{"id":5894,"date":"2019-12-22T18:29:35","date_gmt":"2019-12-22T22:29:35","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=5894"},"modified":"2022-03-17T15:59:54","modified_gmt":"2022-03-17T19:59:54","slug":"big-hairy-audacious-goal-bhag","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/big-hairy-audacious-goal-bhag\/","title":{"rendered":"Big Hairy Audacious Goal (BHAG): Definition + Examples"},"content":{"rendered":"\n<p>What is a BHAG, or <a href=\"https:\/\/www.shortform.com\/blog\/bhag-examples\/\">Big Hairy Audacious Goal<\/a>? Why do you need one if you want your business to be successful?<\/p>\n\n\n\n<p>A BHAG (Big Hairy Audacious Goal) is a <strong>huge, seemingly impossible objective that can inspire outsiders and stakeholders alike<\/strong>. The concept of the BHAG (pronounced <em>bee-hag<\/em>) is explored in Jim Collins&#8217;s <em>Built to Last<\/em>.<\/p>\n\n\n\n<p>We&#8217;ll cover what a good BHAG or Big Hairy Audacious Goal looks like and how it ties in with your <a href=\"https:\/\/www.shortform.com\/blog\/hedgehog-concept\/\">hedgehog concept<\/a>, another necessity for a <a href=\"https:\/\/www.shortform.com\/blog\/what-makes-a-business-successful\/\">successful business<\/a>.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Big Hairy Audacious Goal<strong>s (BHAGs<\/strong>)<\/h2>\n\n\n\n<p>But there are <em>good <\/em>Big Hairy Audacious Goals and <em>bad <\/em>Big Hairy Audacious Goals:<br><br><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>A <em>good <\/em>BHAG is one determined by the <a href=\"https:\/\/www.shortform.com\/blog\/how-to-understand-anything-deeply\/\">deep understanding<\/a> derived from hedgehog thinking\u2014the application of the three circles and the creation of a Hedgehog Concept.<br><br><ul><li>BHAG Example: Boeing, for example, began as a military contractor exclusively. When a level 5 CEO took over the company in 1952, he realized that the company\u2019s knowledge of jet propulsion and manufacturing large airplanes could apply to the design and production of large-scale commercial aircraft. This was a good Big Hairy Audacious Goal.<br><br><\/li><li>The BHAG\u2014to become the leading commercial aircraft maker in the world\u2014was certainly bold, but it checks out when analyzed using the three circles: (1) The company\u2019s technology and knowhow meant it <em>could <\/em>be the best commercial aircraft manufacturer in the world; (2) commercial aircraft satisfied its economic variable (profit per aircraft model); and (3) the company\u2019s managers were passionate about the move.<br><br><\/li><\/ul><\/li><li>A <em>bad <\/em>BHAG is one determined by hubris, without the steady and disciplined development of a Hedgehog Concept.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">The Big Hairy Audacious Goal and the Hedgehog<\/h2>\n\n\n\n<p>People can be divided into <a href=\"https:\/\/www.shortform.com\/blog\/are-you-a-fox-or-a-hedgehog\/\">foxes and hedgehogs<\/a>: Foxes know many things and engage with a complex world on its own terms; <strong>hedgehogs know one big thing and subsume the world\u2019s complexity to a single, simple, unifying idea.<\/strong><\/p>\n\n\n\n<p>Collins <em>et al<\/em>. determined that \u201chedgehog concepts\u201d emerge from a Venn diagram consisting of three key questions: What can I do better than anyone else in the world? What is my financial engine? And: What am I profoundly passionate about? Knowing you hedgehog concept can help you create a good Big Hairy Audacious Goal.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Circle #1: What can I do better than anyone else in the world?<em><br><\/em><\/strong><\/h4>\n\n\n\n<p>Rather than focus on \u201ccore competences,\u201d good-to-great companies homed in on an area of their business they led (or <em>could<\/em> lead) the world in. This is key to creating a good Big Hairy Audacious Goal.<br><br><\/p>\n\n\n\n<p>For example, by the 1960s, Abbott Labs hadn\u2019t invested enough in R&amp;D to compete with major pharma companies like Merck. So, even though Abbott had focused on pharmaceuticals for its entire existence, CEO George Cain decided to move the company into the areas of hospital nutritional products and diagnostic devices, areas with which the company had flirted and in which opportunity was significant. Abbott eventually became leading company in both these areas. <br><br><\/p>\n\n\n\n<p>The takeaway is this: <strong>If you can\u2019t be the best in the world in a particular area, even if it\u2019s your core business, then it <em>can\u2019t be part of your Hedgehog Concept<\/em><\/strong>. It\u2019s equally useful to define what you <em>cannot <\/em>be the best in the world at, and to avoid that sector.