The Hedgehog Concept and How It Applies to Product Development

By Chris Marocchi‘The Practical Product Marketer’January 12, 2011

The ProblemProduct 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”.

The QuestionAfter 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?

The AnswerJim 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)

The Story

Foxes vs. HedgehogsFoxes 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.

ExamplesFoxes:

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 BurgerKrispy KremeStarbucks

The Three CirclesCollins’ definition of the Hedgehog concept is

based on three key dimensions that should lead the strategy of product development for any company:

Three Circles DefinedWhat 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.

A Case StudyCompany – CB Richard EllisDivision – Asset ServicesProfit Center – Axis Portal GroupTeam:

DirectorMarketing ManagerBusiness AnalystsCustomer Service Manager and RepDevelopers

Axis Portal

Where To Begin?Off-Site Strategy MeetingPresentation of the Hedgehog ConceptDefine 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 teamsBrainstorm

The 3 Questions AnsweredCompile the brainstormed answers

from all teams into a single listCompare and analyze the results of all

three teamsDetermine common patterns by

analyzing frequency of resultsDiscussionAgreement

The AnswersWhat can Axis Portal be the best in the world

at doing?Offering online service products to benefit property

managers and tenantsProvide 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 technologyProviding high level of service and trainingProviding solutions to our clients’ challenges

The ResultsWhat product enhancements should

we pursue?Portfolio data/reportingImproved analyticsImproved customer

experience/footprintAxis CommunitySustainability module

38% revenue growth with 14% margin increase over 3 years.

The Team (Newport Beach, CA)