Management Lessons From The King Of Madison Avenue
The Hedgehog Concept: How to Make Your Business The Best In Its Field
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Management Lessons From The King Of Madison Avenue
David Ogilvy
Let’s be honest.
David Ogilvy had some cool nicknames:
“The King Of Madison Avenue.”
“The Real-Life Don Draper.”
“The Father of Advertising.”
If you don’t know him, he is the founder of Ogilvy & Mather — one of the biggest advertising agencies in the world.
Before his advertising career, he used to sell ovens door-to-door.
And he was good at it.
So one day his employer asked Ogilvy to write a sales manual for other salespeople.
The manual was so good, his big brother brought it to the advertising agency he was working at.
And Ogilvy got a job there.
Fast forward thirty years, famous editors called it “the finest sales instruction manual ever written.”
By that time, David Ogilvy had his own agency.
And in 1983, he wrote his book “On Advertising” to share his knowledge on advertising and business.
Besides his writing process and favorite ads —which I mentioned in How To Hypnotize Your Readers— he also gave useful management tips on how to run an advertising agency.
But the lessons apply to any type of business.
Here are 4 of them:
1. Hire giants
Success in running a business depends on your ability to hire people of exceptional talent, train them thoroughly, and make the most of their talents.
“When you are appointed to head an office in the Ogilvy & Mather chain, I send you one of these Russian dolls. Inside the smallest, you will find this message:
‘If each of us hires people who are smaller than we are, we shall become a company of dwarfs, but if each of us hires people who are bigger than we are, Ogilvy & Mather will become a company of giants.’”
David Ogilvy's gift to new managers
2. Who not to hire
Four type of people to not hire in your business:
Never hire your friends — they’ll stop being your friends
Never hire your children — ambitious people don’t work in places that practice nepotism
Never hire your clients — what makes a good client might not make a good employee
And think twice before hiring people who have been successful in other fields
3. Have written principles
“Marvin Bower, who made McKinsey what it is today, believes that every company should have a written set of principles and purposes.
So I drafted mine and sent them to Marvin for comment.
On the first page, I listed seven purposes, starting with ‘Earn an increased profit every year.’
Marvin gave me holy hell.
He said that any service business which gave higher priority to profits than to serving its clients deserved to fail. So I relegated profit to seventh place on my list.
Do you think it childish to use a set of written principles to guide the management of an advertising agency?
I can only tell you that mine have proved invaluable in keeping a complicated enterprise on course.”
4. Rules to fight office politics
“Fire the worst of the politicians. You can identify them by how often they send you blind copies of their poison-pen memos to their rivals.
When somebody comes to your office and denounces his rival as an incompetent rascal, summon the rival and make the denouncer repeat what he has just told you.
Crusade against paper warfare. Make your people settle their fights face-to-face.
Start a luncheon club within the agency. It turns enemies into friends.
Discourage poaching.
Don’t play favorites.
Don’t play politics. If you practice the fiendish art of divide et impera, your agency will go up in smoke.”
How To Make Your Business The Best In Its Field: The Hedgehog Concept
You’ve probably heard of Ikigai.
It became popular thanks to the book with the same name.
Ikigai means “a reason for being” in Japanese.
And as a concept, it’s finding your sense of purpose in the intersection of:
What you love
What the world needs
What you are good at
What you can be paid for
In Good to Great, Jim Collins has a similar idea.
But for businesses.
He calls it the Hedgehog Concept.
We've talked about Collins before, so I’m skipping the introduction.
The hedgehog metaphor comes from the Greek poet Archilochus’ lines:
"The fox knows many things, but the hedgehog knows one big thing.”
Collins says all great businesses are hedgehogs.
They find one thing they can be the best in the world at (while driving financial results), and they religiously stick with it.
Hedgehog Concept
Now the idea is simple.
But as with any profound idea, applying it is harder than understanding it.
So Collins gives some tips and examples to help you build your own hedgehog business:
Put aside the ego
In the 80s, Wells Fargo was struggling to compete with other big banks.
They tried everything the other banks were doing — including having international operations.
Nothing worked out.
But the failures made them put aside their egos and accept one truth.
Wells Fargo could not beat Citicorp in global banking or JP Morgan in mergers and acquisitions.
They had to find a game in which they could be the best at.
So they decided to run the bank as a regular business focused on consumers, and mostly in the western United States.
They designed their strategy around this simple idea.
And it turned Wells Fargo from a lesser imitation of the other banks to a successful bank.
So sometimes finding your Hedgehog concept comes from facing the brutal reality of what you are not the best at. And avoiding it.
“A Hedgehog Concept is not a goal to be the best, a strategy to be the best, an intention to be the best, a plan to be the best. It is an understanding of what you can be the best at. The distinction is absolutely crucial.”
Core competencies vs. what you can be the best at
We all have some core competencies.
And sometimes it seems like focusing on them is the best way forward.
But beware.
Being good at something doesn’t mean you can be the best in the world.
It’s like getting A’s in high school calculus, listening to your parent’s advice, and becoming a mathematician.
You'd quickly realize you can’t be the best mathematician in the world.
“To go from good to great requires transcending the curse of competence. It requires the discipline to say, “Just because we are good at it—just because we’re making money and generating growth—doesn’t necessarily mean we can become the best at it.” The good-to-great companies understood that doing what you are good at will only make you good; focusing solely on what you can potentially do better than any other organization is the only path to greatness.”
Find your denominator
The economic engine circle has one key aspect.
A unique denominator.
Great companies find a unique denominator to build their businesses around. It’s usually quite simple, yet ingenious.
Walgreens (American drugstore chain) executives discovered their unique denominator was profit per customer visit.
So they made all their decisions to optimize for it.
And this simple idea turned Walgreens into a giant machine:
“Walgreens took this simple concept and implemented it with fanatical consistency.
It embarked on a systematic program to replace all inconvenient locations with more convenient ones, preferably corner lots where customers could easily enter and exit from multiple directions.
If a great corner location would open up just half a block away from a profitable Walgreens store in a good location, the company would close the good store (even at a cost of $1 million to get out of the lease) to open a great new store on the corner.
Walgreens pioneered drive-through pharmacies, found customers liked the idea, and built hundreds of them. In urban areas, the company clustered its stores tightly together, on the precept that no one should have to walk more than a few blocks to reach a Walgreens.
In downtown San Francisco, for example, Walgreens clustered nine stores within a one-mile radius. Nine stores! If you look closely, you will see Walgreens stores as densely packed in some cities as Starbucks coffee shops in Seattle.
Walgreens then linked its convenience concept to a simple economic idea, profit per customer visit. Tight clustering leads to local economies of scale, which provides the cash for more clustering, which in turn draws more customers. By adding high-margin services, like one-hour photo developing, Walgreens increased its profit per customer visit.
More convenience led to more customer visits, which, when multiplied times increased profit per customer visit, threw cash back into the system to build even more convenient stores. Store by store, block by block, city by city, region by region, Walgreens became more and more of a hedgehog with this incredibly simple idea.”
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