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This particular research project is going to focus deeply on the concept of strategic competitive advantage and hedgehog concept. The research's purpose is to demonstrate the profitability associated with hedgehog concept. Added to this, the research will explain the concept of hedgehog and how it applies to the process of continues improvement and innovation. It identifies that the concepts "Hedgehog concept" is one of the six concepts that captures the process of "good to great" companies, which Jim Collins explains deeply in his book, good to great.
In this research paper, the lights will only be spot on one of the above concepts that is "hedgehog concept". Furthermore, the process of hedgehog concept and how it should be maintained in order to gain a competitive advantage which leads to continues improvement process.
The first and most essential goal of almost all companies nowadays is achieving a sustained profit that exceeds the average of the industry. Thus, the goal is called to sustain a strategic competitive advantage. So, it is very essential to reach a competitive advantage using a special particular concept called, standing hedgehog concept. " all the good to great companies had this concept down, which is the idea of understanding what you can and cannot be the best at. The hedgehod and the fox. The idea is that fox knows many things, but the hedgehog knows one big thing. Therefore, the comparison companies are foxes; they try many things becoming scattered, diffused and inconsistent" (Brian:2005,112)
Key terms definitions
A firm might get a competitive advantage, when it can do something that rival firms cannot do, or owns something that rival firm's desire. Getting and keeping competitive advantage is essential for long-term success in an organization.
Jim Cam did several researches over few years to discover the concept of hedgehog and its application in the real strategic competitive advantage. He setup a framework of concepts that are applied in the transformation as a process of buildup followed by breakthrough, broken into three broad stages: disciplined people, disciplined thought, and disciplined action. Two key concepts are allocated within these three stages. As a result of that, these concepts will wrap-up to form a flywheel that captures the entire process of the "good to great companies" that was explained by Jim Cam in the book of "good to great".
The flywheel is illustrated bellow,
Level 5 leadership. " Level 5 leaders channel their ego needs away from themselves and into the larger goal of building a great company. It's not that level 5 leaders have no ego or self-interest. Indeed, they are incredibly ambitious-but their ambition is first and foremost for the institution, not themselves" (Cam:2003,21)
First who..Then What: leaders first got the right people on the bus, the wrong people off the bus, and the right people in the right seats and then they figured out where to drive it
Confront the Brutal Facts: maintaining unwavering faith that a firm can and will prevail in the end, regardless of the difficulties. Also, at the same time, the firm should have the discipline to confront the most brutal facts of reality.
The Hedgehog concept: it is a simple, crystalline concept that flows from the understanding about the intersection of three circles which will be discussed later on in this paper.
Strategy and competitive advantages
According to Dr.Falih and Dr.Marion, the thrust of the field of strategic management is the analysis of the firm's sustainable competitive advantage. "The discussion of competitive advantage is closely connected to the firm's resource endowment and its innovative capability. Two distinct schools of thought provide the bulk of the analysis. They are the resource-based view (RBV) and the industrial organization (I/O) view. The RBV emphasizes the link between the firm's resources and its performance. According to this view, the firm's unique resources (1) are the most important factor in creating and maintaining its sustainable competitive advantage. Resource uniqueness in terms of quality, rarity, and relevance determines the nature of the firm's strategic initiatives and, hence, performance. This view establishes a link between the firm's internal resource endowment and its overall performance by way of sustainable competitive advantage strategies. In our view, the firm's resource uniqueness, especially human resources, are the key instrument for monitoring, recognizing, assessing, and exploiting external opportunities. Moreover, innovative activities, as natural responses to market Stimuli, enable the firm to successfully exploit opportunities. The firm's performance improves as it succeeds in taking advantage of external business opportunities and, at the same time, minimize competitive threats" ( Falih,2009:259).
Basically, there is no doubt that a sustained competitive advantage is very much related to its successful innovative projects and techniques. As a result of that, the ability of a firm to take advantage of opportunities is bound to improve its performance as measured in terms of increased profit, productivity, market share as well as long term growth.
