THE HEDGEHOG CONCEPT (Simplicity within the Three Circles) Michael Seymour Matthew Anderson

Disciplined Thought – Part 2 Level 5 Leadership First Who…Then What Confront the Brutal Facts Hedgehog Concept Culture of Discipline Technology Accelerators

Hedgehog Concept The fox and the hedgehog Strategy or Simplicity? Good-to-Great – hedgehog Comparison – fox Strategy or Simplicity? EX: Walgreens vs. Eckerd

The Three Circles passionate about What drives your economic engine What you are deeply passionate about What drives your economic engine What you can be the best in the world at

Understanding What You Can (and Cannot) Be the Best At What can we do better than any other company? What can we not do better than any other company? It’s not a goal, but an understanding EX: Wells Fargo, Abbott vs. Upjohn

Circuit City: Could become the best at implementing the “4-S” model (service, selection, savings, satisfaction) applied to big-ticket consumer sales. Notes: Circuit City saw that it could become “the McDonald’s” of big-ticket retailing, able to operate a geographically dispersed system by remote control. Its distinction lay not in the “4-S” model per se – but in the consistent, superior execution of the model.

Insight Into Your Economic Engine – What Is Your Denominator? The notion of a single “economic denominator” Companies have many options when choosing an economic strategy Goal is choosing denominator that will have Greatest and most Sustainable impact on company economic engine It can be subtle, even unobvious The key is to gain understanding and insight into your economic model

Gillette: per customer Key Insight: Shift from profit per division to profit per customer reflected the economic power of repeatable purchases (e.g., razor cartridges) times high profit per purchase (e.g., Mach 3, not disposable razors).

Understanding Your Passion Passion is a key part of the Hedgehog Concept Discover what ignites your passion The passion can be focused equally on what the company stands for Ex: Phillip Morris: “We have a right to smoke, and we will protect that right!”

The Triumph of Understanding Over Bravado “prehedgehog” and “posthedgehog” The Council

The Council Ask Questions Dialogue & Debate Executive Decisions Autopsies & Analysis The Council

Conclusion The hedgehog concept: Keep it simple Lies in the heart of these three circles Is a turning point in the journey from good to great Keep it simple