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Economic Engine VS Resource Engine

hedgehog collins good to great resource engine.jpg

In his book Good to Great, Jim Collins talks about how leaders who built the good-to-great companies were, to one degree or another, “hedgehogs”. The hedgehog knows one big thing and is disciplined in thought and action to achieve it. The leaders of great companies used their hedgehog nature to drive toward what he came to call a Hedgehog Concept for their companies. 

Collins states that the Hedgehog Concept is a “simple, crystalline concept that flows from deep understanding about the intersection of three circles: 1) what you are deeply passionate about, 2) what you can be the best in the world at, and 3) what best drives your economic or resource engine”.

This Hedgehog Concept is used in both the business and social sectors, but there is a fundamental difference in the third circle where the “economic engine” of business shifts to the “resource engine” of the social sector. In the business sector the critical question might be “How much net profit did we make?”, whereas in the non-profit social sector the question might be “How do we develop a sustainable resource engine to deliver superior performance relative to our mission?” Some of the main purposes of the social sector are to meet social objectives, human needs and national priorities that cannot be priced for a profit.

There are some other differences between the business and social sectors, like performance measurement (i.e. financial vs mission) and governance structure (clear executive power in business vs more diffused in social).

However, in summarizing the differences between the business and social sectors, Collins concluded that the relative advantages and disadvantages of both sectors more or less cancelled each other out. The key question is not business versus social, but good versus great in both sectors. “Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice and discipline.”

Collins describes the “resource engine” as having three basic components: time, money and brand. Time refers to how well you attract people willing to contribute their efforts for free or at rates below their talents would yield in the business sector. Money refers to sustained cash flow to “deliver superior performance relative to our mission”. Brand refers to how well your organization can cultivate a deep well of emotional goodwill and mindshare of potential supporters.

It is important to identify the key elements under the three basic components of the resource engine for your social sector organization and create measurables for outcomes and impact. In recognizing the fundamental difference between the “economic engine” of the business sector and the “resource engine” of the social sector, performance relative to mission, not financial returns, is the primary definition of success in the social sector.

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