Letter 5: Hedgehogs & Flywheels
On creating momentum in web3 businesses
Are you a founder, or dream of becoming one? Do you work in web3 already or are you curious about doing so in the future? This week’s letter should be right up your alley, as we’re talking about building momentum in your web3 business.
But before I get to that, a quick thank you to everyone who has shared some kind words or messages with us since we started this substack here at Curious Addys. Your encouragement and feedback have been both humbling and motivating for us, and we plan to keep writing these letters so long as you keep reading them. On that note, thank you for making last week’s letter our most read yet!
Our deep dive on The Problem with Blockchain Games required a large cup of coffee and a sizable attention span, so I figured I’d switch things up and make this letter a short shot of espresso in comparison.
Today I’d just like to talk about Jim Collins, and a couple of the concepts he developed for businesses to help them thrive.
Jim Collins is a successful author and business consultant, who primarily specializes in business management and company sustainability. Both of the concepts that I’ll be sharing today come from his book, Good to Great, published by HarperCollins in 2001.
I don’t know the dude, and this isn’t a promotion—A few of us here at Curious Addys just happen to be a fan of some of his ideas.
I’ll start by giving a quick overview of these two concepts before explaining why I believe this is useful information for anyone working in (or considering founding) a web3 business.
The Flywheel Effect
No matter how dramatic the end result, good-to-great transformations never happen in one fell swoop. In building a great company or social sector enterprise, there is no single defining action, no grand program, no one killer innovation, no solitary lucky break, no miracle moment. Rather, the process resembles relentlessly pushing a giant, heavy flywheel, turn upon turn, building momentum until a point of breakthrough, and beyond.
- Jim Collins
What Is a Flywheel?
In non-mechanical terms, a flywheel is the process by which a business grows, almost imperceptibly at first, through a series of actions—some big, some small—which build growth and momentum over time, eventually reaching a tipping point wherein that growth and momentum starts to accelerate and carry on, even without further direction or assistance.
You can picture that runaway momentum like a snowball rolling down a hill, growing larger as it rolls, and picking up speed as it goes.
The Flywheel Effect is the point in which you’ve sustainably built enough momentum that your business appears to take off and thrive on its own volition. To any onlookers outside, this may even appear as though it came out of nowhere or is the result of some “overnight success”, but in reality, it is the result of a consistent series of moves in the right direction; a single massive action that changes the course of a business—while not unheard of—happens quite rarely.
Now suppose someone came along and asked, “What was the one big push that caused this thing to go so fast?” You wouldn’t be able to answer; it’s just a nonsensical question. Was it the first push? The second? The fifth? The hundredth? No! It was all of them added together in an overall accumulation of effort applied in a consistent direction. Some pushes may have been bigger than others, but any single heave—no matter how large—reflects a small fraction of the entire cumulative effect upon the flywheel.
- Jim Collins, From Good to Great
Oftentimes, even the most connected, essential, and well informed members of a team will find it tricky to pinpoint with any degree of certainty the one big thing which turned the tide in their favor and brought their business to a whole new level of success.
Mr. Collins made similar comments in his book:
We kept thinking that we’d find “the one big thing,” the miracle moment that defined breakthrough. We even pushed for it in our interviews. But the good-to-great executives simply could not pinpoint a single key event or moment in time that exemplified the transition.
- Jim Collins, From Good to Great
But does this not pose a significant problem? If even the core members or executives of the team are unable to point to the thing which spurred the momentum, then how can others be expected to identify it, yet alone replicate it?
In cases like this, I think it’s important to consider:
What was the initial purpose of your company and why you formed it in the first place?
What is it that you have to offer?
What do you think you can do better than anyone else?
What pain points are you alleviating in the market?
What are your core values? Are they congruent with your goals and business practices?
How adaptable are you?
How you answer those questions should help provide a certain understanding of self, as well as give some insight into what actions may help build that flywheel momentum in the first place.
