, they’re good at one thing - building computers!
On the flipside, too many companies try to be ‘everything’ for everyone right away (e.g. We do web development, web designing, SEO, social media marketing, etc). As a result, i) their time and energy are spread too thin ii) they struggle with value proposition (differentiation comes from the clarity of *why* not what) iii) they need more resources = high burn rate. Eventually, they either fall short of runway or head straight off-the-cliff by never realizing the product/market fit.
When considering where to invest resources (time, money, human capital), it’s important to remember that 9 women can’t make a baby in 1 month.
Want to create an unfair advantage? Answer this: What is your ‘Books’?