<br><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Circle #2: What\u2019s my economic engine?<\/strong><strong><br><br><\/strong><\/h4>\n\n\n\n<p>It might be tempting to assume that the good-to-great companies happened to be operating in booming industries at the transition point\u2014but, in fact, only <em>one <\/em>of the good-to-great companies was in a high-return industry. (Collins <em>et al<\/em>. ranked each of the good-to-great companies\u2019 industries by averaging returns for the top companies <em>within <\/em>those industries.) This should also be a factor in a company&#8217;s Big Hairy Audacious Goal (BHAG).<br><br><\/p>\n\n\n\n<p>The reason the good-to-great companies were able to excel regardless of industry was their sharp insight into the fundamental economics of what aspect of their business would drive profits. They formulated a single \u201c<strong>economic denominator<\/strong>,\u201d defined as a ratio such as \u201c<strong>profit per X<\/strong>,\u201d and aligned their strategy around that ratio. The challenge was to define the correct X to produce the correct strategy.<br><\/p>\n\n\n\n<p>For example, a common-sense economic denominator for a pharmacy\u2014or any retail company\u2014is <em>profit per store<\/em>. This thinking would lead to a strategy of cutting stores and lowering costs per store, at the expense of customer experience.<br><\/p>\n\n\n\n<p>Walgreens, however, knowing that it wanted to maximize convenience, also knew that profit per <em>store <\/em>would likely diminish (because more convenience = more stores in a smaller area = less profit per store). So they transformed their thinking: They optimized their stores for <em>profit per customer visit<\/em>, thereby <strong>aligning their economic denominator with what they could do better than anyone else in the world<\/strong>\u2014build convenient drugstores.<br><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Circle #3: What is my profoundest passion?<\/strong><strong><br><br><\/strong><\/h4>\n\n\n\n<p>Although good-to-great companies certainly wanted to maximize profits, they weren\u2019t simply looking for golden opportunities. <strong>Rather, they pursued courses of action that <em>inspired<\/em> their people<\/strong>. They only chose opportunities that their team could get passionate about. You need passion to achieve your Big Hairy Audacious Goal.<br><br><\/p>\n\n\n\n<p>For example, while its competitors ran a race to the bottom by manufacturing ever-cheaper disposable razors, Gillette went in the opposite direction, designing and producing sophisticated shaving systems that its technicians and executives could get excited about.<br><\/p>\n\n\n\n<p>&#8212;<br><strong>In the intersection of the three circles lies your Hedgehog Concept<\/strong>. This is a deep understanding of where you can play, win, and make a profit.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is a BHAG, or Big Hairy Audacious Goal? Why do you need one if you want your business to be successful? A BHAG (Big Hairy Audacious Goal) is a huge, seemingly impossible objective that can inspire outsiders and stakeholders alike. The concept of the BHAG (pronounced bee-hag) is explored in Jim Collins&#8217;s Built to Last. We&#8217;ll cover what a good BHAG or Big Hairy Audacious Goal looks like and how it ties in with your hedgehog concept, another necessity for a successful business.<\/p>\n","protected":false},"author":4,"featured_media":5914,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,43],"tags":[67],"class_list":["post-5894","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-self-improvement","tag-good-to-great","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Big Hairy Audacious Goal (BHAG): Definition + Examples - Shortform Books<\/title>\n<meta name=\"description\" content=\"A BHAG (Big Hairy Audacious Goal) is a huge, seemingly impossible objective that can inspire outsiders and stakeholders alike. 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