Jim has an insightful comment on the subject of core values that I think is worth sharing here as well:
“Great organizations understand the difference between their core values and purpose (which almost never change), and operating strategies and cultural practices (which endlessly adapt to a changing world).”
- Jim Collins, Turning the Flywheel
Giving thought to distinguish between the two is worth some examination.
With our brief overview of the flywheel complete, let’s now turn to…
The Hedgehog Concept
There is a line among the fragments of the Greek poet Archilochus which says: ‘The fox knows many things, but the hedgehog knows one big thing.’ Scholars have differed about the correct interpretation of these dark words, which may mean no more than that the fox, for all his cunning, is defeated by the hedgehog’s one defence. But, taken figuratively, the words can be made to yield a sense in which they mark one of the deepest differences which divide writers and thinkers, and, it may be, human beings in general.
- Isaiah Berlin, The Hedgehog and the Fox
The Hedgehog and the Fox is an extended essay from the Russian-British philosopher, Isaiah Berlin. In it, Isaiah examines the quote by Greek poet Archilochus, and then gives his take on what constitutes a fox and a hedgehog, before dividing many established thought leaders, writers, and philosophers into one camp or the other.
To Isaiah, these two groups of people could be divided between those who live with a single idea or guiding principle driving them (hedgehogs) vs those who draw on a broad variety of subjects and whose views could not be reduced to any one single concept (foxes).
Jim Collins looked to this famous essay by Isaiah Berlin, who in turn was looking to the quote by Archilochus, took the metaphor of foxes and hedgehogs, and created The Hedgehog Concept, which he filtered through a business lens.
To Jim, foxes being pulled in every which direction can make them inconsistent, scattered, and think too broadly. While they have many talents and uses, he suggests that most who built good-to-great companies were hedgehogs.
Like the Japanese ikigai “reason for being” Venn diagram you’ve likely seen posted all over social media, the image above shows Jim’s Hedgehog Concept as a Venn diagram to help determine a company’s answer to three overlapping questions:
What are you deeply passionate about?
What can you be the best in the world at?
What drives your economic engine?
I would argue you don’t even need to be the best, necessarily, although I’d certainly agree that playing to your greatest strengths is a boon.
In theory, if you can answer those questions, you will have found your hedgehog, the identifiable “it factor” your business has which you are passionate about, exceed at, and can profit from.
Applying Flywheels & Hedgehogs to Web3
So now that we know about flywheels and hedgehogs, what can we take away from this letter? Some thoughts of mine:
1. Examine how the flywheel effect operates/could operate within your business.
2. Determine your hedgehog: that unique strength that tells you what your business can be the best at.
3. Identify who on your team are hedgehogs and foxes and play to their strengths accordingly.
4. Establish whether you yourself have more in common with foxes or hedgehogs.
5. Having determined your flywheel and hedgehog, consider how to implement them within your business.
I also put a huge caveat on all of this to remember that these models and concepts are meant for self analysis and are only a tool to help determine the guiding principles of your business. You must be cognizant of the fact that the world is not so easily divided in practice, and people are incredibly nuanced. Remember that these concepts are for guidance, and are not a rigid metric. If in doubt, always trust your intuition and your thoughts above all else.
The only purpose I had in sharing these concepts today is to give our readers some food for thought, and have you consider your web3 business from a new angle and perspective.
A Single Step
Flywheels and hedgehogs can be challenging to conceive, challenging to implement, and challenging to pull off successfully. Setting the wheels in motion requires not only the right actions, but a consistent series of right actions.
Like the profound quote/overused cliché above says, “A journey of a thousand miles begins with a single step.” But that thousand mile journey and experience is only available to those who make the effort and take that step: they are the ones who have a chance at building something great which takes on a life of its own.
If you’ve been sitting on the sidelines with a great idea for a web3 business while watching others in the space, perhaps with a certain amount of envy and curiosity, now’s the time to set that aside and take your first step.
Identify that hedgehog. Plan and execute your flywheel.
This space will be a better place with you in it.
Written by: Brad Jaeger
Director of Content @ Curious Addys (say hi on Twitter!)