On Hedgehogs and Foxes

Writing over half a century ago, the philosopher Isaiah Berlin distinguished two types of intellectual: foxes, which know many things and hedgehogs, who know one big thing. Shakespeare, Aristotle, Erasmus, Balzac and Joyce are foxes who pursued many ideas, Plato, Dante, Dostoevsky and Proust are hedgehogs who "who relate everything to a single central vision...and a single, universal organizing principle." Writing at the beginning of this decade, management consultant and business guru Jim Collins applied the same analogy to companies. Collins's praise was reserved for "hedgehog" companies: those whose strategies were based upon a single, penetrating insight into the complexities of their business environments that allows them to build a powerful, focused competitive advantage. Yet, as we survey the wounded on today's corporate battlefield, it is clear that many "hedgehog" companies have experienced difficulties in coping with turbulence, unpredictability and hypercompetition. Toys-R-Us with its big-box retailing, Dell with its direct sales model, AOL with dial-up internet access, and Borders Books with its reliance on IT-based inventory management are all companies that built their strategies upon a single big idea, whose strength did not endure. Conversely, the companies that have shown resilience and have been effective at maintaining profitability and market share during this troubled decade are those that have built multiple layers of competitive advantage – Toyota, 3M, Canon, Swatch, and IBM. These companies have succeeded in meshing the diverse performance goals of cost efficiency, differentiation, innovation, responsiveness, and global learning. The capacity to build pursue multiple dimensions of performance through building layers of organizational capability requires what Tushman and O'Reilly have referred as "ambidextrous" organizations (though the term "multi-dexterous" organizations may better capture the multidimensionality of capability building). Some of the critical challenges relate to organizational design. We know how to build organizations for cost efficiency, we know how to build high-reliability organizations, we know the kinds of conditions that foster innovation, we know how decentralization and encouragement of initiative fosters responsiveness. It's doing all these simultaneously where the challenge lies. Many of the conventional solutions – building matrix structures and assigning specialized roles to differentiated organizational units – don't work well in environments characterized by extreme instability. Moreover, some of these capabilities – innovation in particular – need to be diffused across the whole organization. The answer is to adopt approaches to coordination and control that substitute informal for formal mechanisms. Complexity theory can help us to recognize and understand the self-organizing properties of complex adaptive systems. If bee hives and ant colonies can demonstrate complex, spontaneous patterns of coordination without managerial direction, surely human organizations can do even better. If organizational members are given the information needed for mutual adjustment, if goals and behaviors can be aligned through building organizations founded on commonality of culture and identity, and if business leaders can accept that their primary role guiding the evolution of their organizations rather than taking decisions, we will be well on the way to expanding the range of capabilities that individual business enterprises can develop. Nevertheless, limits on the degree of internal coordination that individual business organizations can cope with will always constrain companies' ability to reconcile the benefits of large organization size with requirements for entrepreneurial flexibility. Inevitably, firms' quest to assemble more complex portfolios of technological and commercial capabilities will require increased collaboration with other companies. Procter & Gamble's "Connect & Develop" approach to new product development, IBM's massive, biannual "Innovation Jam," and Boeing's outsourced model for developing its 787 Dreamliner are all examples of collaborative approaches to accessing capabilities beyond companies' own boundaries.