What is a BHAG® (and why is it powerful?)
Ever feel like you need an interpreter? Acronyms are everywhere in business. They’ve become a language in their own right, particularly in the Scaling-Up arena! The buzzwords, phrases and abbreviations can be baffling and it’s easy to get cynical. But some of them are really valuable. Take my personal favourite, the BHAG® — short for Big, Hairy, Audacious Goal.
This is all about the direction of travel and I happen to believe it’s vital to any business that wants to grow. Why? Because without it, you’re likely to get steered off course by the everyday ‘busy-ness’ of working life. Not forgetting the twists and turns of client demands. Your business needs a BHAG® to act as a north star, guiding it forever forwards in the right direction.
What exactly is a ‘BHAG®’?
Trademarked by Jim Collins in the mid-1990s, a BHAG® replaces the more traditional five-year plan with a longer-term trajectory that reaches 10, 15 or even 20 years into the future. So far into the future, that the executive team who create it are unlikely to fulfil it.
At its most powerful, the BHAG® is an emotional tool. It’s not just a goal — it’s a moon-shot. Your 10x. It should fire people up, inspiring passion, excitement and motivation. Eyes should shine every time you discuss it. Linked to your Core Purpose and Values, it’s the destination that’s achievable if you follow your strategy.
The best ones are clear and compelling, requiring very little explanation. They break down into four models:
– Target orientated
These are clearly defined as quantitative or qualitative BHAG®s. When I’m coaching clients through the process of finding their BHAG®, I prefer not to use numbers or quantitative figures. In 1990, Walmart had a BHAG® of $125 billion by the year 2000. This may have excited their shareholders but I couldn’t see it meaning a lot to their staff.
One of my clients has just come up with a great target-orientated BHAG®. They’re an academy trust and their new mission is ‘to be a global leader of innovation in education’. When I asked one of the directors how it made him feel, he looked at me wide-eyed and said it ‘scared him shitless’. That’s just the kind of emotional reaction you need!
– Role Model
This type of BHAG® mimics the traits of other successful companies outside your sector. It’s something we did brilliantly when I was at Rackspace.
Originally, our BHAG® was ‘To be the leading provider of managed hosting services to businesses, while providing Fanatical Support™ to our customers and generating profits’ — a bit long-winded. We wanted to make it more emotional. Our aim was to become the IT equivalent of Ritz Carlton or Nordstrom’s. They have an amazing reputation for customer service and we wanted to bring this to our sector. So, our BHAG® became “To be recognised as one of the world’s great service companies alongside Ritz Carlton, Lexus and Nordstroms”. Now we were getting somewhere!
By reaching outside your industry, you can use the reputation of a larger company to haul you up past your competitors in the eyes of your prospects. It’s great for publicity too. Journalists are generally pretty lazy and, if you provide the words, they’ll include your BHAG® in any press releases — great positioning for your growing business.
– Competitive
As its name implies, this type of BHAG® focuses ruthlessly on your competition. It can work wonders if you need to rally your troops around a common enemy. Examples include Nike’s 1960s goal to ‘Crush Adidas’ and Honda’s 1970s aim ‘Yamaha wo tsubusu! We will destroy Yamaha’.
– Internal Transformation
If you’re already well established but have an obvious transformational mission, you can focus your BHAG® on that goal. This would be relevant to many of the businesses in my old sector, Managed Hosting. The more traditional companies have struggled with revenue growth as a result of Cloud. There’s a clear opportunity to transform but they’re stuck, mainly because they don’t have a clear BHAG®. As customers side-step them to the Cloud, they need to find a new way to compete.
It all goes back to Core Customer and the problem they’re trying to solve. These traditional MSPs are the old way of solving the problem and they need a new trajectory if they’re going to survive. One of my clients, Wirehive, have managed this reinvention brilliantly. A few years ago, they were a very traditional VMWare managed hosting company. Now, they’re an AWS and azure cloud consultancy business. They changed their core purpose and BHAG®, along with their business operating model, cash flow and margin dynamics with dazzling results.
