Every entrepreneur that I work with has a similar problem: They want to do EVERYTHING. Afterall, part of the allure for them to pursue entrepreneurship was to be able to have CHOICE in their activities, IMMUNITY from the constraints set by others, and ultimately FREEDOM of movement, finances, etc. But this freedom can often lead to a paralyzing lack of focus that creates small businesses that are disorganized, poorly managed, and often times financially taxed to the point of bankruptcy.

Generally this all starts with the entrepreneur’s choice of business models. An electrical contractor thinks that they need to do service work, AND installation work, AND industrial work. An architect thinks that they need to design both small, affordable homes, AND large commercial buildings. A painter thinks that it would be a great idea to re-stain decks, AND paint house exteriors, AND re-seal highway bridge abutments. These are all actual examples of clients of mine who were, at one time, plagued with a common challenge…TOO MUCH FREEDOM.

One of the models that I like to use most with entrepreneurs who are experiencing this challenge is called “The Hedgehog Concept.” the Hedgehog Concept was popularized by Jim Collins’ amazing book, Good to Great, and is based on a famous essay by Isaiah Berlin called, “The Hedgehog and the Fox,” which describes how the world is divided into two types. The fox knows many small things. The fox is a very cunning creature, able to devise complex strategies to sneak attack upon hedgehog. The hedgehog knows one big thing: rolling up into a perfect little ball, thus becoming a sphere of sharp spikes, pointing outward in all directions. The hedgehog always wins despite the different tactics the fox uses.

In business, small business in particular, we want to be the hedgehog. This boils down to understanding what we are passionate about, what we are good at, and what society finds valuable…and executing at the intersection of these three places. Collins’ interpretation of the Hedgehog concept looks like this:

Applying the Hedgehog Concept inside of your business is simple (notice, I didn’t say easy), but it requires you to make hard choices…and it requires you to say NO to things that don’t fit with your particular focus. Here are some steps that you can take to apply the Hedgehog concept:

Step 1: Find Your Passions

Think about what you feel passionate about at work. What gets you up in the morning and keeps you working late, voluntarily? Then, consider what your people feel most excited about. How does the purpose of the organization inspire them? And what motivations and values do you look for when you hire new team members? Then, look at your organization’s mission and vision statements . What are its core values, and do your people buy in to them?

Step 2: Understand What You Do Best

Here, your aim is to understand what your organization can do better than anyone else. If you cannot be number one in the world at your core business, then this shouldn’t be your Hedgehog Concept. It’s also important to know what your organization will never be the best at. Be honest when you consider these weaknesses, and remember that not being the best in certain areas is OKAY – understanding what your organization can be good at is far more powerful. Tools such as SWOT Analysis, Core Competencies Analysis, and USP Analysis will reveal what you do well already, and help you to determine where you can excel.

Step 3: Discover Your Economic Engine

To have a powerful economic engine, your organization must understand how to generate sustained cash flow and profitability, and express this insight as a single “economic denominator.” This is also known as “profit per X,” where “X” is the single measure that can have the greatest and most sustainable impact on your organization’s long-term success. Some common economic denominators include:

• Profit per customer
• Profit per employee
• Profit per location
• Profit per geographic region
• Profit per part manufactured
• Profit per brand
• Profit per sale

The “X” that you adopt can be specific to your business or industry. For example, most of the airline industry historically used “total revenue per available seat mile.” Southwest Airlines, however, adopted “profit per airplane” as its denominator. Focusing on airplanes, rather than on available seat miles, meant that Southwest took different strategic decisions from its competitors. As a result, it has become the most consistently profitable US airline.

Step 4: Look for the Overlap

Once you’ve looked at the model’s three circles, look at where they overlap. That’s where you’ll find your Hedgehog Concept: the central vision that should guide your organization’s strategy.

For example, imagine that you and the people in your organization are passionate about innovation, and about benefiting vulnerable people. You realize that you have the capability to be the best in the world at developing affordable water filtration systems and portable water carriers. You have a great charity network, and you have experience in making high-volume, major account sales. Therefore, a possible Hedgehog Concept could be to develop a portable water filtration system that people in developing nations could use to filter river water. You could sell these products in bulk to charities.

Don’t worry if your Hedgehog Concept isn’t obvious right away. You may have to do some additional analysis, or explore different combinations to find the core vision that works best for you.

Step 5: Review and Communicate Your Strategy

Once you’ve found the areas of overlap between the circles, look at your existing strategy and ask yourself whether it aligns with your Hedgehog Concept. You may find that your organization could benefit from developing a revised strategy , based on what you’ve learned. You’ll need to get your team members on board with the new strategy. Start by explaining what the Hedgehog Concept is, and communicate why it’s so important for your organization to align its strategy to reflect its true passion, talent, and economic capabilities. (Linking your explanation back to people’s personal passions and values can be a useful way to win their support). If the result of your analysis is likely to result in a significant shift within your organization, it’s essential to plan and manage this change effectively.

Once implemented, your new, properly aligned strategy will provide long-term focus for your team members, vendors and customers, resulting in better engagement, productivity, and profitability.