Spelling it out: What Profit Per X is all about

That kicked off spelling lessons at home, but with Leo as the teacher, instructing me on how to apply various spelling rules.

Teaching others really solidifies your own understanding, and that’s exactly what I am doing by exploring the topic of Profit Per X—a term popularised by Jim Collins in Good to Great.

To dig into Profit Per X, we firstly need to understand that it is one of three elements that form the Hedgehog Concept. Wait? How did we get from profit to a prickly little animal? Just like with spelling concepts, let’s start at the beginning.

 

What’s your hedgehog?

When you take the three circles of the hedgehog concept (passion, excellence, profit), and allow for an overlap, you’ll find you sweet spot or, your hedgehog concept – the prickly piece that is unique to you.

The ancient Greek parable says, “the fox knows many things, but the hedgehog knows one big thing.” In business, we often fall into the trap of trying to be good at everything (and yes, I’m imagining that unicorn that many strive to be). But businesses that truly stand out are the ones that, like the hedgehog, excel at one core thing.

Jim Collins found that companies who went from good-to-great were hedgehogs at heart. They built their strategies around their Hedgehog Concept and drove their businesses with a laser focus. The companies that faltered, on the other hand, were like foxes—constantly scattered and inconsistent.

 

What are the three circles of the Hedgehog Concept?

1. Passion: What are you deeply passionate about? This takes us back to Simon Sinek’s famous idea of starting with “why.” What gets you out of bed in the morning? What lights your fire?
2. Excellence: What can you be the best in the world at? It’s not about what you wish to be the best at—it’s what you already have the potential to truly excel in.
3. Profit: What drives your economic engine? What’s the single metric that powers your financial success?

This is where Profit Per X comes in. It’s about identifying the one key metric that best captures your business’s ability to generate consistent and scalable value.

 

Profit Per X – What does it mean for you?

So, what exactly is Profit Per X? Think of IKEA and their famous trolleys. For them, the key driver of profit is the amount each customer spends per visit. By focusing on this one driver, IKEA knows exactly what to optimise, and the entire team can align behind it.

Our Two Tides clients know that their Profit Per X ties back to their BHAG (Big Hairy Audacious Goal). Why? Our CEOs and leadership teams know that their day-to-day key financial drivers must be aligned with their long-term vision.

Here’s why this connection is essential:

1. Consistency and Focus: The Profit Per X helps clarify the most critical lever for financial success. When this metric is directly tied to the BHAG, it ensures that every action, investment, and decision is pushing the company closer to its audacious goal. Without this alignment, efforts could be scattered, driving short-term gains without contributing meaningfully to long-term success.
2. Strategic Direction: The BHAG sets a bold, visionary direction for the company, while the Profit Per X keeps the business grounded in practical financial realities. When these two are in sync, it balances ambition with measurable, actionable steps—allowing the company to achieve its grand vision without losing sight of the day-to-day drivers of success.
3. Unified Purpose: Having a clear connection between Profit Per X and the BHAG unifies the team. Everyone can rally around a single financial metric that both supports the company’s immediate profitability and pushes it toward its ultimate, long-term goal. This builds alignment across all levels of the organisation.
4. Scalability: If Profit Per X is driving the company toward the BHAG, it ensures that the growth model is scalable. As the company grows, this alignment helps maintain focus on the right areas, ensuring the business doesn’t lose momentum or direction as it scales up.

In short, tying Profit Per X to the BHAG creates strategic coherence, helping the business stay disciplined in the short term while working toward an inspiring, long-term goal.

 

Why the Hedgehog Concept and BHAG must align

Now, you might be asking, why do the Hedgehog Concept and BHAG need to align?  It’s simple. The Hedgehog Concept clarifies where your company’s strengths lie—where passion, excellence, and profit overlap. The BHAG, on the other hand, stretches you towards a long-term vision.

Think of it like a road trip. The Hedgehog Concept is your GPS, showing you the exact path to take. The BHAG? That’s your destination. Without the clarity of the Hedgehog Concept, you’ll never get there. But without the inspiration of the BHAG, you’ll never be driven to go the distance.

And how does this all tie back to classroom spelling? We are all on a journey of learning, from classroom to boardroom it doesn’t stop. It’s about finding focus, a way to share our knowledge, and coaching others to achieve.

The more we teach, the more we learn. Whether you’re an 11-year-old mastering spelling rules or a CEO driving your company to success, sometimes, we need a teacher (or a coach from Two Tides) to help us along the way – let’s chat!