All in all, Successful opportunity exploitation helps the firm to improve its performance and, hence, long-term survival. "Moreover, the firm's stockpile of strategic resources can enable it to capitalize on opportunities as well as avoid threats by means of strategies aimed to achieve sustainable competitive advantage. Lack of attention to the firm's external opportunities - in relation to its strategically relevant resources and sustainable competitive advantage - as the key determinant of organizational innovation has constituted a formidable obstacle toward the development of a comprehensive innovation theory" (viorel,2009) .
The hedgehog concept
In the business environment, there are several books which describe how the great companies became great. Jim Collins, in his book Good to Great, adds a new twist when he attempts to find out if a company can go from being just good to great, and if so, how. Collins in his book used a compared eleven companies that were able to make the leap from good to great to those that could not and found six distinguishing characteristics that set them apart: Level 5 leaders, first who...then what, confronting the brutal facts, the Hedgehog Concept, creating a culture of discipline, and finally using technology an accelerator.
In the book of "good to great" Collins expressed the idea of Isaiah Berlin when he gave a sort of simple relationship between the foxes and hedgehog. For example, as foxes pursue many ends at the same time and see the world in all its complexity. On the other hand, hedgehogs simplify a complex world into a single organization idea, a basic principle or concept that unifies and guides everything. As a result of that, a hedgehog reduces all challenges and dilemmas to simple indeed almost simplistic, hedgehog ideas.
More precisely, "a hedgehog concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles" (Collins; 2001.95);
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 posses 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.
What drives you 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.)
What you are deeply passionate about. The good to great companies focused on those activities that ignited their passion. The idea here is not tp stimulate passion but to discover what makes you passionate.
These circles are in the diagram bellow;
The relationship between hedgehog concept and the process of continuous improvement and innovation
It is very necessary that all firms continue to improve and innovate. That is essential nowadays due to the continues recurrent changes that occur in today's business environment. Thoes changes vary from changes in financial statements, change in rules and regulations as well as changes business strategies. Thus, the hedgehog concept came to support the process of continuous improvement and innovation.
Jim Collins declared that every company would like to be the best at something, but few actually understand-with piercing insight and egoless clarity-what they actually have the potential to be the best at and, just as important, what they cannot trast between the good- to- great companies and the comparison companies. Consequently, hedgehog concept is sometimes can be considered as a great tool which determines the means of continuous improvement and innovations. Collins spent several years doing researches and case studies on different companies and at the end realized that " hedgehog concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. The distinction is absolutely crucial" (Jim;2001,98).
As it is mentioned earlier in this paper that in-order to fully develop a hedgehog concept, all three circles' should present. So, if there is a lot of money to do things at which a firm could never be the best, the firm will only build a successful company but not a great company. Then, if the company because the best at something, it will never remain to be the best and the top if it didnââ‚¬â„¢t have intrinsic passion for what it is doing. Finally, the company itself can be passionate all it want, but it can't be the best at it or it doesn't make economic sense, then no much good results will be produced.
Collins argued that keeping a strategic competitive advantage using hedgehog concept is not an easy task indeed. According to Collins, It took about four years for the good-to-great companies to clarify their hedgehog concept. Collins also emphasized in his book that there should be a special mechanism for moving the process along which he called the Council. So, as Collins said, the council should consist of a group of the right people who participate in dialogue and debate guided by three circles which is demonstrated in the diagram bellow;
From the diagram above, we can conclude that such council might be considered as a device to gain understanding about important issues facing the organization. Added to that, the council here might include key members of the management team.
Performance of a company is very much affected with innovation and continues improvement. Consequently, the profitability of the organization will obviously depend on continuous process of improvement which is brought in through maintaining a strategic competitive advantage. Here, it is very obvious that the hedgehog concept may play a vital role in the process of continuous improvement.
At the end of the book which Collins wrote, the reader may conclude that many of the good to great principles can be applied to one's personal life as well as to corporate life.