Chapter 5: The Hedgehog Concept Group 7


Hedgehog vs Fox

The Three Circles

Economic Engine

Understanding Your Passion


Hedgehog Concept

Hedgehog vs Fox

Fox: pursue many ends at the same time, see the world and all of its complexities

Hedgehog: simplify everything in a single organized idea or basic principle

Hedgehog Concept: intense understanding of what a company can be the best at

The Three Circles

Hedgehog Concept is a simple concept that comes from an understanding of the intersection of the following three questions:

1. What can you be the best in the world at ( and what you cannot be the best in the world at)?

2. What drives your economic engine?

3. What are you deeply passionate about?

The Three Circles

A fully developed Hedgehog Concept includes all three circles.

Core competencies may not necessarily be the hedgehog

Just because an organization is good at something and is profiting off of it does not mean they can be the best at it.

Economic Engine

Good to Great companies were not in spectacular industries, they simply understood the key economic driver in that industry.

Economic Denominator:

the one ratio that would have the greatest and most sustainable impact on the economic engine (ex: profit per x)

Economic denominator gives specific insight into what the economic driver is in industry.


Shift from profit per store to profit per customer visit

Understanding Your Passion

Strong need for passion in a company to succeed

Passion cannot be manufactured, passion has to be discovered internally instead of motivated externally


Top business school graduate not hired because she had no passion for deodorant

Fannie Mae:

Strong passion for what the company stood for in helping all classes of people purchase homes



Searching through the fog, long march with no vision of what is to come


Break through the fog and receive a clear vision of what is ahead

Growth is not a hedgehog but the posthedgehog creates long, sustainable growth with strong momentum

Clarifying the hedgehog concept comes through a process called the Council

The Council


Hedgehog Concept aims to simplify the complex in order to make smart, strategic business decisions through the three circles.

Coming to the conclusion of the hedgehog is an iterative process led by the Council model.

The Hedgehog Concept is not a goal, strategy, or intention; it is an understanding.


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