In his seminal work Good to Great: Why Some Companies Make the Leap… and Others Don’t, Jim Collins reports on some of the research he and his colleagues have done in to what transforms good companies in to great companies. One of the central tenets of the book his the “hedgehog concept”, based upon an ancient Greek parable:
The fox knows many things, but the hedgehog knows one big thing.
As he explains on his website, jimcollins.com -
The Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:
- 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 possess 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 your 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 to stimulate passion but to discover what makes you passionate.
Internet discussion about Amway Global’s transformation have tended to center around issues such as client retailing vs a personal consumption model, or accreditation and better monitoring of the training of Amway Business Owners, and of course the name change from Quixtar to Amway Global in the North American market. A review of the Hedgehog Concept reveals that they are just part of the story – means to an end. Let’s look at the three circles -
What drives Amway’s economic engine? Clearly it is the Nutrilite and Artistry brands. Nutrilite recently broke $3billion in sales in just one 12 month period.
What can Amway be the best in the world at? Health & Beauty products. Indeed, in my opinion – they already are. Nutrilite is clearly the most successful nutritional brand in the world, and Artistry is well on the way to taking that position in prestige cosmetics and skin care. If one thoroughly researches the brands and the science behind them, you can only be impressed.
What is Amway deeply passionate about? I cannot speak for Amway’s owners, or Amway management and staff, but for myself, when I talk to people about Amway, I don’t only get passionate about the business opportunity and what it can offer, I am extremely passionate about Nutrilite.
Amway has all the seeds in place to transform from a good company, indeed a great company in the Direct Selling industry, into a truly great company in the much larger and more competitive Health & Beauty industry. In my opinion, this is what the Amway Global transformation is about – turning Amway into the clear and acknowledged world leader in Health & Beauty.
As an addendum to this discussion, a few words on the what Amway is currently best known for in many markets – cleaning products. SA8 and LOC are Amway’s oldest products, and still some of the best on the market. Many “old timers” in the business, and folk like myself who have been using Amway products since we were children, have been more than a little concerned that Amway has been moving these products to one side, perhaps with a view to eventually discontinuing them. On this, I’d like to plead their case to Amway: If one understands SA8 and LOC – they fit extremely well into the Health category! While organic cleaning products such as LOC clearly have health benefits over their more caustic competitors, SA8 has an even clearer health roll – there is a body of research that indicates that aborption of soap residuals into the skin may have significant influence on health, increasing risk of allergies and other problems. I don’t know if I’ve ever seen Amway promote the health benefits of these products. Perhaps they should?
Comment below, or join the discussion on Amway Talk