How to Find Your Company's Three Circles

Audio Transcript

If you’re in a corporation and you want to work with the three circles, first let me emphasize that getting your Hedgehog Concept—getting your three circles right—is not an event. It’s not an offsite. It’s not something that you can get in one shot. It’s not something that is going to come, in most cases, overnight. It is an iterative process, meaning a process whereby you wrestle with it, you get a working version of it, then you make decisions, make autopsies based upon those decisions, reflect, refine, revise, over and over again, using a council of some kind—a key group of people involved in those decisions—and eventually your understanding of those three circles deepens, and eventually you get your clear and crystalline Hedgehog Concept.

Now, that being said, there is an exercise that I would recommend that you can use to get started, to at least get your very early version—if you will, your bad first draft, your rough cut—of those three circles. The way I would suggest doing it is to basically bring together three groups of key people in your organization, people who know it really well. Each group is assigned the task of trying to get brutal facts: what is the truth of that circle?

So, you have one group that works on the question, what are we truly passionate about? What are we truly, truly passionate about? That group will go ahead and basically take a look at the question, what are our core values that should never change? What is our purpose, our reason for being, that we’re deeply passionate about? What is the kind of work that we could do that we would be deeply passionate about?

The second group should wrestle with the question involving brutal-facts reality: what can we be the absolutely best in the world at? Whether you’re doing it or not. The question is not, what are we the best in the world at? The key question for group #2 is, what can we be the best in the world at? Even if we’re doing something, if the brutal fact of reality is that we can’t be the best in the world at it, we should note that. And if there’s something that we’re not doing that we can be the best in the world at, we should note that, too.

Finally, in the third circle, we should have a third group working with the question, what really, fundamentally, drives our economic engine? Now in the for-profit world, what is that one denominator, that one profit per “X” that we write about in Chapter 5 of Good to Great, that allows you to understand that there is a profit per customer, profit per employee, profit per customer relationship, profit per transaction, profit per what? What is the single economic denominator that would drive you toward your best economic results?

Then those three groups should come together. And basically, another group—which could be comprised of members of the first three, or a separate group altogether; it doesn’t really matter—but another group gets formed that takes those three pieces of work that were done and looks for the overlap.

In addition to looking for the overlap, they should also come away with a list of the following things. One, the things that we are currently engaged in that fail the three-circles test and therefore we should consider not doing. Two, the things that we’re already doing that meet the three-circles test that we ought to continue to do or consider continuing. Three, the things that we’re not doing that might meet the three-circles test that we ought to seriously consider doing.

This would be the way to begin to turn the flywheel, to begin to produce results with a working model of the three circles.