March 9, 2018 The Three Circles

The essential strategic difference between the good-to-great and comparison companies lay in two fundamental distinctions. First, the good-to-great companies founded their strategies on deep understanding along three key dimensions—what we came to call the three circles. Second, the good-to-great companies translated that understanding into a simple, crystalline concept that guided all their efforts—hence the term Hedgehog Concept.

More precisely, a Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:

1. What you can be the best in the world at (and, equally important, what you cannot be the best in the world at). This discerning standard goes far beyond core competence. Just because you possess a core competence doesn’t necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged.

2. What drives your economic engine. All the good-to-great companies attained piercing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the single denominator—profit per x—that had the greatest impact on their economics. (It would be cash flow per x in the social sector.)

3. What you are deeply passionate about. The good-to-great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what makes you passionate.

Jim Collins. “Good to Great.”

To often we want to be a Jack of all trades and master of none.  It is important that we structure our business as a hedgehog and not a fox.  This requires discipline and does not mean you only do one thing for ever.  It means you doe the things that you have a passion for, you can be the best at, and drive your revenue.  This should be the litmus test for any endeavor for a company.

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