Jim Collins’ Hedgehog Concept is Wrong

Why Jim Collins is Wrong about the Hedgehog Concept.

In his famous and wildly successful book Jim Collins becomes quite the Hedgehog advocate.

Specifically, he touts a theory called the “Hedgehog Concept.

Collins defines the Hedgehog Concept as such:

“All good-to-great leaders, it turns out, are hedgehogs. They know how to simplify a complex world into a single, organizing idea—the kind of basic principle that unifies, organizes, and guides all decisions. That’s not to say hedgehogs are simplistic. Like great thinkers, who take complexities and boil them down into simple, yet profound, ideas (Adam Smith and the invisible hand, Darwin and evolution), leaders of good-to-great companies develop a Hedgehog Concept that is simple but that reflects penetrating insight and deep understanding.”

But Collins, in an effort to force an analogy, gets the Fox/Hedgehog concept backwards.

His big mistake is to confuse the importance of communicating a unifying vision as a single organizing idea (a Hedgehog Concept) with actually being a Hedgehog.

When leading change in a company or as an entrepreneur, a single organizing vision is needed and it needs to be communicated as a single and straightforward idea…Yes…but that is communication advice, not strategy advice.

The leaders profiled in Jim Collins’ book Good to Great are not not successful because they stuck to a single idea. In fact, quite the opposite, many of them radically departed from a proven strategy that had worked in the past…something a Hedgehog would never do!

In Collins’ Walgreens example, Charles Walgreen III makes the difficult decision to close 500 restaurants under the Walgreens Brand, including “Corky’s” a restaurant named after himself. Restaurants and food service were a critical part of the history of Walgreens -it was part of the company’s DNA. But Charles Walgreen III changed that strategy when faced with a new environment and new information – very much a fox move. His next strategy of doing one thing and doing it well – focusing on being the most convenient drugstore – is what Collins refers to as a “Hedgehog Concept” – singleminded and simple. Brilliant, right? The Hedgehog Concept was the answer. Well, no…what if the environment changed? What if customers started shopping online? Sticking to a failing strategy like a Hedgehog would then look pretty stupid.

Ask Polaroid, Nokia and Kodak how the Hedgehog Concept worked out for them.

Charles Walgreen III was successful because he was a Fox. He saw that the old way wasn’t working and he changed it. He was not fixated or single-minded, but flexible and open to new ideas. A Fox does not jump all over the place, changing direction randomly and without thought – if that were true, there wouldn’t be any Foxes left in the world. Foxes change direction and change their strategy based on their environment and the threat they are facing. They pivot. They test. They adapt. They find something that works and they do that, until the environment changes and they have to change direction again.

So, Ok. My big problem with Collins’ “Hedgehog Concept” is my perceived misappropriation of an age-old analogy. Collins’ basic idea that a company should have a simple and easily communicable strategy is accurate. Companies and organizations that want to succeed should not be trying to do ten-different things at once.

But they should also not follow a single idea-blindly off of a cliff. They need to be able to adapt. The main lesson from the stories in Good to Great is that the companies created cultures that allowed them to adapt and switch directions (at that point in time). Collins’ Hedgehog Concept seems to miss this point.

Jim Collins possibly misses the bigger point in his analysis, because he is too closely tied to the old Management Consultancy industry – a Management Consultant’s analysis is static, based on old data and is out-dated before it’s even delivered as a power point. Collins looks at a snapshot in time and extrapolates some huge assumptions and grandiose claims. The eleven companies he looked at did well at a specific point in time.

If you purchased a portfolio of the Good to Great companies when the book first came out, you would probably vastly underperform the S&P500. Circuit City and Fannie Mae alone would probably destroy your returns. You can see Freakonomics’ analysis of Good to Great companies here.

Thus Collins’ analysis suffers from survivorship bias. The Hedgehog Concept looks brilliant when only looking at companies that have done well…but let’s ask Blackberry (the company formerly known as Research in Motion) how the Hedgehog Concept has worked for them?

So what is the big lesson here?

First, Good to Great companies were all once successful because they pivoted. They saw a new opportunity and they changed direction. They were able to do so and be initially successful, because, as Collins describes it they had “Level 5 Leadership” and “Got the right people on the bus.”  What Collins misses is that each company managed to create a learning organization, if perhaps only briefly, that allowed them to reassess, adapt and change strategy at a critical point in time.

What Collins gets wrong is the need to then stick to that strategy like a Hedgehog….basically throwing out the learning organization that found you your initial success.

Creating a learning organization is the only true sustainable competitive advantage and companies that sacrifice this culture for a Hedgehog Concept will miss the next big change and end-up being the next big failure (e.g. Circuit City)…

 

Circuit City Ten Year Share Price Performance

Circuit City Ten Year Share Price Performance

 

…or simply stop innovating and get overtaken by competitors, because your strategy is fairly simple (e.g. the Walgreen Company has continually underperformed CVS for years now).

 

Walgreen Company has underperformed vs CVS and the S&P 500

Walgreen Company has underperformed vs CVS and the S&P 500

Bottom Line

First…it’s just an analogy. The whole Fox/Hedgehog thing is just an analogy, so let’s not lose sight of the big picture.

Collins is correct in stating that to be effective leaders do need to communicate their vision with a simple organizing statement. He simply takes what is essentially communication advice way too far. A simple unifying vision in itself will not save you. In fact, it may drive you over a cliff.

The only truly sustainable competitive advantage is the ability to effectively change direction when needed – to be a learning organization.

So…if you haven’t read “Good to Great,” read Collins’ blog, been to his talks, watched his videos, etc, etc…save yourself a lot of time and bad analogies and instead read Peter Senge’s “The Fifth Discipline: The Art and Practice of the Learning Organization” and Eric Reis “The Lean Startup” and leave Collins’ work for the management consultants and their Powerpoints.

 

The Fifth Discipline - the Art & Practice of the Learning Organization

 

The Lean Startup

 

About the author

Abraham Kamarck

Abraham specializes in innovation, new product development, emerging markets, conflict zones, social marketing, for-profit / non-profit hybrids and writing long bios. After an eight-year career as a Naval Aviator, Abraham lived and worked as an entrepreneur in many different emerging and frontier markets. He launched multiple businesses in difficult environments; raised debt and equity capital for SMEs in Africa and China; structured angel investment funds/groups; and built brands and social media followings...all while dragging his family around the globe. After eight years abroad, he has now settled into the Washington DC metro area.

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