The hedgehog concept was first introduced by Isaiah Berlin, the famous British political theorist, philosopher, and historian, in his 1953 essay, The Hedgehog and the Fox. In it, he divides the world into hedgehogs and foxes based on an ancient Greek parable from the poet Archilochus: “The fox knows many things, but the hedgehog knows one big thing.” The analogy is that hedgehogs are more the big idea people, more decisive while foxes are more accepting of nuance, more open to using different approaches with different problems.
In his 2001 famous bestseller, Good To Great, the author, Jim Collins uses the hedgehog concept to describe the companies he highlighted and the distinguishing characteristics that caused them to go from good to great. He goes on to say that hedgehogs have a “piercing insight that allows them to see through complexity and discern underlying patterns. Hedgehogs see what is essential and ignore the rest.”
To illustrate the concept, Collins compared the two pharmacies, Walgreens and Eckherds. In the early days, the two were fierce competitors vying for dominance across the United States. The two had completely different strategies for market dominance. Eckherds relied on acquiring more and more stores as its strategy. Walgreens had a much simpler strategy of maximizing profit per customer visit. They did this by systematically replacing all inconvenient locations with more convenient ones, preferably on corner lots where customers could easily enter and exit from multiple directions. Walgreens pioneered drive-through pharmacies, found customers liked them, and built hundreds more. In urban areas, the company clustered its stores together based on the concept that customers should not have to walk more than a few blocks to reach a Walgreens. They linked this concept to the simple idea of profit per customer visit which allowed them to add high-margin services such as one-hour photo developing. More convenience led to more customer visits and the increased profits threw cash back into the system to build even more stores.
During the period from 1975 to 2000, Walgreens generated cumulative stock returns that exceeded the market by over fifteen times, beating such great companies as GE, Merck, Coca-Cola, and Intel. Eckherds, on the other hand, had no evidence of a similar concept for growth and acquired stores in a hodgepodge fashion, with no obvious unifying theme. It was eventually bought by JC Pennies in 2004.
It’s not a question of having a “good strategy” versus a “bad strategy.” It’s the idea that the hedgehog concept is so incredibly simple. The idea of making your business so convenient and providing customers products and services they want is just common sense. It is a proven way to differentiate your business from your competition.