Hello friends,

Greetings from Utrecht!

I've been working on my personal brand in the background, and one of the steps I'm taking is to go through the Hedgehog Concept exercise.

I do it with most of my clients to figure out what their real core business is, and so it's only right that I subject myself to the same existential crisis.

It then came up again in Kim Nordstrom's book UP DOWN UP, along with an excellent and practical example, so I figured this was a great time to share this exercise in the essay below.

Hope you like it!

Today at a glance:

• Essay: How To Find Your Hedgehog Concept
• UP DOWN UP
• Poor Charlie's Almanack
• 12 Minute Foundation Training

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How To Find Your Hedgehog Concept

All companies, even the most diversified ones, have a core business. Sometimes it's called a mission, or a cause, or a purpose.

They all boil down to the same thing:

Your core business is the thing where you KNOW you can make a difference for your customers, and where they feel confident that you can make a difference for them.

Here's how to find (or refine) yours, using Jim Collins' Hedgehog Concept:

The Hedgehog Concept

Jim Collins first coined this term in Good to Great, which traces back to an ancient Greek parable: “The fox knows many things, but the hedgehog knows one big thing.”

Collins found that companies who really understood and focused on their core business, their one big thing, tended to last longer and be more successful than ones that didn't.

A company's Hedgehog Concept, according to Collins, consists of 3 fundamental questions:

• What you are deeply passionate about?
• What can you be the best in the world at?
• What drives your economic engine?

At the intersection of these three questions is your one big thing, your core business.

Why it works

It should be fairly easy to see the compounding power of finding business that satisfies all three criteria.

If you can get paid for something, you can keep doing it and keep improving.

If you are passionate about something, you will have a a drive to keep going when things get tough, and to keep improving your craft.

If you are good at your work and keep getting better, it will become increasingly easy to find clients or players, and they will be increasingly willing to pay.

It might take a while to find your exact intersection. But when you know exactly what your hedgehog concept is, you can use it as a guide for all crucial company decisions.

As a rule of thumb, anything that sits outside your core purpose should be very critically examined, and if those things come at the expense of your core purpose they should be avoided at all cost.

Examples

Let me give you my own Hedgehog Concept as a first example. I'm still figuring out a lot of things about my business, so this is just what feels right to me right now. But I feel confident about the ingredients I share here, and expect them to stay roughly the same.

Passion: I am deeply passionate about figuring out the universal rules and systems that dictate business success, and helping ambitious companies use these to thrive.

Looking at (and being critical of) the connections between my area of expertise and the rest of the business has caused friction in more than one previous job. And my drive to better understand how businesses operate is what drove me to enroll in an MBA program, and why I still read a never-ending stream of business books.

Best in the world: I can be the best in the world at adapting proven systems to the needs of videogame companies, making them accessible, and guiding their implementation.

If this sounds grandiose, know that I realize I am not there yet. But at the same time I really, deeply believe that I could be the best at this particular intersection of coaching, consulting and facilitating.

Economic engine: I get paid to coach companies on improving the foundations of their business. In each engagement, I update my knowledge and improve my craft, and the revenue lets me work on other ways of sharing my knowledge.

My goal is to create multiple tiers of products and services. For clients, this means that there is an entry point for every budget. For me, it creates multiple revenue streams that give me the freedom to be both more flexible and more intentional with my time.

Combined, this results in the following mission statement:

I help ambitious founders build better videogame companies.

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Here's another example, taken from Kim Nordstrom's excellent book UP DOWN UP, describing the Hedgehog Concept of Paradox Interactive:

We are passionate about creating Grand Strategy Games and interacting with the audience who loves playing them.

We are the best in the world at creating deep and endless complex sandbox games for our audiences who love us for it.

We create quality games for PC and console, that we maintain for years and years, with constant updates and DLC. This generates revenues that allows us to create more games and content

Combined, this becomes:

We create endless complex replayable games for our loyal fans and ourselves

Sufficiently inspired? Then let's get to work on your own Hedgehog Concept.

Getting to work

Ok, so now it's time to define your own Hedgehog Concept. The steps are simple, but finding the right intersection might take some work, so don't get discouraged if you don't nail this in one go.

Step 1. Each member of the team writes down for themselves what they think the company is most passionate about, what it can be the best in the world at, and what drives its economic engine.

Be very critical about what you actually can be the best in the world at. This is not a goal, a plan, or a strategy; it should come from a deep understanding of your own capabilities.

Step 2. Share what you wrote down, and discuss until you have a rough definition of each circle that you can all agree on.

Step 3. Each member of the team writes down for themselves what the intersection of the three circles looks like as a short, punchy mission statement.

Step 4. Share what you wrote down, and discuss until you agree on the rough definition of the mission statement.

Step 5. Wordsmith the statement until you're happy with it, and add a paragraph or so of context. This will help your team to fully understand your hedgehog concept, and use it to make the right decisions.

Good luck!

The Best Bits

​UP DOWN UP: Kim Nordstrom's book has been taking Linkedin by storm, and after reading it I'm happy to tell you that it's well worth a read. Nothing groundbreaking if you're well versed in business literature, but a good summary of best practices with plenty of supporting arguments from industry leaders.

​Poor Charlie's Almanack: Years ago, I came across the concept of mental models, and specifically the idea of building a "latticework" of mental models, as propagated by Warren Buffet's business partner Charlie Munger. Poor Charlie's Almanack is a collection of talks, of which I thought the 11th one, on psychology, was particularly interesting. Out of print for years, but now available freely online.

​12 Minute Foundation Training: I don't know about you, but my posture is pretty bad, and sitting behind a laptop all day makes it even worse. So this year I committed to doing some form of exercise daily, and most days it's a version of Eric Goodman's foundation training. Twelve minutes a day, and my lower back has never felt better.

See you in two weeks!

Martijn

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