Finding a powerful BHAG®
When I’m guiding clients towards finding their BHAG®, I often reference Jim Collins’ work from his best-selling book, ‘Good to Great’. His approach revolves around what he calls the ‘hedgehog concept’ It’s based on the ancient Greek parable of a fox trying every trick in the book to eat a hedgehog. Collins argues that your company is more likely to succeed if you can identify the one thing you can do best.
Sounds simple but it takes time to define this, working through three specific areas. Firstly, I get the leadership team to isolate the things that give their company energy and passion. I ask them to work out what gets them out of bed early in the morning and keeps them working late voluntarily. Secondly, I ask them to define the one thing that they can be best in the world at — something they know they can do better than anyone else. And finally, I get them to examine the things that drive their economic engine in terms of profitability and market potential.
Where these three areas overlap is their company’s ‘hedgehog concept’ and the germination of their BHAG®. Often, I’ll get each member of the team to write down their version of a possible BHAG® on a post-it note. It doesn’t need to be word-smithed to perfection. It’s the first stab. We stick them all up on the wall and, you guessed it. They’re all completely different! Then I ask the team to reflect — collectively — and choose the most creative idea that embodies the biggest leap of faith. I get them to tune into their emotional reactions — I’m looking for those shining eyes.
This collaborative approach can be really effective — after all, everyone needs to buy in and sell this new trajectory to the rest of the company. Once a BHAG® has been embedded and brought to life, I suggest clients review it every year along with the other foundations of growth that we’ve worked on together — core purpose, values, core customer etc.
Why does your company need a BHAG®?
I often get met with scepticism when I start talking BHAG®s. Maybe it’s because clients have operated in the past without one. I can see it in their eyes, ‘What a load of tosh!’. But then I start to explain how it’s going to make their lives easier, and suddenly they’re interested. Why? Because if you have a BHAG® that’s working well, it will make strategic decision making so much easier.
Going back to the earlier example of my client, the academy trust, whose new BHAG® revolves around innovation in education. As soon as they’d found it, they started using it. Their financial driver is numbers of pupils and they want to attract more schools to join their Trust. They have a limited budget and measure themselves on the value-add that their schools deliver to their pupils. They realised that the way forward wasn’t to keep doing what they’d done before but to innovate — to do more with less.
Their thought process went something like this. We want to be known globally for innovation. What do we need to make that true? Great teachers who like to do things differently, or experiment, and are therefore attracted to our mission. They’re likely to be frustrated where they are and searching for something new. How do we attract them? We can’t pay them more — the salary’s the salary. Maybe we could do something around benefits? Or try a whole new way of going to market. Soon, they had come up with a differentiated strategy that would set them apart in the education arena.
Another reason for BHAG® scepticism is businesses are used to thinking short term. They’ve never really worked strategically before. When we meet for the first time, clients say they have a strategy. When I probe further, it’s just half a dozen tactics for the next 12 months. Yes, they’re very busy — but not necessarily on the right things.
I’m asking them to stop. Really stop and think, where will their business be in 15 years? ‘Are you mad’, they reply. ‘I can’t even tell you where we’re going to be next week!’. They can’t see the wood for the trees.
Once you have your BHAG®, I can guarantee it will act as a North Star for the voyage of your business, providing direction of travel and stretch. As you tack into the wind, you may not always be aiming towards it, but you’ll always know it’s over your port or starboard side. And you’ll be turning back towards it at some point. Product Development, Customer Selection, Markets, Geography, M&A — all are impacted by the BHAG® you choose. It’s part of the narrative that you’re telling to staff, customers and competitors.
It’s relatively rare to find small businesses with BHAG®s. But that doesn’t mean you shouldn’t have one. A strong BHAG® will give you a sense of ambition and clarity as your company grows. Don’t be afraid to think big. You’ll find it inspires others and helps you attract like-minded, talented staff who share your ambition.
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