HOW TO WRITE A POWERFUL BHAG FOR YOUR BUSINESS

Author: Dominic Monkhouse

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 valuable. My favourite is the BHAG® – short for Big, Hairy, Audacious Goal.

This is all about the direction of travel, and 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 forward in the right direction.

What is the meaning of BHAG?

A BHAG pronounced ‘bee hag’ replaces the more traditional mission-driven five-year plan with a longer-term trajectory that reaches 10, 15 or even 25 years into the future. So far into the future, the executive team who create it will likely fail to fulfil it.

BHAG is a concept first developed by Jim Collins and Jerry Porras in the book Built To Last: Successful Habits of Visionary Companies. In what Collins now calls the prequel Good To Great: Why Some Companies Make the Leap… and Others Don’t, he further develops the term ‘company Big Hairy Audacious Goal’ to replace the term company mission statement.

At its most powerful, the Big Hairy Audacious Goal, 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. Your BHAG completes your company’s vision along with your core purpose and core values. It’s the destination that’s simultaneously achievable and yet out of reach, even if you stick to your company’s strategy.

Examples of big hairy audacious goals from visionary companies

1. 1. NASA: “Put a man on the moon and return him safely to Earth by the end of the decade.” This BHAG set by President John F. Kennedy in 1961 inspired the Apollo program and led to the successful moon mission in 1969.

1. 1. Starbucks: “Become the most recognised & respected consumer brand in the world.”

1. 1. Tesla: “Accelerate the world’s transition to sustainable energy.”

1. 1. Amazon: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.” Amazon’s focus on customer satisfaction and its continuous expansion into various industries exemplify this audacious goal.

1. 1. Microsoft: “A computer on every desk and in every home.” This goal, set by Microsoft co-founder Bill Gates, reflects the company’s ambition to make personal computers accessible and ubiquitous, driving the growth of the technology industry.

These examples illustrate how BHAGs can motivate organisations to pursue extraordinary achievements and stimulate progress, pushing the limits of what is considered possible.

Some examples from our clients are:

• • PAX8 UK: “#1 market (favourite place) for IT pros to buy cloud”.

• • ExcelsiorMAT: “Being world famous for innovative education”.

• • 6Degrees: “To be the global default secure cloud provider”

The Four Types of BHAG

While there isn’t a specific categorisation of BHAGs into distinct models, there are four common approaches to formulating them. They provide different perspectives on setting audacious goals:

• • Market Dominance or ‘common enemy’ BHAG

This model focuses on establishing or maintaining a dominant position within a specific market. The goal is to become the undisputed leader and set a high bar for competitors. For example, a BHAG for a technology company could be to capture 70% of the global market share in a particular industry within a specific time frame.

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 BHAG

Internal Transformation BHAGs focus on transforming the organisation itself. The goal is to redefine the company’s culture, operations, or capabilities to adapt to a changing business landscape or achieve exceptional performance. An example could be a BHAG to become a fully self-managed organisation where hierarchical structures are completely eliminated, fostering a highly empowered and collaborative workforce.

Remember, BHAGs should be audacious, challenging, and inspiring. They should stretch the organisation’s capabilities and become a powerful motivator for individuals to rally behind a shared vision. The specific model or approach to formulating a BHAG will depend on the organisation’s context, industry, and strategic priorities.

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 businesses in my old sector, Managed Hosting. The more traditional companies have struggled with revenue growth due to 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 must 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 (now PAX8), 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. With dazzling results, they changed their core purpose and BHAG®, along with their business operating model, cash flow and margin dynamics.

• • Target-oriented BHAG

These are clearly defined as quantitative or qualitative BHAG®s. When I’m coaching clients through finding their BHAG®, I prefer using a qualitative goal rather than numbers or quantitative figures. In 1990, Walmart had a BHAG® of $125 billion by 2000. This may have excited their shareholders, but I couldn’t see it meant much to their staff.

A few years ago, one of our clients, ExcelsiorMAT, developed a great target-oriented BHAG®. They’re an academy trust, and their mission statement was ‘to be a global leader of innovation in education’. When I asked one of the directors how it made him feel, he looked me wide-eyed and said it ‘scared him shitless’. That’s just the kind of emotional reaction you need!

This big hairy audacious goal was transformational for their business, starting from how they wrote job ads, which increased the volume of CVs they received and transformed the quality of teachers they hired. They now have a greater impact on the wider educational arena in Birmingham. We recently had the CEO and Deputy CEO on The Melting Pot sharing their story.

• • Role Model BHAG

This big hairy audacious goal mimics the traits of other successful companies outside your sector. It’s something we did brilliantly 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.

Finding a powerful Big Hairy Audacious Goal

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, “The fox knows many things, but the hedgehog knows one big thing.” Collins argues that your company is more likely to succeed if you can identify the one thing you can do best.

It is a powerful tool to identify their core strengths and focus on achieving long-term success, and it consists of three intersecting circles:

What You Can Be Best In The World At

This circle represents your core competencies and capabilities. What are the activities that you excel at and make you the best? This requires a deep understanding of your strengths, resources, skills, and unique advantages. The goal here is to pinpoint the areas where you can outperform your competitors.

What You Are Passionate About

This one focuses on finding your true passion, the activities that ignite your enthusiasm and energise you. It involves understanding what truly motivates and inspires you and your team. Passion is essential because it provides the fuel and commitment necessary to overcome challenges and sustain long-term effort.

What Drives Your Economic Engine

Collins explained that each of the ‘great’ companies he studied had a deep understanding of the key drivers in its economic engine and built its system accordingly. He said, ‘If you could pick only one ratio – profit per x – to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine?’ This single question can lead you to profound insights into the inner workings of your company’s economics.

The sweet spot, where the three circles intersect, represents the Hedgehog Concept and the germination of your BHAG®. It is the central idea that guides your actions and decisions. Sustainable success lies in focusing on the activities that fall within this intersection. By aligning what you can be best at, what you are passionate about, and what drives your economic engine, you can achieve long-term greatness.

Collins argues that the Hedgehog Concept helps organisations avoid distractions and focus on their core strengths rather than being lured into areas where they may not excel. It encourages a clear understanding of the organisation’s unique value proposition and a disciplined approach to decision-making. The concept emphasises the importance of simplicity and a relentless pursuit of excellence within a well-defined scope.

How To Define Your BHAG

It sounds simple, but defining this requires time, 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 they can be best 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.

Often, I’ll get each team member 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 collectively reflect and choose the most creative idea that embodies the most significant 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, core 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 explain how it will 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 my client’s earlier example, the academy trust, whose new big hairy audacious goals revolve around innovation in education. As soon as they’d found it, they started using it. Their financial driver is the number 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 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 developed a differentiated strategy to set them apart in education.

Another reason for big hairy audacious goals scepticism is that businesses are used to short-term thinking. 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 busy – but not necessarily on the right things.

I’m asking them to stop. 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&As – all are impacted by the BHAG® you choose. It’s part of the narrative that you’re telling to staff, customers and competitors.

Finding small businesses with BHAG®s (Big Hairy Audacious Goals) is relatively rare. 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.

This piece has more tips – 7 important lessons from Jim Collins Good to Great.