The hedgehog theory is a famous theory that many businesses have successfully applied to overcome difficult times and crises. So what is the hedgehog theory in business ? What is the secret to applying this model successfully? In the article below, 1C Vietnam will help companies answer the above concerns in detail.

1. The concept of hedgehog theory in business

The Hedgehog Concept is a business strategy model proposed by Jim Collins and Jerry Porras in the book "Good to Great". This business theory is based on an ancient Greek fable about the fox and the hedgehog.

In the story, the fox is a clever and cunning person who knows many things. But the hedgehog is stupid and only knows one thing, which is to curl up and shoot out sharp spines. As a result, during the chase between the two, the fox finally gave up because it could not do anything to the hedgehog.

Jim Collins and Jerry Porras used this story to illustrate an effective business strategy model. Accordingly, successful businesses are those that clearly know their strengths, competitive advantages and know who their customers are. These units focus on what the organization does best and ignore what it doesn't, thereby achieving sustainable success.

2. Process of applying hedgehog theory in business

To apply successfully, in addition to clearly understanding the concept of the hedgehog theory in business, businesses also need to understand and correctly implement the following 5-step process:

2.1. Step 1: Determine the driving force of the business

Business motivation is what the company really cares about and wants to achieve. It could be profits, customer satisfaction, benefits to the community, etc. Determining the business's motivation is an important step in the process of applying the hedgehog theory.

Business units can determine their motivation through the following questions:

• What makes a business survive?
• Why work?
• What causes excitement?
• What do you want to achieve?

2.2. Step 2: Identify your business's strengths compared to its competitors

Jim Collins's hedgehog theory encourages businesses to become number one in a niche/business field or abandon that niche/field altogether. This means the company needs to find its unique point and focus on it. If you cannot be number one in the industry, your business will not be able to compete with companies that have many years of experience and advantages in the market.

To find strengths, organizations need to answer the question: Who does the business want to become? If you can answer this question clearly and convincingly, you can build a successful business strategy that focuses on what you do best and what you offer. customers really want.

2.3. Step 3: Determine the profitability factor of the business

In addition to determining the main business, businesses need to build an economic model, that is, a method to obtain sustainable profits from that product or service. There are two main ways to construct the economic denominator:

• Increase profit margins: Businesses can achieve this through increasing revenue such as selling more products or services, increasing selling prices or expanding markets... or reducing costs by improving operational efficiency. dynamic, cut unnecessary budgets or optimize production processes.
• Increase added value: The company can increase this value by improving product quality, providing additional services or creating new products/services.

2.4. Step 4: Determine the intersection of the three factors of motivation, competitive advantage and profitability factor

The strategic focus of a business is the intersection of three circles in the graph between motivation, profitability and competitive advantage. That is also the area where the unit can focus resources to achieve success. In particular, businesses need to pay attention to accurately determining that the information about the elements in the graph is specific, clear and correct.

2.5. Step 5: Evaluate and adjust the plan accordingly

After obtaining the correct intersection point, businesses need to re-evaluate the business plan to ensure it is consistent with the newly determined focus. If the operating plan is not appropriate, the company needs to quickly consider and make adjustments.

Implementing and adjusting plans according to the hedgehog theory in business can help companies reduce costs and resources, while improving the quality of products, services and supply chains. This also leads to increased revenue, profit, and improved employee welfare and morale.

3. Benefits of applying the hedgehog theory

The hedgehog theory is a useful and effective model that many businesses choose to use. By adopting this strategy, organizations can achieve significant benefits, including:

3.1. Risk management

One of the main benefits of applying the hedgehog theory is that it helps businesses manage risk. By clearly identifying core values, core competencies, and market opportunities, companies will be able to focus on the areas where they can be most successful. This helps that business unit minimize negative impacts by avoiding areas that do not have strengths and are likely to fail if implemented.

3.2. Plan to deal with risks

The hedgehog theory in business is based on identifying the most important factors for the success of the organization to clearly identify risks that may appear. Especially cases that are likely to affect key areas need to be accurately assessed for severity. This will be a necessary foundation to help the unit properly arrange priorities in the process of finding response solutions.

After evaluating and knowing what are the important risks that need to be addressed first, businesses will begin to plan detailed response options. These solutions need to be built clearly, specifically and ensure feasibility.

3.3. Maintain flexibility

The hedgehog theory is not a rigid strategy. Businesses can still flexibly change strategies when necessary. However, clearly identifying strengths and core values will help the company ensure flexibility within the strategic scope of the unit.

Thus, the hedgehog theory in business is a simple but effective strategic model. Applying this model helps companies clearly define goals and development directions, thereby focusing resources and efforts to achieve success. In addition, to learn more knowledge about corporate governance, don't forget to follow related useful articles on the 1C Vietnam website.